Jessica Sautter is a Content Writer for CarInsuranceCompanies.com with a Bachelor’s Degree from Eastern Michigan University in Elementary Education with a Major in Reading and a Minor in Mathematics.

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Chris Harrigan has an economic degree from Limestone College and an MBA from Clemson University. He previously managed auto insurance claims for Enterprise Rent-A-Car. Currently, he is using his business and insurance expertise to provide insurance data analysis and visualizations to enhance the user experience.

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Reviewed by Chris Harrigan
Former Auto Insurance Claims Manager

UPDATED: Sep 21, 2020

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Here's what you need to know...

  • A commercial automobile policy and a personal policy both follow statutory requirements for your state
  • The rating criteria for commercial auto are roughly the same as for personal autos
  • Be clear with the insurance company or agency as to the usage of the vehicle to avoid gaps in coverage

Every state has laws require a purchase of automobile insurance. The type of insurance required for cars used in a commercial venture and ones used personally is essentially the same.

Insurance departments in each state enforce the laws of the state with regard to auto insurance, but certain laws limit of liability insurance is required.

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Table of Contents

Purchasing Personal Car Protection or Commercial Car Protection

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When you own an automobile used in your business, there are things that must be considered when insuring the vehicle.

Here’s what you need to consider:

  • Determine who owns or leases the vehicle in question:
  • Determine the driver of the vehicle:
  • Determine the principal use of the vehicle

If the vehicle qualifies as a personal vehicle, choose to purchase a personal automobile policy.

However, if the car is owned by a business, a commercial automobile policy should be purchased.

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Difference between Commercial Auto Policies and Personal Auto Policies

Almost no difference can be determined between the two types of policies. Purchase the insurance policy in the name of the entity that owns the vehicle.

Be clear with the insurance company or agency as to the usage of the vehicle to avoid gaps in coverage.

The coverage is often the same between commercial and personal policies,  but failure to disclose business usage can invalidate your policy.

If the vehicle is owned by a business, be sure to purchase a commercial automobile policy to provide adequate protection for you and your business.

Consider higher limits of liability for this type of policy because businesses have more assets to protect than an individual does.

What if the vehicle is driven by a company like Uber?

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Uber does purchase its own insurance, but that insurance only covers their liability. You need to be up-front about notifying your insurance company of the situation.

Gaps in coverage can occur because Uber’s insurance doesn’t  fully cover your interests.

Some insurance companies are experimenting with writing auto policies contemplating this activity.

However, most are canceling their policies in which individuals use their cars for Uber or Lyft.

Insurance Coverage to Purchase

A commercial automobile policy and a personal policy both follow statutory requirements for your state.

Here are the types of coverage you will see:

  • Bodily injury liability, usually expressed as $100,000 per person/$300,000 per accident. This coverage pays for your legal liability if involved in an accident that maims or kills another party.
  • Property damage liability, usually expressed in an amount such as $50,000 pays for your legal liability for damage to another person’s vehicle or property.
  • Medical payments coverage provides emergency medical care for individuals driving or riding in the vehicle. The limits are usually $1,000 to $5,000 per accident. Note that employees driving the vehicle should be covered for this under Worker’s Compensation insurance.
  • Underinsured and uninsured motorist’s coverage has the same liability limits as your bodily injury liability. States vary in the percentage of uninsured or uninsured motorists who drive in the state.

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Consider Purchasing Property Damage Indemnity on your own Vehicles

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There are two types of property damage indemnity provided under automobile insurance – comprehensive and collision. These are designed to help protect your investment in the automobiles for your business.

The amounts can be a large portion of the assets for your company, and well worth protecting. Credits apply for higher deductibles, so consider asking for $1,000 and $5,000 deductibles on property damage for company vehicles.

Comprehensive insurance

Comprehensive pays for such things as animal damage, hail, windstorm, water, fire, theft, vandalism, and glass damage. A deductible applies to this coverage.

– Collision insurance

Collision pays for damages to your vehicle when it is driven into another automobile, truck, or object. A deductible also applies to this coverage.

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Rating on a Commercial Automobile Policy

The rating criteria for commercial auto are roughly the same as for personal autos.

Here are some of the factors that influence your insurance premiums:

  • The type of vehicle driven can affect your premium. You will pay more for a delivery van or SUV than you will for a sedan.
  • Purchase safety devices for your automobiles. Credits for these can reduce premiums.
  • Anti-theft alarm systems, as well as global positioning devices, often earn discounts.
  • Parking the vehicles in an indoor garage or locked parking lot when not in use is advantageous.

Purchasing a Commercial Auto Policy

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Consult with your insurance agent or company about purchasing commercial auto policies. Explaining to them the ownership and use will help them determine if a commercial auto policy is needed.

Get at least three quotes from different insurance companies because this saves you up to 17 percent of premiums.

Explain the nature of your business and its activities to the agent or insurance company to help them classify your needs for insurance.

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Before Purchasing Insurance

Pursuing the following checks will help protect yourself from problems with your insurance.

Here are the checks to follow:

  • Calling your state’s Department of Insurance to see if the agency and company selling the insurance is licensed in your state.
  • Consult with a national insurance rating company to determine the financial stability of the companies you have chosen. One of these is A.M. Best.
  • Examine the national complaint ratings by consulting the NAIC.
  • Another national insurance rating company is Standard and Poors

A trustworthy agent helps you because their expertise can not only save you money in premiums but also protect your assets with adequate insurance.

Good Advice about Commercial Auto Policies

Ask your agent about the coverage because a business may need additional limits of liability as carried under an umbrella policy.

If you travel across state lines, delivering items, you might need a more sophisticated policy for Interstate Transport.

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