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Commercial vs Personal Auto Insurance

Commercial vs Personal Auto Insurance

It would seem that an auto insurance policy is an auto policy is an auto policy. As long as you have auto insurance, does it really matter who owns the vehicle or the usage of the vehicle? In a word: yes.

Insurance companies rate policies based on vehicle information, driver age and driving record, location and usage. Properly insuring your vehicle can actually save you money in the long run, since improperly insured vehicles can result in cancelled policies or lower-than-expected claim payouts.  Here is what you need to know to insure your vehicle properly..

Personal Vehicles Used Commercially

If you own a vehicle and have it insured under a Personal Auto Policy (PAP) you should be aware of your policy exclusions. In the standard Personal Auto Policy (PP0001) coverage form there are the following exclusions:

  • A.6. We do not provide Liability coverage for any insured…while employed or engaged in the business of selling, repairing, servicing, storing or parking vehicles designed for use on public roadways.
  • A.7. Maintaining or using any vehicle while that insured is employed or otherwise engaged in any business (other than farming or ranching)

There is a small amount of giveback on the policy for point two, but only under these conditions:

This Exclusion (A.7.) does not apply to the maintenance or use of a:

  1. Private passenger auto;
  2. Pickup or van; or
  3. “Trailer” used with a vehicle described in a. or b. above.

While most PAPs are based on the PP0001, some include additional exclusions or conditions, including amount of usage per period (week, month, policy term) and vehicle size. Read your policy and talk to your broker about the business usage of your personal vehicle.

Your policy will not cover business use of your personal vehicle for any of the following: livery (taxi or Uber, or package delivery), valet, newspaper or pizza delivery, so read your policy and talk to you broker. Endorsements or hybrid policies may be available, but you won’t get the coverage unless you disclose the business use of your vehicle.

Personal Use of Commercial Vehicles

While there is no specific exclusion on the Business Auto Coverage Form (CA0001) for personal use of company vehicles, there may be exclusions and/or conditions in the policy limiting both the use and the storage of these vehicles. Usually these are disclosed on your new or renewal quote, but you should also check your policy and talk with your broker to find out the specifics for your policy. Things to consider:

  1. Which vehicles are you insuring? Check the coverage symbol on the policy (the Business Auto Coverage Form defines them all) and pick the broadest coverage symbol available for your business.
  2. Do your company officers own vehicles that are insured under a personal auto policy? If not, consider adding Drive Other Car coverage for your officers to extend personal auto policy benefits to the business auto policy.
  3. Do your employees take home company vehicles to be used personally or garaged at their home overnight or on weekends? Your policy may exclude this, so check with your broker.
  4. Do your employees use their own vehicles for company business such as errands or sales calls?

If your company performs deliveries, valet service, livery, auto repair or other heavy commercial auto usage, a standard commercial auto or fleet policy is likely not the proper policy for your business.  An independent insurance broker can properly insure these types of businesses.

It is likely there are gaps in your current coverage that can be bridged with endorsements or a policy rewrite. Schedule a risk management analysis with your insurance broker to discuss the vehicles your company owns and the vehicles used to perform company business.

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