Business owners are always advised to purchase commercial auto insurance for company-used vehicles. This is because personal car insurance will not cover damage to any car used for business purposes. However, is this the same the other way around?
As some may consider having two separate policies as too expensive, they may be tempted to just have one for the business. Here you’ll learn why that may not be a great idea. Let’s find out why.
What is Commercial Auto Insurance?
Commercial auto insurance is a policy that provides coverage for business owners. It protects the commercial vehicle and pays for damages caused by it. This is similar to personal auto insurance, but there is a difference.
This type of coverage protects the entire company, including multiple drivers and vehicles simultaneously. Therefore, the main distinction lies in the scope of coverage. Keep in mind that the extent of the protection can also differ from one insurer to another.
With some, the amount of vehicle drivers is limited to a couple, while in others, a larger number of drivers and cars can be added to the coverage. For a large range of vehicles, you’re likely to need commercial fleet insurance instead.
Beyond the scope, policy coverage also ranges from mandatory to additional perks. The mandatory coverage includes:
- Third-party liability (protection for at-fault accidents)
- Accident benefits (coverage for medical care costs regardless of fault)
- Property damage (coverage for partial and not-at-fault accidents).
Additional coverage may include:
- Increased third-party liability (with limits you can choose based on your needs),
- Optional accident benefits (for added protection)
- Collision or upset (coverage of damages from impact with another object or vehicle)
- Comprehensive (damages beyond upset and collision)
- All perils (combines comprehensive and collision)
- Specified perils (selected perils included)
What is Personal Auto Insurance?
Personal auto insuranceis similar to commercial auto insurance, except it can only protect one vehicle at a time. It’s a contract between the individual car owner and the insurance company. Secondary drivers can be added to the policy, and, in some cases, those who have the policyholder’s permission to drive the vehicle may also be covered.
Personal auto insurance covers repair costs for the vehicle (and other vehicles) and medical and legal expenses of those involved while in or near the vehicle, as part of the general liability insurance that’s mandatory in Canada. Additional coverage can also be obtained, similarly to commercial auto insurance policies.
Is There an Overlap?
While commercial and personal insurance are often used interchangeably, they aren’t the same, and policyholders should be aware of the differences. Naturally, your insurer will need to be notified about the exact purpose of the vehicle. Failure to disclose you’re using a personal car as a business vehicle and vice versa can result in your claim being denied in case of an accident.
Most companies treat personal and commercial auto insurance as two separate entities. This means a personal insurance policy won’t cover business use, and a commercial policy won’t protect vehicles used for personal purposes.
The reason behind this is simple. Business use is considered far more dangerous, especially in certain fields. For example, your damages will be much greater (and the payout higher) if you get into an accident transporting construction material than if you were driving to the supermarket to pick up some groceries. Moreover, those using their vehicles for business purposes will likely drive every day, raising the chances of accidents.
The case is a little different when using commercial auto insurance for personal use because the risks are lower. Still, insurance companies often require owners to maintain separate policies for personal and business use. That said, there are some exceptions, as some insurers will permit personal use if the same vehicle is used for both business and personal purposes.
Options For Dual Use
If you have an existing vehicle and policy, contact your broker or your insurer directly to ensure you have the right coverage for your various driving needs. If you’re buying a new vehicle or are shopping around for a different policy, make sure to clarify what you need and verify the scope of the coverage of the policy you’re considering.
You might need to purchase two separate car insurance plans. In this case, you can save money by bundling the policies. Many insurers have this option, allowing customers to cut down on their insurance costs. You may even be able to create a mix of policies, adding business insurance into the bunch as well.
Another option that might be available (depending on your insurer and their specific plans) is to add personal car insurance as additional coverage to your commercial insurance policy. Dual use can be important for small businesses, but you still need to ensure you’re covered for any commercial liability.
Final Thoughts
Unlike personal auto insurance, which only covers one vehicle, a commercial vehicle insurance plan spans multiple cars and drivers at the same time. However, despite being more extensive, it may not provide coverage in certain circumstances, like personal use.
Whether commercial auto insurance covers personal use depends on the insurer. Some permit personal use of business vehicles, while others will not. If you need either commercial or personal auto insurance, then give Buckler Insurance a call today. We’ll happily provide you with a quote and answer any questions you may have.
