Does My Personal Auto Insurance Cover Business Use?

It’s common for a lot of people to use their personal vehicle for traveling to work and returning home. Also, for commuting to client meetings, or other job-related activities like delivering an important document.

If you’re using your own vehicle for business activities, does your personal auto insurance apply? Also, at what point does a personal auto insurance policy fall short, and when might you need commercial auto insurance instead?

The answer to all these questions isn’t so straightforward. While personal auto insurance can sometimes be used for business purposes, there are reasons, and conditions that don’t allow you to use personal auto insurance to cover business use.

Does My Personal Auto Insurance Cover Business Use?

Well, if we go by the books, then the short answer is no. Personal auto insurance policies don’t apply for business related accidents.

So, if you’re travelling for a business purpose, or a certain job activity, and if your auto insurance company finds out that you were travelling for commercial purposes then your personal auto insurance policies won’t apply.   And, in that case if you don’t have commercial auto insurance, then you will have to pay for the accidental damages out of your own pocket which may include medical bills, vehicle repair expenses, and legal costs.   Also, when you’re traveling for commercial purposes with personal auto insurance, it is equivalent to being uninsured, this is because your personal auto insurance won’t apply for vehicles that were used for commercial purposes.

On the other hand, exceptions do apply, if you’re using your personal vehicle for commuting to the office, and back home, it doesn’t specifically count as ‘business use,’ so in that case, personal auto insurance does apply.

The point here is, whenever it’s specifically used for any commercial intent involving direct business activities like transporting products and delivering documents, it won’t be covered by your personal auto insurance.

To understand this more clearly, it is important to know the differences between personal and commercial auto insurance, especially what they cover.

What is the Difference Between Personal Auto Insurance and Commercial Auto Insurance?

The main difference between personal and commercial auto insurance comes down to who owns the vehicle. Typically, personal auto insurance is only applicable for vehicles that you own, whereas commercial auto insurance applies to vehicles that are registered by your company.

When it comes to the costs, the cost of commercial insurance is significantly higher than personal auto insurance. But then again it also depends on the types of coverage that you’re buying and their limits.

The average cost of personal minimum auto insurance in USA ranges from $633 to $869 per year, whereas the annual average cost of commercial auto insurance is $147 per month, or $1,762 annually.

The auto insurance cost of businesses will vary though based its size, where it is located, how many vehicles it owns, in what way are these vehicles used, and to what extent.

If you purchase the minimum state mandated coverage, then commercial auto insurance will obviously be more expensive than your personal auto insurance. But if you invest more and get increased coverage then your personal auto insurance may be more expensive. It is safe to say that, in general commercial auto insurance is lot more expensive.

Apart from these general differences, the best way to differentiate Personal Auto Insurance and Commercial Auto Insurance is by exploring what they cover.

What Does Personal Auto Insurance Cover?

Personal Auto Insurance typically covers privately owned vehicles driven by the owner and their family members. Aside from Virginia, and New Hampshire, Personal Auto Insurance is mandatory for vehicle owners in every state in the USA.

Depending on the State that you’re residing in, the auto insurance coverage types, and minimum coverage limits can significantly vary. In most states in the USA, you will need to have the following auto insurance coverage which includes:

1. Liability Insurance

2. Personal Injury Protection Insurance (PIP)

3. Uninsured/Underinsured Motorist Insurance

4. Medical Coverage Insurance (MedPay)

Aside from these types of personal auto insurance, you can purchase optional insurance policies like collision insurance, comprehensive insurance, gap insurance, medical coverage insurance and more.

What does Commercial Auto Insurance Cover?

Commercial Auto Insurance covers vehicles that are owned by your company or organization. Usually, all employees of the company are covered by this insurance policy.

In general, it covers vehicles like cars, trucks, vans, limousines, that are used to transport goods and services, drive clients or employees, perform paid services, ridesharing, and other commercial services.

Having a commercial auto insurance policy is mandatory for businesses owning a vehicle in every state in the USA except New Hampshire.

So, if you’re driving with colleagues, and if you end up in an auto accident the commercial auto insurance will cover the vehicle damage, legal fees, and the medical fees of you and your colleagues or employees.

Typically, commercial auto insurance comes with a bundle package which a combination of the following insurance policies,

1. Liability Insurance

2. Personal Injury Protection Insurance (PIP)

3. Medical Payment Insurance Coverage (MedPay)

4. Collision Insurance

6. Comprehensive Insurance

7. Uninsured Motorist Coverage

8. Underinsured Motorist Coverage

Additionally, you can also buy optional auto insurance policies like gap insurance, cargo insurance, new vehicle type insurance, rental reimbursement insurance, and roadside assistance insurance.

In a nutshell, commercial auto insurance will cover vehicle repair costs, medical bills, lost wages, legal fees, pending lease payments, and funeral expenses.

Reasons Why Your Personal Auto Insurance Won’t Cover Business Use

Usually, businesses use their vehicles more frequently, and more extensively, which makes commercially used vehicles more prone to auto accidents. This is the main reason auto insurance companies charge a higher premium for auto insurances and provide higher and more extensive coverage.

Here are some reasons why personal auto insurance will not cover business use:

• Increased risk: Business use often involves more frequent driving, heavier loads, and potentially more hazardous conditions. These factors increase the chances of accidents and insurance claims.
• Different coverage needs: Business use may require specific coverage, such as cargo insurance or commercial liability, that are not included in personal auto insurance policies.
• Premium implications: Insurance companies may charge higher premiums for commercial auto insurance to manage the increased risk.
• Policy exclusions: Many personal auto insurance policies explicitly exclude business use. So, using personal auto insurance will violate the terms and conditions, and your insurance claim may be denied.

Do I Need Both Commercial and Personal Auto Insurance?

Yes, commercial, and personal auto insurance have been designed for specific purposes. While commercial auto insurance has more extensive coverage, it has certain conditions that will not apply in case you are involved in an accident using your private vehicle.

For instance, if you, or any employee in your company get into an auto accident while using a privately owned vehicle to run errands, or even while traveling back and forth from work, it won’t be covered by your commercial auto insurance. This is because commercial insurance specifically covers company registered vehicles.

On the other hand, it is legally mandatory for you to have personal auto insurance to own a vehicle in almost every state in the US. So, you need to have both commercial and personal auto insurance.

If you live in Michigan, and if you are looking for a reliable auto insurance company that provides both personal and commercial auto insurance policies, you can consider checking out PLPD Insurance Agency in Michigan.

What Type of Insurance Covers Using a Personal Car for Business?

Whether you, or your employees are using a personal car, or a rented vehicle your commercial auto insurance will not cover it. As mentioned before commercial insurance only applies for company registered vehicles.

So, let’s say some of your employees use their personal car or company rented vehicles to drive to work, or use it to travel for certain business purposes like meeting clients. In that case, if they get into an accident, what happens?

Do they cover it with their personal insurance? Or is there any alternative for that? There is a special type of auto insurance called Hired and Non-Owned Auto Insurance.

Hired and Non-Owned Auto Insurance (HNOA)

Hired and non-owned auto insurance is specifically designed to protect your business from liability when your employees use company rented or leased vehicles or their own personal vehicles for work purposes.

Hired Auto Insurance: Hired auto insurance specifically covers vehicles that have been rented or borrowed by your company on lease. So, if any authorized employee from your company gets into an auto accident while driving the company rented vehicle for work-related purposes, then the hired auto insurance will compensate for the damages.

Non-Owned Auto Insurance: It’s often common for many business owners, and job holders to use their personal cars, or privately owned vehicles for traveling to work, and even for certain business uses. So, if you or any of your employees get into an accident while using a personal car for business, then the non-owned auto insurance will have it covered.

Also, your employee might sue your business either because their personal coverage is not sufficient, or they may see it as the business’s liability to compensate for the accident. In that case, this insurance policy will help you cover the expense of compensating for this accident and dealing with the lawsuit.

How Much HNOA Insurance Coverage Should You Get?

Well, that typically depends on the size of your business, the number of employees who will use a personal vehicle, and the number of employees who will use hired/rented vehicles.   HNOA insurance is an optional coverage to protect the financial liabilities of your company. It’s an add-on insurance, so you will have to purchase it additionally with your commercial auto insurance.

To stay on the safe side, our industry experts would recommend that you should purchase a combined coverage limit of $500,000 to $1,000,000 to get adequate protection for bodily injuries, and property damage.

However, you can go for lower coverage, or a higher one depending on the size of your business, your budget, and its overall necessity. On average the cost of HNOA insurance is $134 to $172 per month. As HNOA insurance is an add-on, some providers may offer low rates such as $10 per month, and $100 per year for adding extra drivers. 

Although the rates vary depending on the policies and pricing of your auto insurance provider and where you are located.

What Does HNOA Insurance Not Cover?

While getting HNAO coverage keep in mind that it does not cover the policy holder, and it does not cover the driver, which means it will only cover the other driver’s bodily injuries, vehicle, and property damage.

So, if you or your employees get injured then the HNOA insurance will not cover your or your employee’s medical bills. And it won’t cover the vehicle damage costs of the rented vehicle. Moreover, hit and run accidents are not covered by HNAO insurance policies.

Do I Actually Need Commercial Auto Insurance?

Well, that depends whether your business requires the use of vehicles for traveling, and transportation.

If you’re running a business that does not require any traveling or transportation for you and your employees, then you don’t need commercial auto insurance. This applies for companies that are operating fully remotely, and typically offer digital products, and services.

But if you’re running an eCommerce business that transports tangible goods, or any business that requires you to have company registered vehicles, then yes, you’re legally required to get commercial auto insurance in almost every state in the USA.

Plus, if your employees use vehicles that are registered to your company for business activities then it’s also crucial for you to have commercial auto insurance.

When it comes to protecting your business’s finances, it is crucial to have a commercial auto insurance policy. Even a small accident can cost your business severely, so it’s highly recommended for every business to have a commercial auto insurance policy, along with HNOA insurance.

Tips for Choosing the Right Commercial Auto Insurance Policy

When it comes to choosing the right commercial auto insurance policy, here are some tips that you should consider which includes:

Evaluate Business Needs: This should include the number of registered vehicles, number of employees who drive these vehicles, to what extent these vehicles are used, and the potential risks of carrying out the daily operations.

Understand Coverage Types: There are 3 mandatory types of coverages which include liability coverage, uninsured/underinsured motorist coverage, and personal injury protection coverage (in about 16 states in the US). There are multiple types of optional coverage which include collision, comprehensive, cargo, gap, and medical coverage. It's important to identify the best combination of mandatory and optional coverage for your business.

Learn about State Regulations: Throughout the USA, the required minimum coverage varies across states, and there are different rules and regulations in every state. It is crucial to ensure that you are familiar with the local auto insurance laws to operate your business. Moreover, it’s also important to know the specific auto insurance policies that are mandatory in your state.

Arrange Driver Safety Programs: Insurance providers prefer companies that have trained drivers and carry out safety programs to prevent accidents. By displaying sessions, or proof of having driver safety programs you can give a better impression of your company and get lower insurance rates.

Consider Combined or Specialized Coverage: Many insurance companies have combined or specialized coverage policies for commercial auto insurance. Let’s say if you have trucks for your business’s distributions then you can go for a specialized auto insurance policy for trucks, with a combination of other necessary commercial auto insurance policies.

Explore Discounts, and Other Offers: If you have employees with good driving records, then you can negotiate with your insurance company to offer you exclusive discounts, or a reduced price on certain add-ons. In that way, you can minimize your costs on monthly or annual premiums.

Bottomline: Personal Auto Insurance Does Not Cover Business Use

Regardless of whatever the reason is, you cannot use personal auto insurance for business use. It directly violates the policies, terms, and conditions of personal auto insurance.

So, even if you are a solopreneur, if you need to use a vehicle for commercial purposes like delivering goods and services, or traveling long distances to meet clients, it’s best to get a commercial auto insurance.

If you have a small business, or even a large one which requires the use of vehicles for various business activities, then it’s best to get commercial insurance, and get those vehicles registered under your company.

The biggest advantage of having commercial auto insurance is, it covers any accidental compensation for your employees, and it protects your business from hefty fines, and lawsuits.

If you are looking for either personal, or commercial auto insurance you can contact us and consult with our auto insurance experts, they will help you choose the best auto insurance policies specific to your business needs, and budget.

FAQ (H2)

Do I need both commercial and personal auto insurance?

Yes, you need both commercial and personal auto insurance because it’s a legal requirement in almost every state in the USA, and personal auto insurance policies don’t apply for business use.

Does my personal auto policy exclude business use?

Yes, most personal auto insurance policies exclude business use. It is equivalent to driving uninsured if you are using your privately owned vehicle for commercial use, as it strictly violates personal auto insurance policies. In this case, your insurance company may deny coverage, and you will have to spend from your own pocket.

Can I put my business vehicle on my personal insurance?

Yes, you can but in that case, you will have to purchase a separate auto insurance policy for your personal insurance. If you’re using the same vehicle for both commercial and personal reasons, then you can get both commercial and personal auto insurance.

How to register a commercial vehicle for personal use?

You will have to visit the local DMV and register for a new license plate for personal use. Make sure to take all necessary documents which include your driver’s license, commercial vehicle registration, and vehicle identification number (VIN). Once you submit it, pay the necessary fees to get your vehicle registered for personal use. 

Can I drive a company car without my own insurance?

If you are among the enlisted drivers in your company for commercial use, then you can drive a company car without having your own insurance. But without personal auto insurance, you cannot own a private vehicle.