Why do I want commercial vehicle insurance anyhow? Why can’t I just insure my trucks under my personal policy? Let’s address that very question.
There are two major ways in which one can insure a vehicle used for business, depending on the actual use, the type of vehicle, and the insurance company.
Personal Auto Insurance, generally speaking, covers your vehicle while going to and from work and for personal use. Sales use may also be allowed.
Commercial Auto Insurance: covers your vehicle for business use, which can be sales, service, or commercial trucking. Personal auto policies actually exclude most types of business use.
A closer look at the uses themselves
Sales use: this is called business use on a personal auto policy. It assumes that mileage you put on your vehicle will be in traveling to customers’ sites to make sales, speak to existing clients, go to meetings or meals with clients and so on. This could be use in a private passenger vehicle or a pickup truck up to half-ton. Not all personal lines companies will allow this category. Such a policy will be rated for business use and covered that way.
Beware of using your personal vehicle for sales calls and not advising your insurer that you are doing that, as your policy may specifically exclude such use unless endorsed for business. Your insurance carrier may not even allow such endorsements, and you don’t want any rude surprises in case of an accident.
Make sure that if you are driving for work, that you have adequate insurance coverage. $30,000/$60,000 will not do if you are in business. An accident in your business vehicle will likely exceed that limit, and then they go after the business. Get the highest limits you can.
Service Use: An example of this would be a contractor using a pickup truck to go to a work site or sites, where he would be using his tools for his job. You don’t even have to think contractor in this. You could easily think domestic cleaning service, such as a maid service. The maids (actually janitorial workers,) go from customer to customer during the day and do their work in each location, bringing their cleaning tools with them. We can think of other examples as well.
Commercial use: an example would be delivering packages, or products such as raw materials. The type of vehicle used could be a personal vehicle like a mini-van delivering printed products, to a step van such as FedEx or UPS, all the way up to a gasoline truck, cement truck, tow truck or produce truck. Heavy equipment qualifies as commercial use as well. Think tractor and trailer or flatbed. As long as it can be registered to travel on roads and freeways, it can be commercial use. Equipment such as bulldozers are in a different category.
Why bother with commercial insurance at all?
- Your client may require you to have certain coverages not afforded by personal insurance.
- Your client may require higher limits than available on a personal insurance policy; $1,000,000 for example. Personal lines policies normally do not have limits this high.
- Your client may require an additional insured certificate, which actually names them as part of your policy. This is very common with commercials and largely unavailable for personal lines.
- You may need to tow a commercial trailer. This is definitely not covered by personal lines insurance.
- You may have employees who drive for work incidentally (running to the Post Office for stamps,) or consistently (a salesman using her personal vehicle to make sales for your company.) For this type of use, you would add non-owned auto coverage to your policy. This protects your business in the event that this person is in an accident while on company time or business.
This coverage can actually save a business. Let’s say you asked an employee to pick up something for the business owner, and the driver got into an accident. Of course, if an attorney finds out that it is business use, they will sue the business for any damages, and if you are using a personal policy for business use, you will not be covered and the business will lose.
If you are operating your business as an individual rather than as a corporation or LLC, such a lawsuit can affect your personal life and assets directly. If you are in business, the best protection for you is to operate under an entity such as an LLC or a corporation and insure your vehicles under that entity.