For many who use their vehicle for work, it can be difficult to navigate the differences in coverage and exclusions between a personal auto and a commercial auto policy to know how to best protect your individual and business interests. And let's face it, insurance policies don't exactly make for enthralling reading. So let's break down some of the most common scenarios in which policy distinctions can affect coverage.
If you're using a private passenger auto that is registered to you individually, and simply driving to and from appointments or job sites, chances are your personal auto policy is sufficient to protect you as an individual without the need to purchase a full fledged commercial auto policy. However, in order to make sure the business entity is also protected should you be found liable for an accident, you should inquire about Hired & Non Owned Auto coverage. This is a liability coverage that is used for vehicles owned or hired by employees or owners that still have the potential to be involved in an accident for which the business could be liable. Typically this coverage can be added to a business owners package for just a few hundred dollars a year.
If your vehicle is a truck or van and/or you're hauling tools or equipment, the lines get a bit more blurry depending on the type of business and manner in which the vehicle is being used. Some policies have exclusions for box trucks or those over a certain gross vehicle weight. And almost all vehicles with a clear commercial purpose such as tow trucks would be excluded from a personal auto policy.
If your vehicle is being used to make deliveries such as pizza or packages for the purpose of compensation, there are likely exclusions in your personal policy that you will want to investigate as this can vary from one insurance company to another.
Similarly, is your vehicle is being used to transport people for compensation? If so, this is what insurance companies refer to as "livery". Although taxis, limos and shuttles might be the most obvious examples, the growing popularity of ride-sharing transportation networks like Uber and Lyft is increasingly presenting significant coverage gaps. While almost all personal policies have some form of livery exclusion, a handful of personal insurers such as Mercury Insurance now offer special endorsements that allow Uber and Lyft drivers to buy back coverage for the period of time between turning on their app when they actually pick up a passenger (which is when their Uber coverage typically will kick in).
Finally, consider how the vehicle is registered. If it's registered to, or leased in the name of a business you will want to ensure that whatever type of policy it is insured under is properly protecting the business entity. Not only is it important to make sure the business is covered for the loss itself but for the defense costs as well, should it end up in court.
Clearly there are no shortage of gray areas on the subject of business use, which is why it's best to check with your agent if you think any of these scenarios might apply to your situation. With the potential for auto claims to run into the millions, you certainly want to make sure that both you and your business will be adequately protected BEFORE you have a loss!