A car is a significant investment. It is trivial that it is protected from any form of liabilities. What better way to achieve this than purchasing auto insurance for the car? As a small business owner, you may have difficulty distinguishing between personal and business vehicles. Therefore, when purchasing auto insurance, you may end up buying the wrong one. The result may be detrimental to your business in the long run. It is, therefore, safe to understand the difference between commercial and personal auto insurance coverage before setting out to buy any.
Questions to ask yourself before purchasing an auto insurance
1. Vehicle Ownership
One distinguishing factor between personal auto insurance and business car insurance is the vehicle’s owner. It would be best to buy commercial auto insurance if the car is registered under your business name. You may also be a sole proprietor, but you have dedicated your vehicle for business use. In this case, you still need to purchase a commercial car insurance policy.
2. Coverage Limit
Personal auto insurance policies cover third-party auto damage if you are found at fault, bodily injuries, and legal expenses. However, even with the personal auto insurance cover, you get to opt for a higher package that can also cover your vehicle damage. You get to achieve this when you purchase comprehensive insurance.
Commercial auto insurance covers higher claims compared to personal auto insurance. Also, the coverage can be for different vehicle types and legal issues considered to be more complex.
3. Type of Vehicle
No person buys a vehicle weighing more than five tons for personal use. Therefore, when you purchase an auto insurance policy, the insurance companies will factor in the vehicle weight. Therefore, vehicles with higher weight are excluded from personal insurance coverage.
4. Vehicle Usage
You need to state out what your car usage is clearly. Personal car insurance only offers coverage up to a certain extent, after which it gets no longer viable. Private car insurance only gets applicable when you use the car to commute from home to work and vice versa, transporting your family members or for recreational purposes. However, personal car insurance does not cut when the car is being used for work errands such as transporting goods or equipment to different work sites, performing payable services, charging for rides, or deliveries. In this case, you may need to go for commercial insurance coverage.
5. Cost of Commercial Auto Insurance Versus Personal Auto Insurance
The cost of commercial auto insurance is significantly higher when compared to that of personal auto insurance. The price difference is primarily because commercial auto insurance covers a higher limit. Regarding limits, commercial auto insurance offers single limits inclusive of liabilities relating to body injuries or property damage. Besides, the policy also ensures that your business assets get protected if you are at fault.
Other than the above obvious reasons, other reasons are attributed to the high cost of coverage. Unlike personal auto insurance that only covers a person in case of an accident, commercial insurance covers an entire business entity. The coverage includes:
• Different vehicle types.
• Drivers in your business.
• Frequency of vehicle use.
• The number of vehicles your company owns.
• Even employees with poor records of driving.
As such, auto insurance companies always consider commercial vehicles to be of higher risk than those dedicated for personal use hence increased costs.
Comparing Costs of Commercial Auto Insurance Premiums
The complex chains of claims are what make the commercial auto insurance coverage to be pretty high. However, this does not imply that you cannot get a good deal of commercial auto insurance cover for your business. The sheer number of auto insurance companies has made the market quite competitive. Therefore, you may find a commercial auto insurance company whose premium costs fit your budget when you shop around. Consequently, it would be best if you never rushed into choosing the first auto insurance company you come across due to pressure from its salespeople.
However, considering your business investment is your top priority, you also do not want to end up buying your commercial insurance cover from a company because its coverage cost is cheap. Such a company may look enticing initially, but your business may end up suffering in the long run due to this poor partnership. You indeed get what you pay for. Therefore, the reputation of the auto insurance company should be what drives you to purchase your commercial auto insurance cover from them.
For your small business to remain operational for a long time, you need to be keen on the investment decisions you make. Not understanding when to go for personal or commercial auto insurance may significantly impact your business. However, you are more enlightened on your choice from the information above.
