Factors That Determine Whether You Need Commercial Auto Insurance

Businesses need commercial auto insurance, and individuals need personal auto insurance. However, the insurance line separating the two is not always clear, and the coverage sometimes overlaps. Below are some factors that determine whether you should buy commercial car insurance.

Vehicle Use

Commercial car insurance covers the business use of vehicles. Commercial car insurance is necessary if you use your car to earn money. The coverage applies to both direct and indirect income generation.

Here are examples of direct income generation:

• Using your car to carry people for money, for example, as a taxi driver
• Using your car to deliver goods for payment, such as goods people buy from online stores
• Hiring your car to other drivers at a fee

Examples of indirect income generation include:

• Carrying your business tools and equipment in your car
• Driving clients to work events

You need commercial insurance for all the above cases, whether you drive your personal car or have a dedicated business car.

Vehicle Type

Insurance companies know that people use some vehicles almost exclusively for business use. Examples of such vehicles include:

• Food trucks
• Box trucks
• Utility trucks
• Tractor-trailers

For example, few people buy box trucks to drive kids to school or take private road trips. In addition to exclusive business use, many of these vehicles are also heavier and more expensive than an average private car. Thus, car insurance companies require commercial car insurance for vehicles that fit the profile irrespective of their use.

Vehicle Title

A car's title determines its legal owner. Most businesses are separate entities from their human owners. Thus, if your car's title is in your business name, the business has the legal rights to the car and not you. A business requires business car insurance for its vehicles. Thus, you need commercial car insurance for vehicles whose titles feature business names.

Personal Policy Exclusion and Limits

Your personal auto insurance may cover some of your car's business uses. For example, personal auto insurance covers you when commuting to and from work in your private car. The insurance company will ask you a series of questions to ascertain how you intend to use your car when you want to buy coverage. Your answers determine the policy to buy.

You need commercial auto insurance if your personal policy doesn't cover some of the things you intend to use your car for. In addition, many commercial auto insurance limits typically exceed personal auto insurance limits. Thus, commercial auto insurance is necessary if your personal policy covers some business uses but at lower limits.

For more information, contact a commercial auto insurance agency such as Rowell Insurance Agency.