Commercial vs. Business & Personal Auto Insurance

Commercial, Business, and Personal Policies Provide Similar Basic Coverage 

The fundamental coverage for each type of policy is the same. You can purchase liability insurance to pay for damages caused to the other driver, personal injury protection to cover both parties and physical damage protection to cover damages to you or your car. The main difference between commercial, business and personal policies is that the personal policy is usually smaller than the others. Personal policies also tend to cover the car owner and anyone who has permission to drive the car, while commercial and business policies might stipulate who is covered and who is not covered. 

Each Type of Use Must Be Covered Separately 

The type of coverage you purchase needs to reflect the way the vehicle will be driven. If you only drive your car for personal trips to and from work with an occasional shopping excursion, a personal policy is exactly what you need. In fact, the only time you should worry about buying any other type of insurance policy is when you find yourself driving your car for work-related errands. If there is any chance that your trip could be considered work-related, your personal insurance policy might not cover any of the injuries or damages from an accident. 

It is safer to either drive a company car or purchase a different kind of insurance for your car if you find yourself running work errands on a regular basis. A small business owner who doesn't have the right insurance policy could potentially wipe out the business if they are involved in a serious accident because they would not be able to rely on their personal insurance to cover any of the damages. Using the wrong insurance policy can also leave you vulnerable to lawsuits from anyone involved in the accident, which can lead to astronomical settlements that are more expensive than any commercial or business insurance policy. 

How Business and Commercial Use Differ 

Business and commercial insurance sound like the same thing, but there are some important differences. A business insurance policy covers vehicles used in regular traffic situations. Commercial car insurance is for specialized vehicles that perform specific tasks on the job, like cement trucks or tractor-trailers. Both insurance policies are owned by the business rather than the car owner, so the business is liable if the car is involved in an accident. 

While both types of insurance are more expensive than personal insurance, commercial coverage tends to be more expensive than business coverage. A car that is driven by a courier or real estate agent is usually only in normal traffic situations. Commercial vehicles tend to be at a higher risk to sustain damage on the job because they are used more frequently than typical vehicles. Trucks on a construction site are constantly in danger of being damaged as well. 

Buses and 18-wheelers are much larger than the other cars on the road, which increases their danger of being involved in an accident because they can't always maneuver out of a dangerous situation quickly. That increased risk of damage causes an increase in commercial insurance rates. 

Meeting Local and State Regulations for Commercial Insurance 

When you purchase insurance for a commercial vehicle, you need to make sure that the coverage meets all of the local and state regulations for the way you will be using the vehicle. Cargo vehicles have to carry specific kinds of insurance coverage if they transport good across state lines, for example. 

Make sure you explain the vehicle's expected uses in detail to your insurance agent so that you are covered for everything you need. If you're purchasing a business or personal policy, there is less danger of missing a certain type of coverage because there are fewer regulations regarding passenger vehicles. 

Business and Commercial Insurance Reflect High Mileage Expectations 

Personal car insurance is less expensive than commercial or business insurance simply because a personal use vehicle is expected to be driven fewer miles. A commercial vehicle is usually on the road during the hours when a personal vehicle would be sitting in a parking garage or driveway. Most businesses operate longer than the traditional eight-hour workday, as well, which means their vehicles are being used during 10 to 12 hour shifts sometimes. Every extra mile that a car is on the road adds more risk that the car will be involved in an accident. Commercial and business policies are more expensive in general because the cars they cover experience risk more often than personal vehicles are. 

How Each Type of Coverage Impacts Multiple Drivers 

When your car is covered by a personal insurance policy and someone else drives it, that other driver is generally covered by your policy. Business and Commercial policies are more precise about who is covered when driving a work vehicle, however. Some business and commercial policies only cover specific employees who are named in the policies. Others will cover anyone who is employed by your company. If someone who is not covered is in an accident while driving a company vehicle, the company could be liable for any damages or injuries. It is important to talk to your insurance agent about who is on the policy and who is not on the policy so you don't find out the hard way. 

Insurance terms: 

Insurance Terms Dictionary Agent: In insurance, the person authorized to represent the insurer in negotiating, servicing, or effecting insurance policies. Applicant: The party applying for an insurance policy. Application: A printed form developed by an insurer that includes questions about the prospective insured and the desired insurance coverage and limits. Auto Collision Coverage: Optional auto insurance which pays for damage to your car caused by collision with another car or object, or by rolling the car over. Frequently required if you have a car loan. Auto Comprehensive Physical Damage Coverage: Optional auto insurance which pays for damage to your auto caused by things other than collision or rolling the car over, such as fire, theft, vandalism, flood or hail. Frequently required if you have a car loan. Bodily Injury Liability Coverage: Pays when an insured person is legally liable for bodily injury or death caused by your vehicle or your operation of most non-owned vehicles. This coverage also pays for your legal defense if you are sued. Claim: A person's request for payment from an insurer for a loss covered by the insurance policy. Collision Coverage: Pays for loss to your covered vehicle when it collides with another object or overturns. We will also pay for a collision loss to any non-owned vehicle, or to a vehicle you have rented other than a vehicle rented for use in connection with your business or employment, while that vehicle is in your custody, or while you are operating it. Comprehensive Coverage: Pays for loss or damage to your covered vehicle caused by any event other than collision. This includes damages due to events such as fire, theft, windstorm, flood, and vandalism. We will also pay transportation and loss of use expenses under this coverage if your motor vehicle is stolen. Conditions: The part of your insurance policy that states the obligations of the person insured and those of the insurance company. Continuously Insured: Insurance coverage was in effect from an insurer or more than one insurer at all times, without a break or lapse in coverage for any reason. Contract: A legally enforceable agreement between two or more parties. Declarations Page: The report from your insurance company listing: the types of coverage you have elected; the limit for each coverage; the cost for each coverage; the specified vehicles covered by the policy; the types of coverage for each vehicle covered by the policy; and other information applicable to the policy. Deductibles: The portion of the loss that the policyholder agrees to pay out of pocket, before the insurance company pays the amount they are obligated to cover. For example, if the covered claim is $1000 and your deductible is $250, you pay $250 and your company will pay $750. Deductibles help to keep insurance rates reasonable. Raising the amount of the deductible lowers the cost of insurance. Depreciation: Reduction in the value of property due to age and use. Endorsement: Attachment or addendum to an insurance policy; an endorsement changes the contract's original terms. Garaging Location: The ZIP code where your vehicle is parked when not in use and usually corresponds to your primary residence. Insurance Company: An organization that has been chartered by a governmental entity to transact the business of insurance. Insured: The person whose insurable interest is protected under an insurance policy. Insurer: See Insurance Company. Lapse: Termination of a policy due to nonpayment of premiums. Liability: A legal obligation to compensate a person harmed by another's acts or omissions. Liability Coverage: Insurance that provides compensation for a harm or wrong to a third party for which an insured is legally obligated to pay. Life Insurance: Insurance that pays a specified sum of money to designated beneficiaries if the insured person dies during the policy term. Limits: The most we will pay for a specific insurance coverage. You may choose the limit which meets your needs. Most states have laws that specify the minimum limits you must purchase. Loss: A claim either paid or payable due to the insurer's policy obligations. Medical Payments Coverage: Medical and funeral expense coverage for bodily injuries sustained from or while occupying an insured vehicle, regardless of the insured's negligence. Named Insured: The first person in whose name the insurance policy is issued. Negligence: Failure to use a generally acceptable level of care and caution. No-fault Insurance: A system of compensation enacted by law in many states under which indemnification is made by the insured's own insurance company regardless of who is at fault. Details of this system vary significantly from state to state. Occasional Driver: The person who is not the primary or principal driver of the vehicle. Peril: The cause of loss or damage. Personal Property Insurance: Protects against the loss of, or damage to property other than real property (real estate) caused by specific perils. Policy Expiration Date: The date when your current insurance policy expires. This date can be found on your current policy, Declaration (or "DEC") page, insurance identification card or recent cancellation notice. This date is not to be confused with the date of your next payment or when your renewal payment is due. Policy Term: The length of time that the policy is in force. Usually 6 months or a year. Primary Residence: The place where you will reside for the majority of your policy term. If you are a homeowner who does not reside in the home you own, please choose the "rent" or "other" option. Primary Use: What your vehicle is mainly used for: To/From Work If you use your vehicle to commute to and from your work and/or school. Business If your vehicle is used for one or all of the following: used to make sales calls used as vehicle for business trips to bank or post office, picking up supplies, going to different locations owned or leased by a partnership or corporation that have a business listed as and additional interest on the car Farm If your vehicle is used primarily on a farm, ranch or orchard Pleasure No others apply Policy: The written forms that make up the insurance contract between an insured and insurer. A policy includes the terms and conditions of the coverage, the perils insured or excluded, etc. Policy Declarations: The part of the insurance contract that lists basic underwriting information, including the insured's name, address and description of insured locations as well as policy limits. Policy Limits: The maximum amount an insured may collect or for which an insured is protected, under the terms of the policy. Policyholder: The person who buys insurance. Policyowner: An individual with an ownership interest in an insurance policy. Policy Period: The amount of time an insurance contract or policy lasts. Premium: The price for insurance coverage as described in the insurance policy for a specific period of time. Principal Driver: The person who drives the car most often. Proof of Loss: A sworn statement that usually must be furnished by the insured to an insurer before any loss under a policy may be paid. Property Damage Liability Coverage: Pays when an insured person is legally liable for damage to the property of others caused by your vehicle or your operation of most non-owned vehicles. This coverage also pays for your legal defense costs if you are sued. Reimbursement: The payment of an amount of money by an insurance policy for a covered loss that was initially paid by the insured or a third party. Reinstatement: The process by which a insurance company puts back in force a policy that has lapsed or has been canceled for nonpayment of premium. Riders: An addition to an insurance policy that becomes a part of the contract. Risk: The possibility or chance of loss or injury. Second Named Insured: The named insured or listed agent on a policy may request to designate any other person listed on the policy as a "second named insured". The second named insured has the same coverage under the policy as the named insured. Settlement: An agreement between a claimant to an insurance policy and the insurance company regarding the amount and method of a claim or benefit payment. Theft Limit (or Inside Policy Limits): The highest amount an insurance company will pay on certain items of personal property. For instance, some policies have a $5,000 limit for computers. Underwriting: The process of reviewing applications for coverage. Applications that are accepted are then classified by the underwriter according to the type and degree of risk. Uninsured Motorist Coverage: Coverage that pays for covered damage for bodily injury that an uninsured motorist is legally liable but unable to pay. VIN: The vehicle identification number (VIN) on your vehicle. This number is usually found on the dashboard of your vehicle on the driver's side, and is usually listed on the vehicle registration and title. The VIN number is a combination of letters and numbers 17 characters in length that can be used to identify the make, model, and year of your car.