The Main Differences Between Personal and Commercial Auto Insurance

Auto insurance is essential when it comes to protecting your car from any damage. Whether it is accidents, vandalism, or other unforeseen events, making sure you have the appropriate coverage is important. After all, owning a vehicle is a significant investment, and it is essential to safeguard it against any harm.

If you are looking for new auto insurance or updating your existing policy, you may be confused about the difference between personal and commercial auto insurance. This article breaks down the similarities and differences to know which one you may require.

What is personal auto insurance?

Personal auto insurance is formulated to cover an individual’s needs when owning and operating a vehicle for personal use only. This includes activities, such as running errands, meeting friends, or commuting to work.

If you are using your vehicle for work-related activities, such as a role in sales or consulting where you may be visiting more than one client in a day, this would be considered “Business Use.” It is important to be honest and upfront about how you are using your vehicle to ensure you are properly covered in the event of a loss.

Rates for personal auto insurance are determined by several factors including annual kms driven, how many kms you commute to work one way and where your personal automobile is garaged.

What is commercial auto insurance?

Commercial auto insurance is insurance to cover your vehicle when it is being used for commercial purposes which include carrying tools or materials to job sites. Typically, vehicle ownership is registered under a company name. Several factors determine how your commercial vehicle is rated, such as the type of vehicle and whether it is considered a heavy or light commercial vehicle. This is usually determined by the gross vehicle weight. Other things to consider are the radius travelled and your business operations.

There are different types of commercial auto policies depending on the size of your fleet. If you operate a small business with a single or limited number of vehicles, they are typically insured on an individually rated commercial auto policy. This means that all drivers and vehicles must be listed on the policy and are rated separately, and each driver is assigned to a vehicle. Changes made to drivers and vehicles on an individually rated auto policy must be sent into the insurance company to be recorded as they happen.

If you operate a large business with a fleet of vehicles, these may be insured under a blanket fleet policy, also known as a 21B. With a blanket fleet policy, changes throughout the policy term are recorded with your broker and there is an adjustment made at the end of the year based on the number of vehicles and drivers added and/or deleted.

Which one should I pick?

The use of your vehicle will determine whether you require commercial or personal auto insurance. You may ask yourself the following questions:

Do you commute to the same location to work daily?
Do you only use your vehicle to run personal errands, to meet friends, or for pleasure drives?
Is your vehicle registered in your name personally?

If the answer is yes to these questions, personal auto insurance sounds right for you.