Updated June 10, 2020|8 min read
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If you use your car or truck for work, you’ll need a commercial auto insurance policy to cover you while you’re on the clock
Commercial auto insurance covers your car or truck, and can be extended to cover your employees, even when they’re driving their own vehicles
Commercial auto insurance tends to be more expensive than personal car insurance, but you can qualify for discounts just like with your regular personal policy
Semi-truck drivers have commercial auto insurance; so do food trucks and dump trucks. These are all obviously commercial vehicles, and they need commercial auto insurance. But if you use your personal car for work, you may also need a commercial insurance policy, because your personal auto insurance doesn’t cover your vehicle when you’re using it for business.
Commercial auto insurance includes many of the same coverage components as personal car insurance. Liability coverage protects you from damage you cause in your vehicle, and collision coverage and comprehensive coverage protect your vehicle itself, no matter who caused the damage.
But commercial car insurance also includes components that are specific to the needs of people who use their cars or trucks for work, like non-owned vehicle coverage, which extends the coverage when your employees use their vehicles for business purposes.
Simply driving to and from work doesn’t necessitate commercial auto insurance, that will be covered by your personal auto insurance, but if you’re a real estate agent who drives clients to showings, or a landscaper who drives a truck filled with tools and supplies, you’ll need a commercial auto policy to protect you.
One thing to note, however, is that in most places rideshare drivers do not need a commercial auto policy, but if you drive for a service like Uber or Lyft you should add rideshare coverage to your personal policy to make sure you’re fully protected.
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Commercial auto insurance is car insurance for vehicles that are used for work or business purposes. This is in contrast to standard or personal auto insurance, which is car insurance for vehicles that are used in your personal life.
Your personal car insurance policy covers you if you’re just driving to and from work, but if you use your car for business, like if you’re an electrician who drives to jobs and carries tools and supplies in your car, or a caterer who takes food and employees in their van, your personal auto policy won’t cover you and you’ll need a commercial car insurance policy.
Like personal auto insurance, commercial auto insurance is made up of several types of insurance coverage, including:
Liability coverage: Bodily injury liability (BIL) covers you when you or one of your employees cause bodily injury to another party while using one of your covered vehicles, and property damage liability (PDL) covers you when you or one of your employees cause property damage to another party while using one of your covered vehicles. (These types of coverages are combined into a “combined single limit” in commercial policies, while in personal policies they are often separated out.)
Medical payment coverage / personal injury coverage: Pays medical expenses for the driver and passengers of your vehicles if they’re in an accident, regardless of fault.
Collision coverage: Pays for damage to your vehicles from accidents, regardless of fault.
Comprehensive coverage: Pays for damage to your vehicles from theft, vandalism, extreme weather, falling objects, or other non-crash incidents.
Uninsured/underinsured motorist coverage: Pays for damage caused by an uninsured or underinsured driver.
Commercial policies also offer a number of types of specialized coverage that personal policies do not. These include:
Trailer interchange coverage: Covers trailers your vehicles use that are owned by other companies
Rental reimbursement with downtime: Covers your costs to rent a temporary replacement if your vehicle needs repairs
Hired vehicle coverage: Covers you when you rent cars or vans for employees or clients
Non-owned vehicle coverage: Covers you when your employees use their own cars to conduct business for you
The main difference between personal auto insurance and commercial auto insurance is that personal auto insurance covers you when you’re using a car in your personal life, and commercial auto insurance covers you when you’re using a car or truck for business purposes.
If you’re self-employed, say as a house painter, and you’re in an at-fault accident while driving your truck filled with supplies to a job, your personal auto policy won’t cover any related claims, since it happened while you were using your truck for work. You need commercial auto insurance to make sure you’re covered while driving for work, since commercial car insurance is a separate product.
Though commercial auto insurance offers many of the same kinds of coverage as personal auto insurance policies, it differs from personal auto insurance in several important ways:
Commercial auto policies have higher liability coverage limits than personal policies
Commercial auto insurance is tax-deductible (personal insurance can be partially tax deductible if you use your car for business)
Commercial policies can cover either named employees or can offer blanket coverage for all employees
Commercial auto insurance includes extra coverage that personal auto insurance does not, including equipment coverage, like for trailers or forklifts
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If you just use your personal car to drive to and from work, you don’t need a commercial auto policy, your regular commute is covered by standard car insurance. But if you use your vehicle for work, your personal auto policy won’t cover you, and you’ll need commercial auto insurance.
Sometimes, though, it can be hard to know for sure whether you need to buy a separate commercial auto policy. Deciding whether you need to purchase a commercial auto insurance policy involves considering three major factors:
1. Ownership of the vehicle All vehicles owned by a company need commercial auto policies; but some vehicles owned by individuals also need commercial auto policies, based on how it’s used or the type of vehicle it is.
2. Use of the vehicle If you own your vehicle and use it for work, you may need a commercial auto policy in addition to your personal auto policy so that you and your car are covered when you’re using it for work. Commuting to and from work is covered under personal use, but if you also use your personal vehicles to transport people, goods, or equipment for work, then you need an additional commercial auto policy.
3. Make and model of the vehicle Some vehicles must be insured by commercial auto policies regardless of use or ownership. If your vehicle has a gross weight of 10,000 pounds or more or has a load capacity over 2,000 pounds, then you need a commercial policy; standard auto policies won’t cut it. Additionally, any work-related modifications, like a ladder rack, require commercial policies.
Rideshare drivers are not required to have commercial auto insurance. (There is one exception to this: in New York City, rideshare drivers are required to have commercial auto insurance.) Here’s why: Rideshare companies like Uber, Lyft, and Juno require their drivers to have their own personal insurance and provide some additional insurance when drivers are on the clock.
But because of a coverage gap between personal policies and the coverage offered by the rideshare companies, many rideshare drivers also opt for something called rideshare insurance.
To understand the coverage gap, know that rideshare driving consists of three distinct periods:
Period one is when you have the app on but haven’t matched with a customer.
Period two is when you’ve matched with a customer and are en route to pick them up.
Period three is when the customer is in your car.
Uber and other rideshare companies will cover you during period two and period three, but period one, the time between turning on the app and being matched with a rider, may be a coverage gap.
And even though you have personal auto policy, your insurer considers you working during period one and could deny your claim if you have an accident while the app is on. That’s why many Uber and Lyft drivers opt to purchase additional insurance to make up for the coverage gap.
Rideshare insurance is available either as a rider on top of a personal policy or as a replacement to a personal policy, and can cost between $6 and $10 per month. If you drive for a rideshare app and want to add this additional coverage, check with your insurer to see if they offer it as a coverage add-on to your personal policy.
When most people think of the gig economy, they think of ridesharing, but there’s another kind of gig that may require use of your wheels: on-demand delivery. From Postmates to Caviar to Amazon Flex, if you’re using your car to deliver food or goods, you may need coverage beyond what your personal policy can offer.
If you get in an at-fault accident while doing on-demand delivery, your personal insurance company will likely deny your claim. That means you could be financially on the hook for any medical payments or property damage you caused in the accident.
And while the delivery companies often provide supplemental liability insurance to their drivers when they are on active deliveries (that is, after they have picked up the food/packages and are headed to drop off), they don’t cover you during that first period, when you have the app on but haven’t yet picked up the item for delivery.
There aren’t explicit “on-demand delivery” insurance policies (yet), but some rideshare policies may work for your needs, and cover you during that gray area when the app is on but you haven’t been assigned a job yet. Talk to your insurer about your options to fill that coverage gap. And if you want to make sure you’re fully covered, get a commercial policy.
You can expect to pay between $1,000 to $2,000 per year ($80 to $160 per month) for a commercial auto insurance policy. Commercial auto insurance is typically more expensive than personal auto insurance, because the liability coverage limits are generally higher, and a commercial policy can extend to cover your employees and their vehicles as well as you and your truck.
However, like with a personal auto policy, your premium will be based on a number of factors. Commercial auto insurance rates will depend on your location, the driving records of the drivers on your policy, and the type of vehicles you are insuring. For example, large cargo vehicles can cost much more to insure than small passenger vehicles.
Like with your personal auto policy, you may be able to get discounts when you buy commercial auto coverage, like a discount for insuring multiple vehicles under the same policy, a discount if your business has existed for more than a certain number of years, or a discount for paying your annual premium in-full instead of monthly.
Most insurance companies that sell personal auto insurance policies, like Allstate, Geico, Progressive, and AAA, also sell commercial auto insurance policies. The first place to start is with your current insurer to discuss whether they can also give you commercial coverage.
If you need a new provider, our list of the best car insurance companies is a great place to start.
How auto insurance companies handle the current coronavirus outbreak will vary from company to company. Most major insurance companies are adapting their commercial auto policies as the global pandemic is affecting the need to drive, especially for business or commercial purposes.
You should visit your commercial car insurance company’s website to learn details about how they are handling COVID-19. Below are some changes to look out for:
Waiving of late fees and continued leniency for customers who need extra support
Working with customers to revise billing or coverage if they temporarily no longer need to drive for commercial reasons
Reduced commercial auto insurance rates
Text, mobile app, and online claims services
Extended standard car insurance coverage to policyholders using their personal vehicles to deliver food, medicine, and other emergency goods
You should contact your insurance company online or over the phone if you have questions about how processes have changed due to the coronavirus pandemic. If you’re a small business owner, your insurer may be able to connect you with solutions for COVID-19 related financial relief. Likewise, truck drivers should stay aware of any changes to FMSCA guidelines, and should stay aware of truck stop closures along their route in order to make their trips as safe as possible.