What is the Difference Between Personal Auto Insurance and Commercial Auto Insurance?

No matter what vehicle you drive, auto insurance is required in order to operate legally on the road. But there are many different policies to choose from, and not all of them are right for you. 

Personal auto insurance is the most common type of auto insurance that every driver operating a personal vehicle carries. This insurance is required by the state for normal drivers. 

Commercial auto insurance, on the other hand, is an auto insurance policy that only applies to vehicles used for work purposes, such as transporting equipment. It provides a lot of the same coverages as a personal auto insurance policy but is geared specifically for work vehicles. 

What Does Personal Auto Insurance Cover? 

A full coverage car insurance policy generally comes with: 

What Does Commercial Auto Insurance Cover? 

Commercial auto insurance provides the same coverages as listed above, though the limits on these coverages are often higher for commercial vehicles. There are also additional coverages available for commercial auto insurance policies to cover equipment being transferred. This is called inland marine insurance. 

It may also include: 

• Hired and non-owned liability covers liability for vehicles used or rented by the business. 

• Hired auto physical damage covers physical damage to rented or borrowed vehicles. 

Which Auto Insurance Policy Do I Need? 

So, how do you know which policy you need? 

It’s important to note that commercial auto insurance does cover personal use, as well. It’s unlikely that you will need to insure your vehicle with both commercial auto insurance and personal auto insurance. 

Since commercial auto insurance is geared toward commercial vehicles, you should not use this insurance on a personal vehicle that is not used for work. Doing so can result in the insurance agency cancelling your policy. 

But how do you know if your vehicle is used for work purposes? 

Commuting to and from work does not count as work purposes. If this is the only work-related use of your vehicle, you will need personal auto insurance rather than commercial. On the other hand, if you frequently transport cargo and equipment or use the vehicle to frequently transport clients, you will need commercial auto insurance. 

Do Employers Cover Commercial Auto Insurance? 

In some cases, an employer may provide commercial auto insurance for certain vehicles. If you use work cars or utilize your personal car for work, be sure to ask your employer about their commercial auto insurance policy. If they do not provide commercial auto insurance for personal vehicles, they may still provide compensation for other aspects of the vehicle, such as gas. 

Is Commercial Auto Insurance Cheaper than Personal Auto Insurance? 

On average, commercial auto insurance is typically less expensive than personal auto insurance. These costs are influenced by many of the same factors such as credit scores, driving records, and location. The size of a business can factor into its commercial auto insurance as well as the driving record of other drivers operating the work vehicles. 

The average cost of commercial auto insurance is between $750 and $1,200. Full coverage policies tend to cost more. Personal auto insurance, on the other hand, costs an average of personal auto insurance is about $1,758 a year. 

It’s important to identify what your vehicle is used for and what type of insurance you need. Simply going with the cheapest option without considering the use of the vehicle can cause an insurance agency to cancel your policy or drop you as a client, so be careful when it comes to choosing your coverage.