By Gayle SatoPersonal vs. Commercial Car Insurance: Do I Need Both?
If you own a business or are self-employed, you may need more than one kind of car insurance. Driving a car for business isn't covered under your personal car insurance policy. To make sure your business driving and business vehicles are also protected, you need separate commercial auto insurance.
Here's a quick table showing the differences between personal and commercial auto insurance.
| Personal Auto Insurance | Commercial Auto Insurance | |
|---|---|---|
| When you need it | You own a car | You own a business that owns or operates vehicles |
| What it covers |
|
|
| Cost | $2,304 on average for a full coverage policy, according to Experian data. | Costs vary widely depending on the type and number of vehicles, the number of employees and the coverage you need, but may start at under $600 for a single vehicle driven occasionally to thousands of dollars for a fleet of full-time vehicles. |
What Is Personal Auto Insurance?
Personal auto insurance offers financial protection when you're in an accident or your vehicle is damaged. Personal car insurance typically covers damage to another party's vehicle, medical bills and compensation for lost wages if the other party is unable to work following an accident. A full coverage policy also pays for damages to your vehicle.
Personal auto insurance covers your personal vehicle and accidents that occur when you're driving off the job; it typically doesn't cover business vehicles or accidents that happen when you're driving for business in your personal car.
Do I Need Auto Insurance?
If you drive a car, you almost certainly need auto insurance. A minimum level of auto insurance is required to legally operate a vehicle in most states. And if you have a loan or lease, your finance company may require you to carry additional collision and comprehensive coverage to protect their collateral (also known as your car) if it's severely damaged or totaled.
Personal auto insurance also protects you and your assets. If you're at fault in a major accident, damages can add up quickly. Without insurance, you could be on the hook for major expenses. Full coverage insurance can also help ensure you get back on the road quickly if your car is damaged or totaled. When the unexpected happens, car insurance helps to mitigate your losses.
Learn more: Benefits of Auto Insurance
What Does Personal Auto Insurance Cover?
Basic personal auto insurance covers liability, medical payments for personal injury and damages caused by uninsured motorists.
- Liability insurance pays for damages to the other party and their vehicle when you are at fault in an accident.
- Personal injury protection and medical payments coverage cover treatment for injuries to yourself and your passengers.
- Uninsured or underinsured motorist coverage pays for injuries and damage when an uninsured or underinsured motorist causes an accident.
You may also opt for full coverage car insurance, which covers damage to your car.
- Collision coverage pays for damage to your car from an accident.
- Comprehensive coverage covers damage to your car from natural disaster, theft or other non-collision event.
Additional coverages help out with the cost of car rental if your car is totaled or damaged, broken glass replacement or roadside assistance. There's also new car replacement coverage that pays you the cost of replacing your totaled car with a new version of the same make and model. These coverages are strictly optional.
Learn more: What Are the Types of Car Insurance?
How Much Does Personal Auto Insurance Cost?
The average annual cost of a full coverage auto insurance policy is $2,304, according to Experian data. However, a wide range of factors affect the price of an auto insurance policy, including:
- Amount and type(s) of coverage
- Where you live
- Demographics (your age, gender and marital status)
- Credit history
- Vehicle (type, age and value)
- Driving record
- Miles driven per year
If you're pricing out car insurance, it's a good idea to get multiple quotes. Pricing can vary significantly between insurance companies, even for similar coverage.
Learn more: How Much Does Car Insurance Cost?
What Is Commercial Auto Insurance?
Commercial auto insurance covers liability and damages for business vehicles and business driving. It's similar to personal auto insurance but it specifically covers business uses, like delivery driving, traveling to client locations and transporting goods or people.
Business auto insurance also covers the business use of personal vehicles, so if you sometimes drive your personal car for business purposes, a commercial auto policy can pick up where your personal auto policy leaves off.
Do I Need Commercial Auto Insurance?
You need commercial auto insurance if you own a business that owns or operates vehicles, or if you or your employees drive personal vehicles on the job.
Here are a few situations where you need commercial auto insurance:
- Your business owns or leases vehicles. Your business operates trucks, vans, transport vehicles or trailers as part of doing business.
- You use your personal car for business. Commuting doesn't count. But, if you drive from one work site to another, do gig work for a delivery app, or transport goods or clients in your personal car, you may need dedicated business auto insurance to cover what your personal auto insurance does not.
- Your employees drive on the job. Your employees' personal auto insurance won't cover them if they get in an accident while driving for work. Also, their personal liability coverage may not be adequate to protect your business in a major accident.
What Does Commercial Auto Insurance Cover?
Commercial auto insurance policies have coverages that are similar to personal policies:
- Liability insurance covers bodily injury and property damage resulting from an accident.
- Collision coverage pays for covered damage to your vehicle resulting from an accident.
- Comprehensive coverage covers damage to your vehicle resulting from something other than a collision.
- Specified perils coverage is similar to comprehensive coverage but only applies to named perils.
- Hired and non-owned insurance covers vehicles you operate but don't own.
You may be able to save money by choosing different coverage for each vehicle—for example, selecting collision and comprehensive coverage for your company's indispensable delivery truck but only liability coverage for the spare car you drive occasionally to run errands. Also be aware, however, that your state may have minimum coverage requirements for business auto insurance.
How Much Does Commercial Auto Insurance Cost?
Like personal auto insurance, commercial auto insurance varies widely in cost. Unlike personal auto insurance, commercial coverage may involve a wider range of vehicles and drivers, creating an even broader spectrum of possible pricing.
The best way to get a handle on the potential cost of commercial auto insurance is to get a few quotes. Talking to different insurance companies can help you figure out how much coverage you actually need and what it might cost to get it.
How to Get Auto Insurance
Whether you're looking for personal auto insurance or commercial, the process for getting car insurance is largely the same. To start, you'll need to find insurance companies that offer the coverage you want. Some insurance companies offer both types of auto insurance. If your personal auto insurer doesn't offer commercial policies, seek out a separate commercial insurer. The company that handles your general business insurance may be a good place to start.
Follow these steps to get personal auto insurance, commercial auto insurance or both:
1. Gather Your Information
You'll need a list of vehicles and drivers you want to cover, plus policy documents from your current or previous insurance. VIN numbers, registration documents and odometer readings for vehicles and driver's license numbers for drivers may be helpful as well.
2. Get Quotes
A quote is an estimate of costs, not final pricing. Still, it's a good way to compare coverages and costs to make sure you're getting the policy you need. Consider using an online insurance comparison tool to get quotes from multiple companies at once. You may also want to contact your personal auto insurer to see if you can get pricing on a commercial policy, or try shopping both policies together to help avoid duplicate coverage and potentially qualify for multi-policy discounts.
3. Compare Policies
Review your options carefully. Compare coverage, deductibles, customer service and pricing before choosing the best fit.
4. Get Final Pricing and Sign
Once you've made your choice, ask for final pricing. If everything checks out, pay your premium(s) and get proof of insurance.
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The Bottom Line
If you own a business that owns or operates vehicles, and you drive a car in your off hours, you may need both personal and commercial auto insurance. Though shopping (and paying) for two types of auto insurance isn't anyone's idea of fun, getting the coverage you need to ensure that your personal and business assets are protected will help protect you in the event of an accident.
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About the author
Gayle Sato
Gayle Sato writes about financial services and personal financial wellness, with a special focus on how digital transformation is changing our relationship with money. As a business and health writer for more than two decades, she has covered the shift from traditional money management to a world of instant, invisible payments and on-the-fly mobile security apps.
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