When do I need commercial auto insurance?

By HUB SmartCoverage Team on May 13th, 2024

If you run a business, it’s likely the type of auto insurance you need will be different.

Most personal auto polices do not cover accidents for vehicles being used for business purposes. Commercial auto insurance provides you with another layer of protection.

What is the difference between a personal and commercial policy?

The primary difference between commercial and personal auto insurance is a commercial policy has more specialized coverage for single or multiple drivers and tends to have higher liability coverage limits. It is designed to ensure you’re not leaving your business vulnerable to costly risks and expensive losses.

And while personal and commercial auto insurance is similar, in most cases a personal policy will not cover you when driving for business use and commercial policy will not provide coverage when driving for personal use.

What does commercial auto insurance cover?

Commercial auto insurance provides you with third-party liability protection if you or an employee is involved in an accident. You’re also covered against theft, vandalism, or damage. Polices include protection if you or employees are injured, including medical expenses. You’ll have coverage for goods when in transport to customers and will also get a replacement vehicle when a damaged vehicle is being repaired.

If you operate your commercial vehicle in other provinces or states, additional business auto insurance can often be purchased to ensure you and your employees are covered during these trips. Policies can differ between insurers, so it’s important to speak with your broker to know what’s covered.

Questions to ask yourself

Still not sure if you need commercial auto insurance? Here are a few questions to ask yourself:

Who owns and operates the vehicle? If you’re a sole proprietor who operates your business out of your home and doesn’t travel between jobsites or make customer deliveries — it’s likely your personal policy is protection enough. If your vehicle is owned by the business and used for business needs such as deliveries or transporting equipment, you should have commercial auto insurance coverage. Any full-time employees that use the vehicle for business purposes should be listed as drivers on your commercial auto insurance policy.
How is the vehicle used on a daily basis? If you’re a contractor driving between jobsites, with your expensive equipment in the back of your truck and are involved in an accident and those tools are damaged, your personal policy may not cover the repair or replacement costs. You should also have commercial coverage if you use your vehicle for any of these reasons:

You transport or deliver goods, materials or merchandise
You transport equipment, tools or packaged goods
Your vehicle is used for driver training
You transport customers for any reason (for example, you operate a limousine service or taxi service)

3. What type of vehicle are you using? Like personal insurance policies, the type of vehicle you drive impacts the coverage you need. Bigger, heavier commercial vehicles often cause more damage if they’re involved in an accident and your coverage should reflect that. If you use an SUV, Jeep, truck, tractor, trailer or any vehicle specifically designed for construction or maintenance purposes, you should have commercial coverage. Independent contractors and small business owners need to safeguard themselves from third-party liability and property damages that may occur when using any vehicle for business purposes.

4. Do you drive for a ridesharing service? Ridesharing companies are becoming more popular as more drivers look to them for additional sources of income. If you take part in a ridesharing service, you should always check with your insurance provider to see if your personal auto policy allows for ridesharing and if you require any additional commercial insurance coverage. You must always inform the insurer that holds your personal auto insurance policy you are ridesharing because not all carriers allow this. In addition, ridesharing companies like Uber and Lyft also offer drivers some coverage while they’re on the clock. Check with the company to know exactly what it is.

Are there additional coverages for commercial auto insurance?

Collision coverage in your commercial auto policy will help pay to repair or replace your vehicle if it’s damaged or a total loss resulting from an accident with another vehicle. Without it, you would be responsible for paying for all damages. Comprehensive coverage protects your vehicle from damages resulting from a natural disaster, vandalism and theft.

All perils combines collision and comprehensive coverage. It would also cover you for damages if an employee or member of your household steals the vehicle. Specified, or named perils, protects vehicles against those specifically named in your policy, such as theft or weather-related damage.

As a business owner, you work hard. Speak with your broker to ensure your business and employees are properly protected against risk and loss.