Commercial Auto vs. Business Use on Personal Car Insurance Policy

Most consumers already feel that insurance is a scam and I really don’t blame those folks. However, the reason they feel cheated is because they have not worked with real insurance professionals that explain how a policy works. It is NOT all about pricing or brand but rather about the fine print! – In this post I’ll try to explain it as best and quick as possible so that you, the consumer, can make an educated decision as to how you want to protect yourself and your business. 

Personal auto insurance offers you 4 types of uses that you can be covered for; 

  • Pleasure Use = “this is my weekend vehicle which stays parked most of the week” 
  • Commuter Use = “this is my daily driver that I use to get to and from school, work and the one I use to do my personal errands”
  • Artisan Use = “this is my daily driver and on the weekends, and on rare occasions, I use this vehicle to carry my work tools & equipment for my side gig (artisan trades, landscaping, etc.)”
  • Business Use = “this is my daily driver and this vehicle is used to get me to and from my sales meetings” 

Your Personal Auto only covers you based on the facts you stated on the application – Miles Driven, Who Drives it, Who Lives with you and How It’s Used (Pleasure, Commute, Artisan or Business). You are limited to these stated facts and you will be charged more premium or denied if, at the time of a claim, your stated facts did not match. For example, if you stated you only drive 12,000 miles but you are a super commuter who drives 30,000+. 

Can my claim be denied if I was using my car differently than what I was rated for?

– Yes! Your personal auto insurance carrier has to right to deny any claim if they find a material misrepresentation at the time of the loss. For example, you did not list your teen that resides in your household or the fact that your place of work is 2-3 times farther than originally stated on your application. If these material facts would have been shared with the insurer, you would not have qualified for their insurance program to begin with. – In other words, “you lied to us and here’s your refund, you never had insurance with our company”.

Personal Auto Exclusions, what are they? 

Your Personal Auto policy does have a bit more than just limitations, it has EXCLUSIONS. These can be found hidden in the last pages of your Policy Jacket (NOT your Quote, Application or Declarations Pages, but that lengthy set of documents that comes in after you buy the insurance coverage).  

Most common Personal Auto Exclusions are;

  • Delivery Exclusion = “I understand that my coverage is NULL & VOID when I use this vehicle for delivery work”
  • Public or Livery Passenger Exclusion = “I understand that my coverage is NULL & VOID when I use this vehicle to transport passengers for pay, such as UBER & LYFT”
  • Modification Exclusion = “I understand that my coverage is NULL & VOID when I modify my vehicle’s OEM Suspension or Braking Systems”
  • Commercial Signage Exclusion = “I understand that my coverage is NULL & VOID when I place a sign on my vehicle to promote any business operations”

In short, ALL Personal Auto Insurance policies in California EXCLUDE coverage (meaning they DO NOT COVER) when the vehicle is used for business, commercial purposes or in a manner not otherwise reported on the application. Besides simply telling your agent, you actually have to get your agent to do an endorsement (change) to your declarations pages to state how you will use and who will use the vehicle or vehicles. – For instance, you can now buy Rideshare or TNC coverage via an endorsement to your policy. However, this type of endorsement does have limitations of it’s own but that’s for another post. 

Why should I insure my vehicle under a Commercial Auto policy?

A Commercial Auto policy broadens the coverage options. Such as allowing you to list your Business as a Named Insured and allowing you to drive unlimited miles per year. Plus, the coverage amount options can exceed the usual $500,000 limits a personal auto policy has. A commercial auto policy can extend coverage to protect and insure an employee where as a personal auto policy excludes this coverage. 

How is a Commercial Auto policy rated?

  • The type of business or commercial operations 
  • The years your business has been continuously insured
  • The radius you drive from your place of business
  • The employee driver’s age, violations and accident history
  • The endorsements you require – Additional Insured, Waiver of Subrogation, etc.
  • The vehicle type – Custom Build, GVW, Lift Gate, Box Truck, etc. 
  • The valuation used to pay damages to your vehicle – Stated Value, Actual Cash Value, Agreed Value

Are all Commercial Auto policies the same?

NO! Negative! Commercial Auto policies are NOT all the same. Since most insurers believe that folks are price sensitive, a newer breed of Commercial Auto has come to the market. One that feels and looks like a commercial policy BUT it comes with many limitations and exclusions! Something that is not typical of true commercial policies like those offered by The Travelers, Hartford or Nationwide.

What common exclusions does an online Commercial Auto policy have?

Not to knock the online only or insuretech insurance carriers because there is a need in the market place for these, but as an insurance broker my duty is to inform my consumers on the risks associated with every type of insurer. So here’s what my research has found to be the most common exclusions that you should watch out for;

  • Fellow Employee Coverage = “I understand that my C.A. coverage is NULL & VOID when I injure a fellow employee or co-worker”
  • Exclusion of Terrorism = “I understand that my C.A. coverage is NULL & VOID when my vehicle damage is deemed a terrorist act (like when there is a riot and those folks are then deemed to have caused terror)”
  • Rental Coverage = “I understand that my C.A. coverage requires that I pay out of pocket for a rental car after a covered loss and that I shall then request a reimbursement”
  • Punitive or Exemplary Damages = “I understand that my C.A. coverage is NULL & VOID when I crash into the vehicle that was attempting to hurt me and my employees.”
  • Driving While Intoxicated or Impaired = “I understand that my C.A. coverage is NULL & VOID when I am found to be under the influence or any substance, including prescription pain medications or legal marijuana”
  • Custom Parts and Equipment = “I understand that my C.A. coverage is NULL & VOID when I modify my vehicle”
  • Towing & Labor = “I understand that my C.A. coverage requires that I pay out of pocket for any Towing and or Labor after a covered loss and that I shall then request a reimbursement”
  • Unlisted Driver = “I understand that my C.A. coverage is NULL & VOID when an unlisted driver was behind the wheel of my company vehicle”

In short, the proper Commercial Auto Insurance policy can help protect your business, your vehicles and your employees, but it’s also very easy to fall for the wrong insurance if your agent/broker isn’t doing their due diligence. 

I hope that this quick post helped you understand the difference between insuring your car/truck on your personal auto policy or a commercial auto policy. In the end, it is you that makes this important decision with the help of the knowledge shared with you. – If I can assist you in properly insuring your vehicles or answering any questions in regards to coverage or claims, please feel free to reach out. 

post written by: Domingo Ramos, Insurance Broker, proudly licensed to transact insurance in California, Oregon, Washington, Nevada, Arizona, Texas and Michigan. – domingo@tcsib.com

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