When Does a Personal Vehicle Need Commercial Insurance?

Many entrepreneurs make a potentially costly mistake and they do not get trade vehicle insurance. Whether you are a small enterprise with 20 employees or on your own, this provides more benefits and protection than you may be aware of. Do not make the mistake of thinking that a personal policy will cover most operations.

When You May Need Business Auto Insurance

There are a number of situations where you will need to get this. If you fall into any of the following categories or conduct any of the tasks, you should reconsider current arrangements.

  • The truck has ladder racks, permanent tool boxes or other installed equipment that wouldn’t otherwise have any use in a typical car.
  • You use a specialty ‘box’ van that has a gross weight over 10,000 pounds or a load capacity over 2,000 pounds.
  • Employees use it even on an occasional basis to run errands.
  • Automobiles are rented or leased by a partnership or corporation.
  • It is used for pick up or delivery of any items, materials or product associated with the company, even occasionally.
  • It is used as a taxi, limousine service or participate in Uber like programs.
  • The auto in question is owned by a partnership or corporation.
  • It is modified with special equipment to perform functions only related to a trade such as cooking and catering equipment, altered suspensions for extra capacity or hydraulic lifts.

If you fit any of the situations described above you should have commercial vehicle insurance on a privately owned automobile or the one owned, rented or leased by the company. There will be a little premium difference but at least you are insured for the proper use.

Difference between Personal and Commercial Coverage

Keep in mind that private policies, as the name suggests, are for daily activities like going for shopping, picking up children, traveling for pleasure and commuting. They are not meant to be stretched for specific uses. Also, the vehicle, drivers and home address is pretty clear in the schedule. Commercial policies are much more inclusive in term of other vehicles and drivers. They may extend to any vehicle you or the company own, rent or lease. The latter also allows autos with symbols and endorsements. The former generally will include a spouse and direct family members in the same household but does not protect employees. The latter can be set up to add any number of employees.

Furthermore, the latter generally has much higher liability limits because of the increased risks they face. They can often start at $500,000 but the former will allow a maximum of $300,000 liability limit. If you travel across state lines to perform services, you will also need the latter as mandated by federal legislations.

Do Not Face a “Denied Claim”

Many people wrongly think that their personal auto insurance will automatically cover work errands as long as it happens infrequently. However, in almost all policies there is a ‘Business Clause’ that generally states which trade related activities will not be included and which ones are. You need to read it through carefully to avoid any problem. Of course, there is a possibility that some claims will be approved but you want to make sure that they will be.

Do not take chances for a few dollars a day extra. It may not actually be as much as you think. So, get a few quotes right here and see the score before deciding.

Individual State Rules on Business Use

Depending on where you live some work related activities may be allowed under private car insurance. This may be because of the state legislations or court rulings. Your agent will be able to tell you if certain activities are allowed.

There may be different interpretation of employment as well. Being self-employed is understandably different from receiving a salary. For example, you may be covered to do jobs like pizza delivery in certain states while it may be unacceptable in another state.

Also, you may be able to include certain uses in your own policy with a special “business use” endorsement. It is an explicit agreement made between you and the insurer that leaves no room for doubt. There are so many things that can be done with an automobile. Likewise, there are so many different state rules and court judgements concerning the matter that you should check individual circumstances.