When you own a small business you’re always looking for ways to cut costs, which may lead you to ask a couple of good questions like “who needs commercial auto insurance anyway?” and “can I use my personal car insurance for my business?” Your specific circumstances will dictate the answers, but here are some things to keep in mind before you make a decision.
1. Personal auto policies come with limitations. They often exclude business-related risk. For example, most policies they may have a livery exclusion that says you can’t use a personal policies to cover the use of a private vehicle to transport people or property to charge. A commercial auto exclusion prohibits the use of a vehicle by someone employed or engaged in a business other than farming or ranching. While the commercial auto exclusion is open for interpretation, check with your carrier before you make an assumption about what your personal policy does and doesn't cover.
2. Personal auto policies may lack coverages your business needs. Often the liability limits on a personal auto policy are inadequate for business use. For example, the typical liability limit for a personal policy is $500,000, but twice that for the average commercial auto policy. Personal policies also provide very limited coverage for vehicles you don’t own including rentals. But you can buy commercial auto insurance that includes broad coverage for hired and non-owned vehicles, and it can also cover loss of use expenses and transportation expenses while your vehicle is in the repair shop.
3. Personal auto policies may not cover other drivers using your vehicle to conduct your business. If you or an employee is in an accident while driving your car or his own for your business, it could invalidate your claim and you could end up paying for damages and injuries out of your own pocket. Ouch!
Here are two bonus reasons to consider buying commercial auto coverage: 1) it’s a business deduction; 2) lying to an insurance company about how you use your personal vehicle on an application or claim is fraud. Your claim could be denied, your policy could be canceled and you could end up in a database as a bad risk. You can learn more about commercial auto coverage and compare policies here.