The Thin Line Between Personal and Commercial Car Insurance

business auto policies

When you think of commercial car insurance, large work trucks are probably the first thing to come to mind. We’re talking semi-trucks, cherry pickers, dump trucks, etc. It’s true that all of these trucks do need to be insured, however, regular cars sometimes need to be as well.

It can be a fine line whether or not your personal car also needs commercial car insurance, so we’re here to try and clarify who needs what.

What is commercial car insurance?

Let’s start with the basics. Commercial car insurance is generally referred to as a Business Auto Policy (BAP), where personal car insurance is actually referred to as a Personal Auto Policy (PAP). Both are similar in that they offer a policy of physical damage and liability coverage.   Where they differ is in eligibility, what is covered, and what is not.

The large work trucks we mentioned before are not eligible for a PAP, so must be insured on a BAP.  While your personal car may be covered on a PAP, there are other times you need to insure your vehicle on a BAP.

This is due to the PAP’s policy language.  PAP’s have what is commonly referred to as the Public or Livery Conveyance exclusion in them.  In short, this exclusion says that if you are using the vehicle to transport people or goods for a fee, there is no coverage. However you should note that many companies have now come out with endorsements to give back limited coverage for ridesharing services. This is also something to look into.

Who needs a Business Auto Policy?

If you use your vehicle as a tool for business, other than your regular daily commute, you may need a Business Auto Policy instead of a personal policy. The difference depends on:

  • Transporting goods
    • Pizza or food delivery
  • Hauling equipment
    • Construction tools/equipment
  • Ridesharing
    • Uber and Lyft drivers
  • The way your vehicle is titled
    • Many insurance companies require the titleholder of the vehicle to be the individual Named Insured.   If the vehicle is titled to any kind of a business entity, they want it insured on a BAP. 

It is also very important to point out that all PAPs and BAP are not the same.  Insurance company advertising often gives the impression that the policies are all the same and the only distinction is the price, when comparing the same coverage limits and deductibles. This is not the case, and the variations can be the difference between a claim being covered or not.

Many insurance companies use some form of Insurance Services Office (ISO) policy language. This is to provide a standardized policy language for insurance policies, among other things. However, there is no requirement that a company use ISO forms. They may draft their own—and many have. Generally, when they draft their own, they have done so to reduce coverage somewhere.

Are you covered?

One big area often found to have a huge coverage setback is in the “Business Use” of a car on a Personal Auto Policy. There are policies widely sold online that have virtual total business use exclusions. While ISO PAPs have the public or livery exclusion, in practice this is really the only “business use” exclusion in an ISO PAP.

If you have a policy that includes a total business use exclusion and you drive somewhere on company business, or do something as simple as run to pick up supplies for your boss on a break, and you get into an accident—you are not covered.

If you are concerned that your personal car insurance is not covering your business endeavors, talk to your insurance provider.

Chastain Otis Insurance can help you when it comes to Business Auto Policies. If you have questions or think that you are in need of a BAP, contact us today. We can find the right coverage for you.

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