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Commercial auto vs. personal auto insurance

The line between a personal vehicle and a commercial vehicle is sometimes unclear. Find out which types of auto insurance cover vehicles used for work.

What's the difference between commercial and personal auto insurance?

For small businesses, the line between what is considered a personal vehicle and a commercial vehicle is often blurry. Sometimes small business owners and employees use their personal vehicles for business purposes. For example, they might use their own car to travel to job sites, transport equipment, or deliver goods.

Personal auto insurance policies almost always exclude business use. That means you're not covered if you get into an accident while driving for work (with the exception of your commute).

So, which policy covers multipurpose vehicles? To find out, let’s take a closer look at three different types of auto insurance coverage.

1. Commercial auto insurance

The main difference between personal and commercial auto insurance is who owns the vehicle. If your business owns a vehicle, it must be covered by commercial auto insurance.

Both personal and commercial auto policies pay for legal expenses, bodily injury, and property damage related to auto accidents. However, commercial auto insurance usually covers higher claims, different types of vehicles, and more complex legal issues.

This type of insurance coverage typically includes all the business’s employees as additional insureds, which means every employee with a valid license can drive your company vehicle. The cost of commercial car insurance is affected by their driving records, along with the policy's coverage limits and deductible.

Commercial auto insurance covers business vehicles

If you're a sole proprietor who owns a vehicle used primarily for business, you may need commercial auto insurance. Commercial coverage typically has higher liability limits than personal auto insurance. It can cover vehicles used to:

  • Transport goods or equipment
  • Drive clients or employees
  • Perform a service that you’re paid for
  • Charge passengers a fee to ride in your vehicle
  • Charge people a fee to transport goods in your vehicle
  • Haul heavy, work-related loads
  • Tow a trailer used for business

Does commercial auto insurance cover personal use?

Commercial auto insurance typically covers employees who are given permission to drive your business vehicle. This policy will help pay the costs of accidents when an employee is driving, even if the vehicle was used for personal reasons.

So, what about personal vehicles occasionally used for work? That's where a policy called hired and non-owned auto insurance (HNOA) comes into play.

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2. Hired and non-owned auto insurance

If you or your employees use a personal vehicle for work errands, you should consider purchasing hired and non-owned auto insurance. This policy provides liability coverage if you get into an accident while driving your own vehicle for work purposes. It also provides protection when your business rents or leases a vehicle.

This policy only covers legal bills resulting from an accident, not physical damage. For example, it won't pay for repairs if your vehicle is damaged in an accident.

HNOA covers personal, leased, and rented vehicles used for work

You may want to purchase this liability insurance if:

  • Your employees run work errands in their personal vehicles
  • You rent a car for a business trip
  • Your company leases vehicles

3. Personal auto insurance

Personal auto insurance only covers accidents that occur while you’re driving your vehicle for personal use. That includes commuting to and from work and travel unrelated to your job duties. Policies typically insure the owner of the vehicle and one or two immediate family members.

Your personal car insurance won't cover business use

Most personal auto policies specifically exclude business use. If you get into an accident while driving for work, your insurance company will likely reject your claim.

Because this policy includes less coverage, it's usually less expensive than a commercial auto insurance policy. In some cases, personal auto insurance might include limited coverage for business use. Check with your insurance company to find out exactly what is and isn't covered.

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