At what point do I need a commercial auto insurance policy?
We get this question often, and almost every time, it comes from a business owner who is getting a General Liability quote from us. We want to dispel a common myth and explore some of the reasons why you might need to look into a business auto policy.
But first... Isn't commercial auto insurance expensive?
Before I get into understanding whether or not you need a commercial auto policy, I’d like to squash this myth first. Most people I run into think that commercial auto insurance is more expensive than a personal auto policy. While it can be quite pricey for taxi and limo drivers, most of the time, it isn’t terribly costly! Commercial auto policies are seen as more expensive because, most of the time, our business owner clients have other companies they contract through that require them to have higher liability limits. Of course if you have higher liability limits, your insurance will be more expensive. When you compare apples to apples, though, commercial auto insurance can not only be similar in price, but it can also even be cheaper.
To the untrained eye, deciding whether you need a business auto policy might seem complicated, but we can usually figure it out just by asking a few questions. I’d like to discuss the major questions we ask when trying to figure out whether our client should be insuring their vehicles on a commercial auto policy or a personal auto policy.
1. "Is the vehicle titled in your company's name?"
If your vehicle is titled in your company’s name, then you definitely need a commercial auto policy. No personal auto insurance carriers will allow you to insure a vehicle that is in a company's name. This is definitely an easy indicator that you need a commercial auto insurance policy!
2. "Do you write off your vehicle and/or vehicle expenses on your business’ taxes?"
If you are writing off your lease payment or maybe depreciation, you probably need a commercial auto policy. This can even include gas, vehicle maintenance, or your auto insurance.
3. "Do you carry tools, products, or parts from job to job?"
If you have any of these items in your vehicle on a regular basis, you most likely need a commercial auto policy. This one could have a few exceptions, but more often than not, you are using the vehicle commercially.
4. "What’s your line of work?"
If your business does any artisan type of work, you are most likely using your vehicle commercially. Some examples would be drywall installers, carpenters, plumbers, or even a handyman. All of these should carry commercial car insurance.
5. "Do you transport people for your business?"
This used to be very black and white. If you own a taxi service, limousine company, or even in some cases transport people for medical reasons, you definitely need a commercial auto policy. Now, with ridesharing services like Uber, it becomes grey. Uber has its own insurance that covers you when you are “on the clock", but let me warn you! When you aren’t on the clock, there is no guarantee that your personal auto policy will cover you. The fact that you do use your vehicle “for hire” can disqualify your personal auto policy coverage even if you are in an accident while using the vehicle “off the clock".
If you answered yes to any of these questions, you probably need a commercial auto insurance policy. If you answered yes to more than one question, you definitely need a commercial auto insurance policy. At Harrell Agency, we know that price is a major driver of the industry, but with commercial auto insurance, sometimes you could save money by switching your vehicle to a commercial policy. Even if it's not cheaper, you don’t want to be in a position where your insurance company can deny your coverage based on you using it commercially.
If we left any questions unanswered, you can email me or send me a message on Facebook or Twitter. I'm happy to help!