When Do You Need Commercial Auto Insurance?

Last Updated on April 4, 2023

Depending on how you drive your vehicle, you may need commercial auto insurance.

Someone who drives their vehicle for work needs commercial auto insurance. If you don’t have commercial auto insurance, then your insurer could deny your claim.

Many drivers are surprised to discover they need commercial auto insurance. Today, we’re explaining when you need commercial auto insurance.

Reasons You Need Commercial Auto Insurance

You need commercial auto insurance in all of the following situations:

  • You are transporting people in your vehicle in exchange for a fee (for example – if you are a taxi or Uber driver)
  • You deliver goods in your vehicle in exchange for a fee (for example – Walmart delivery, Uber Eats delivery, or pizza delivery)
  • You provide trucking and freight transportation using your vehicle (such as car shipping)
  • You are conducting a service using your vehicle
  • You sell food or other items from your vehicle (such as a food truck or food trailer)
  • Employees operate your vehicle
  • Your vehicle is owned by a corporation or other business entity
  • Your vehicle is a heavier-than-normal sized pickup or SUV (like a dump truck, semi-truck, or commercial trailer)

In all of these situations, you may need commercial auto insurance. A personal auto insurance policy will not cover you, which could leave you dangerously under-insured.

How Commercial Auto Insurance Works

Commercial auto insurance works similarly to personal auto insurance: it covers vehicles against certain damages and protects you against certain liabilities.

Commercial auto insurance protects you when driving for business purposes, while personal auto insurance protects you when driving for personal reasons.

Commuting to work is not considered a “business purpose.” Personal auto insurance covers you when commuting to and from work.

However, if you are carrying supplies between offices for work in your personal vehicle, then you may need commercial auto insurance. In this situation, you’re using your car for work purposes. If you get into an accident during this trip, then your insurer could deny your claim.

Commercial auto insurance also extends to cover employees. If an employee drives your vehicle, for example, then you need commercial auto insurance.

What’s Covered by Commercial Auto Insurance?

You can adjust your commercial auto insurance policy to fit your unique needs. A typical commercial auto insurance policy covers all of the following:

Liability Coverage: Most states require you to carry bodily injury and property damage liability coverage. These coverages cover any damages or injuries you cause while driving, including medical expenses, deaths, and property damage, along with resulting legal fees.

Medical Payments: Also known as no-fault coverage or personal injury protection, medical payments coverage covers certain medical expenses for drivers and passengers after an accident, regardless of fault. Medical payments coverage could cover your employees’ medical bills after an accident in a company vehicle, for example.

Uninsured and Underinsured Motorist Coverage: 1 in 7 drivers in the United States does not have car insurance. Many drivers carry uninsured and underinsured motorist coverage for added protection. These coverages cover hit-and-runs, collisions with underinsured motorists, and similar incidents. If someone hits your work truck while it’s parked, for example, and leaves the scene, then you can make a claim through your uninsured motorist coverage.

Collision Coverage: Collision coverage covers vehicle damage resulting from collisions with other vehicles, regardless of fault. If you hit someone from behind when stopped at a light, for example, then your collision coverage covers the cost of repairing damage to your work vehicle (and your liability coverage covers damage to the other vehicle).

Comprehensive Coverage: Comprehensive coverage protects your vehicle from non-accident damages, including fire damage, hailstorm damage, theft, vandalism, floods, and more. If your work truck is parked in your warehouse and the warehouse burns down, for example, then you make a claim through your commercial auto insurance policy’s comprehensive coverage.

Other Coverages: Some commercial auto insurance policies also cover towing, roadside assistance, rental reimbursement, and gap coverage, among others.

Some Personal Policies Cover Basic Business Use

Your personal auto insurance policy could provide basic coverage for your business. Some personal policies extend to provide basic protection, for example, which means you can avoid buying a commercial auto insurance policy.

If you drive your personal vehicle 95% of the time for personal reasons, for example, and just 5% for business purposes, then your personal auto insurance policy could cover you.

However, if you’re using your personal vehicle to log high miles for business purposes, or if you’re driving a commercial vehicle, then you likely need a commercial auto insurance policy. On the other side of the coin, if you want to drive your business car for personal use, your commercial policy most likely will not cover you.

Contact your insurer and explain your situation. Your insurer can determine if you need a personal or commercial auto insurance policy.

Your Employer’s Commercial Auto Insurance Could Cover You

If you work for someone else, then your employer’s commercial auto insurance policy could cover you.

Many large employers have commercial auto insurance policies that cover the company’s fleet of vehicles and personal vehicles driven by employees for work purposes.

If your employer asks you to drive a box of papers across town, for example, then your personal auto insurance policy may not cover the trip, but your employer’s commercial auto insurance policy could cover the trip.

Ask your employer about commercial auto insurance coverage to determine if you’re covered.

Other Things to Consider with Commercial and Personal Auto Insurance

There’s a grey area between commercial and personal auto insurance. Insurers treat claims and analyze situations differently.

Other things to consider with commercial and personal auto insurance include:

Who Owns the Vehicle: If your vehicle is owned by a business (like a corporation, an LLC, or a partnership), then you likely need a commercial auto insurance policy. If you are a sole proprietor, then you may only need a personal auto insurance policy.

Vehicle Usage: Is the vehicle primarily used for work purposes or personal purposes? Depending on how the vehicle is used – and how often it’s used for different purposes – you may need a commercial auto insurance policy. Some insurers extend basic coverage if you only visit one or two job sites per day, for example, while others deny claims for any business trips.

Vehicle Type: If your vehicle is heavier than a standard vehicle, then you may need a commercial auto insurance policy. Most tow trucks, semi-trucks, dump trucks, and commercial trailers, for example, need commercial auto insurance and are not covered by personal auto insurance. However, some heavy-duty SUVs and pickups also require commercial auto insurance.

Liability Limits: Commercial auto insurance policies tend to have higher liability limits. Most personal auto insurance policies have $1 million to $2 million liability limits, for example, while commercial policies may have higher limits for added protection.

Commercial Insurance and Rideshare Companies

If you drive for Uber, Lyft, and other transportation network companies (TNCs), then you likely need commercial insurance.

Uber, Lyft, and other rideshare companies offer basic insurance when driving to pick up a passenger and dropping off a passenger. However, they don’t provide coverage in between rides. This leaves you dangerously underinsured.

Typically, you need a commercial auto insurance policy to protect you in this situation.

However, many companies now offer specific rideshare policies. For a few extra dollars per month, you can add rideshare coverage to your policy to stay protected at all times.

Contact Your Insurer to Verify Coverage

Talk to your insurer to determine if you need commercial auto insurance coverage.

Sometimes, your personal auto insurance policy provides sufficient coverage, and you don’t need a commercial policy.

In other cases, your personal auto insurance policy is leaving you dangerously underinsured when driving for business purposes.

By talking to your insurer, you can determine which car insurance is right for you – before it’s too late.

James Shaffer
James Shaffer James Shaffer is a writer for InsurancePanda.com and a well-seasoned auto insurance industry veteran. He has a deep knowledge of insurance rules and regulations and is passionate about helping drivers save money on auto insurance. He is responsible for researching and writing about anything auto insurance-related. He holds a bachelor's degree from Bentley University and his work has been quoted by NBC News, CNN, and The Washington Post.
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