A personal auto insurance policy covers all things that are considered “personal” in nature. These include your drives back and forth to your office for work, trips to the grocery store, and leisure activities. Your auto policy covers the vehicles and household drivers you specifically list on the policy and is geared towards protecting individuals that use their car for regular personal purposes.
A commercial auto policy is designed for business owners or companies that use vehicles in the course of conducting business. Some good examples would be a caterer that does food delivery or a contractor that has trucks out on the road. Although commercial auto policies are rated differently and typically carry higher limits than a typical personal auto policy, many of the coverages are the same, such as towing and loss of use.
A vehicle is usually classified as “commercial” if it is primarily used in relation to your business (with the exception of a personal commute to and from the office, as this is covered by a personal policy). Examples of commercial use include transporting people like a taxi or car service, or goods for delivery, like flowers, car parts, or pizza.
Personal auto policies only cover specific types of vehicle use, registered in an individual’s name. You’ll need commercial coverage if you buy a car in your company name or own a truck, bus, or vehicle that is considered a commercial use and gross vehicle weight. There is often a bit of grey area and confusion regarding the use of a personal auto for jobs like newspaper delivery or pizza delivery. You’ll want to check with your insurance professional to determine whether or not your insurance company considers that type of work an acceptable risk.
What about self-employment?
The type of coverage you need as a self-employed individual depends on the type of work you do. A freelance writer who does not leave her house for work, or who may occasionally leave for a brief business function or meeting, likely doesn’t need more than a personal auto policy. An individual with a home baking business who uses her car to travel and deliver goods for sale would need a commercial auto policy.
The general rule of thumb is that you will need a commercial policy if you transport products or goods, if you have special work-related features or equipment in or on your vehicle, or if you regularly transport people as a part of your business. You’ll also need commercial insurance if you let employees drive your car, if you lease or rent vehicles to others, or if your vehicle is registered or owned in the name of your corporation or business entity.
Don’t wait until you have an accident to question which type of policy, personal or commercial, you need. Be open and honest and let your insurance agent know if you are running a business of any kind that requires driving, so that you can protect yourself with the proper auto liability coverage options and limits.