What is the Difference Between Commercial and Personal Auto Insurance?

When it comes to commercial and personal auto insurance, there are significant differences that set both auto insurance policies apart. The main difference typically lies in the purpose of use.

Commercial auto insurance covers accidental damages for business purposes, such as the distribution of goods, transportation of employees, or providing services like ride-sharing or food deliveries.

Personal auto insurance, on the other hand, specifically covers personal driving like commuting or running errands. Typically, your personal insurance won’t cover you if you get into an accident while being involved in a commercial activity.

If you use your car for both commercial and personal activities, then you need to know the difference between these two policies and when they apply. In this article, you will learn what commercial and personal auto insurance is, and their key differences.

What is Commercial Auto Insurance?

Commercial auto insurance is an auto insurance policy that’s specifically designed to protect your business’s vehicles and employees from accidental damage. Typically, it covers the following.

• Liability coverage: If you or your employee is at fault for the accident, your commercial liability auto insurance coverage will cover the other driver, the passengers of that vehicle, pedestrians, and anyone else harmed by accident. This coverage includes the other driver’s vehicle repair/replacement costs and medical coverage of all third parties harmed by the accident.
• Repair/Replacement Costs of Company-Registered Vehicles and Rented Cars: Your commercial auto insurance policy will cover the accidental costs of company-owned cars and rented cars. But it comes with some specific types of coverage. Typically, your collision and comprehensive commercial auto insurance will cover company-registered cars. Whereas rented cars are covered by HNOA (Hired and Non-Owned) vehicle insurance.
• Medical Bills of You and Your Employees: If you or your employees get involved in a car accident, your commercial auto insurance policy will cover the medical bills up to your coverage limits. Regardless of who is at fault, you will need coverage such as PIP (personal injury protection) or MedPay (medical payments) coverage. If the other driver is at fault, then their liability auto insurance coverage will cover the medical bills.
• Loss of Income: If you, or your employee, is unable to earn due to critical injuries, or prolonged medical treatment, the PIP coverage will cover the loss of income up to 3 years or so, depending on the state that you’re located in, and of course your insurer’s policies. Additionally, if the other driver is at-fault for the accident, then the commercial liability auto insurance will cover the loss of income of you and your employees as well.

If you’re looking for a reliable auto insurance agency offering affordable commercial auto insurance with extensive coverage, you should consider exploring our insurance solutions.

What is Personal Auto Insurance?

Personal auto insurance is a type of auto insurance policy that’s designed to protect you and your family from accidental damage involving a car that you personally own or have rented. Personal auto insurance includes various types of car insurance coverage which include,

• Liability Insurance Coverage
• Personal Injury Protection (PIP)
• Collision Coverage
• Comprehensive Coverage
• Medical Payment Coverage (MedPay)
• Uninsured Motorists Coverage
• Underinsured Motorists Coverage
• Gap Insurance
• Classic Car Insurance Coverage
• Roadside Assistant Coverage
• And more.  

5 Key Differences Between Commercial and Personal Auto Insurance

If you regularly use your vehicle for both personal and business purposes, choosing the right auto insurance policy is critical. To make an informed decision, it helps to understand how commercial and personal auto insurance differ.

Here are 5 key differences between the two types of auto insurance policies as follows.  

Purpose

The intended use is the most significant purpose that separates personal and commercial auto insurance.  

• Personal auto insurance: If your intention of using a car includes daily commute, road trips, or running errands, then you need personal auto insurance.
• Commercial auto insurance: If your intention of using a car or vehicle is work-related, or used for business activities, such as transporting employees, delivering goods, or providing services like ridesharing or mobile repair, then you need commercial auto insurance.    

If you use your car to travel back and forth from home to work, then you can get covered by both personal and commercial auto insurance policies. In general, you can even use your commercial auto insurance to financially protect yourself while commuting.

On the other hand, if you claim your personal auto insurance after getting into an accident while being involved in a commercial activity, then your personal auto insurance won’t cover it. This is because personal policies exclude coverage for commercial activities.

As a reliable insurance agency offering cheap car insurance solutions for more than 33 years, we have full-fledged personal car insurance coverage across several states in the U.S., including Arizona, Colorado, Florida, Georgia, Michigan, Nevada, and Texas.

Coverage Scope

The coverage scope of personal insurance is usually limited to the policyholder. It can be extended to household members but for that you need to list them in your insurance policy. Typically, personal auto insurance coverage scope is strictly limited to personal, or non-commercial use, such as commuting, errands, and personal travel.

Commercial auto insurance on the other hand offers broader protection, it can cover multiple drivers including employees, and an entire fleet of business vehicles.

As business vehicles are used for a wide range of purposes such as transportation of employees, distribution of products, and offering services, commercial policies often include higher liability limits and optional coverages tailored to specific business needs.

In a nutshell, coverage scope is more individual focused in which the policy is geared to provide financial protection for one person or a few individuals, whereas commercial auto insurance is designed to cover several business vehicles and employees which can be far more extensive depending on the size of your business, and it’s insurance needs.

Vehicle Types

Both commercial and personal auto insurance can cover a broad range of vehicles. The types of vehicles covered by commercial and personal auto insurance mainly differ based on how they’re used.

In most cases, personal auto insurance covers commonly used private vehicles such as sedans, SUVs, minivans, limousines and even sports cars. Whereas commercial auto insurance can cover similar types of vehicles for business use, such as sedans, SUVs, minivans, limousines, along with delivery vans, box trucks, utility vehicles, food trucks, and service vehicles used in industries like construction, plumbing, landscaping, and more.

The types of vehicles mentioned above are typically used for personal and commercial purposes, but that doesn’t mean that these vehicles can only be covered by either personal or commercial auto insurance.

For instance, you can even get personal auto insurance for a truck if it’s explicitly used for personal purposes, and non-commercial use. The gist here is, there is no specific obligation to vehicle types when it comes to personal or commercial auto insurance; it mainly depends on your purpose of use.

Premium Cost

The cost of personal auto insurance and commercial insurance can vary significantly. In general, commercial auto insurance is more expensive compared to personal auto insurance.

According to the Insurance Information Institute, most insurers recommend businesses to have coverage of $500,000 to $1 million. The cost of commercial car insurance can range from $1500 to $3,000 on average or more, mainly depending on the number of vehicles and drivers that require coverage.

Whereas the cost of full coverage personal auto insurance varies from $1592 to $2,100 per year, or more depending on your driving profile, age, insurance claims history, and various other factors.

Here’s a clause though, commercial auto insurance isn’t always expensive. A small business with a few vehicles may require spending $1,500 per year on full coverage commercial auto insurance, which can be cheaper than someone’s personal auto insurance.

However, the main reason commercial auto insurance is generally more expensive on average is that it covers more vehicles and drivers with higher risks due to a wide range of commercial activities.

Policyholder

Another key difference between commercial and personal auto insurance is who holds the policy. The policyholder of commercial auto insurance coverage is the business itself, whereas for personal auto insurance, it is an individual person, i.e., the primary driver and owner.

Additionally, personal auto insurance coverage can have multiple policyholders, typically a few, although there is no actual limit. Most insurers allow up to 4 policyholders on a single personal auto insurance policy.

With commercial auto insurance, the policy is usually held by a business entity, such as a corporation, LLC, or sole proprietorship. The business, not an individual, is listed as the primary policyholder, and the coverage can extend to employees who are authorized to drive company vehicles.

Quick Comparison Table: Commercial Auto Insurance Vs. Personal Auto Insurance

Here’s a quick comparison to understand the difference between commercial auto insurance and personal auto insurance, as follows.  

Will My Commercial Auto Insurance Cover My Friends and Family?

If your friends and family members are employees of your business with commercial auto insurance, then yes, your commercial auto insurance covers your friends and family. However, if they’re not part of the business, and if they get involved in a car accident, your commercial auto insurance will not cover the damage.

Even if they were involved in commercial activities, your company’s auto insurance policy won’t provide them with any financial protection. If you want to cover your friends and family who are not part of the business, you can add them to your personal auto insurance policy.

Does My Personal Auto Insurance Cover Business Use?

Your personal auto insurance does not cover business use. If you get into an accident while being involved in a commercial activity such as providing a service, distributing goods, or transporting company employees, your personal auto insurance covers it.

However, if you get into an accident while traveling to work or getting back home, your personal auto insurance may cover you, especially if you weren’t involved in any commercial activity.

Learn More in this Detailed Blog: Does My Personal Auto Insurance Cover Business Use?

The Bottom Line: Do I Need Both Commercial and Personal Auto Insurance?

If you run a business that uses company vehicles, and you also drive a personal car for everyday needs, then yes, you do need both commercial and personal insurance to stay financially protected.

While your commercial auto insurance protects you, your employees, and company-registered vehicles, your personal auto insurance will cover your private vehicle when you get involved in an accident.

Remember, personal auto insurance typically excludes financial protection for accidental damages that involve any commercial activity. So, to stay on the safe side, it is essential to ensure that you have both commercial and personal auto insurance.

Whether you're looking for personal or commercial auto insurance, you can request a quote to get started. If you're unsure which type or whether you need both, you can find an agent nearby to book a free consultation. Additionally, if you have any queries, you can also contact us, and we will get back to you soon.

Frequently Asked Questions (FAQ)

What is the difference between personal and commercial car insurance?

The main difference between personal and commercial car insurance lies in who and what they cover. Personal auto insurance will protect you, and any listed household member, from accidental damage, whereas commercial auto insurance is designed to protect your company-registered vehicles and employees from accidental damage and lawsuits.

Can I use commercial car insurance for personal use?

Typically, commercial car insurance does not cover personal use, especially if it’s a privately owned vehicle. However, if you’re driving a company-registered car, and if you end up in an accident, then you may get covered by your commercial car insurance.

Can I use personal car insurance for commercial use?

No, especially because commercial use is strictly excluded from a personal auto insurance policy. So, if you claim your personal auto insurance and if you were found involved in any commercial activity, your insurance claim will be void.