Does Insurance Cover Business Use Of A Personal Vehicle?

Key Points

• Your personal insurance generally won’t cover a business vehicle.
• You can purchase commercial car insurance to ensure your vehicle is protected during business trips or day-to-day non-personal use.
• When buying additional coverage, you may want to consider coverage beyond the state minimum.

Every time you drive, you’re putting yourself at risk behind the wheel. While policies from the best auto insurance providers won’t shelter you from dangers on the road, they can protect you from financial and legal problems in the case of an accident.

One dilemma with auto insurance is the business use of a personal vehicle. If you’re in an industry where you drive your own vehicle for work, you may be wondering whether to purchase a special car insurance policy.

The truth is, different situations call for different types of coverage. Your best course of action is to figure out how different car insurance policies work to see if they match your coverage requirements.

Does Personal Car Insurance Cover Business Use?

Personal car insurance generally doesn’t cover business purposes. In fact, it’s recommended that drivers avoid the business use of a personal vehicle if they don’t have additional insurance coverage.

If you’re a business owner who heads out on company errands in a personal vehicle or you’re an employee who drives for work engagements or deliveries, chances are your personal auto insurance won’t cover any liabilities that happen on the job.

With so many employees driving their own cars for work, it’s important to know how much coverage your company provides if you engage in the business use of a personal vehicle. Cars used for work purposes usually spend more time on the road, increasing your risk of an accident.

Since insurance companies face greater financial risks when they insure cars used for work, coverage is generally much more expensive than personal insurance. Because of this, a personal auto policy will rarely cover damages caused by the business use of a vehicle.

Types Of Insurance For The Business Use Of A Personal Vehicle

Although owning car insurance is a legal requirement (except in New Hampshire and Virginia), you can upgrade your coverage based on your usage and preferences. The owner, operator, and purpose of a vehicle will largely determine the type of insurance you need.

When you apply for an auto insurance policy, expect to fill out a form mentioning how you plan to use the vehicle. Because of this, it’s best to understand your needs beforehand so you can choose the best policy for your requirements. Broadly speaking, drivers can pick between two categories of car insurance: personal and commercial.

Personal Auto Insurance

Personal car insurance laws vary widely, with different minimum coverage requirements found in each state. Expect your location to play a huge role in determining how much you’ll pay since coverage limits, crime rates, and the number of uninsured drivers differ depending on the area.

On a basic level, minimum-liability auto insurance protects car owners against financial loss when thefts or accidents happen. These policies can also compensate for medical needs and property damages.

When Personal Auto Insurance Is Enough

As a rule of thumb, personal auto insurance policies won’t pay for damages from a business-related accident. However, in limited cases, the business use of a personal vehicle may qualify for insurance coverage. Here’s a list of situations when you’ll be covered by personal auto insurance:

• Strictly personal driving: Personal driving includes going on non-business trips, commuting to work, or running errands like shopping or visiting someone.
• Occasional business meeting: Though business-related rides are not eligible for claims after an accident, an occasional trip to meet a client may qualify for coverage.
• Single business premises only: If your daily commute is limited to a single worksite, you can still receive coverage from your personal auto insurance.

When Personal Auto Insurance Isn’t Enough

Insurance companies are strict when it comes to assessing filed claims. If you regularly find yourself in the following situations, make sure to sign up for commercial auto insurance.

• Frequent business-related rides: If you often use your car to run business errands, it may be time to get commercial auto insurance. Personal auto insurance doesn’t cover accidents while you’re purchasing supplies or delivering goods for your company.
• Work-related damages and lawsuits: A personal auto insurance policy doesn’t cover damages and litigation resulting from business operations. Even taking a business call while driving at the time of the accident can lead an insurer to refuse your claim.
• Regular business travel: If your business requires you to travel often or to drive for business purposes, consider the added protection of commercial auto insurance.

Commercial Auto Insurance

Commercial car insurance covers regular business trips that move beyond personal coverage. This type of policy is often the best way to cover the business use of a personal vehicle and is quite popular among those who are self-employed.

In most states, business owners are legally required to carry commercial auto insurance if their vehicles are used for work. With coverage, your car will be protected from most damage caused by your company’s operations.

When You’ll Need Commercial Auto Insurance

Regardless of whether you have a choice, it’s smart to purchase commercial insurance if you’re involved with the business use of a personal vehicle. Below are some reasons to opt for commercial vehicle coverage.

When it’s required by law: Like with personal auto insurance, most states require companies to carry adequate insurance to mitigate financial loss in the case of accidents. Business owners need to pay for commercial policies if they’re involved in the following:

• Driving daily to meet with clients
• Transporting passengers as a key job role
• Commonly doing out-of-office tasks for work
• Delivering goods
• Permanently keeping work equipment on their car
• Using heavy trucks, vans, or utility vehicles

When you want a wider scope of protection: Commercial auto insurance can cover both your personal car and vehicles intended specifically for work. The following are a few more times when you’ll need to sign up for commercial auto insurance:

• Regular work-related use of your personal vehicle
• Transport of expensive equipment and tools with a personal car

Hired And Non-Owned Auto Insurance

If trips away from the workplace aren’t a regular part of your operations, commercial auto insurance may be a bit excessive. In that case, you’ll want to purchase hired and non-owned auto insurance (HNOA), which covers rented vehicles and cars owned by your employees. Here are some benefits to holding an HNOA policy:

• Third-party protection: HNOA covers damages that occur when you’re driving non-owned vehicles, though it’s limited to third-party items. Because of this, your company won’t have to pay for damages caused by rental cars or vehicles owned by your employees.
• Lawsuit protection: Another benefit of HNOA is that you’ll be protected against lawsuits filed by other parties involved in an accident. Your insurance provider will likely cover your legal expenses if another party opts to sue your company.
• In combination with other insurance: HNOA is almost always significantly cheaper than commercial auto insurance. This is because the cars covered by HNOA insurance generally log fewer miles than vehicles used specifically for companies.

How To Decide Which Insurance You Need

Deciding on the right type of auto insurance typically involves considering your options to reduce risks and protect your company’s assets. Now that we’ve explained the differences between commercial auto insurance and HNOA coverage, it’s time to determine which one your company needs.

Find Out How Much Insurance Is Required

First off, find out the minimum amount of car insurance required by your state. You’ll probably want additional protection since the state minimum doesn’t fully protect your vehicle against damages caused during an accident. Generally speaking, you shouldn’t settle for a basic car insurance policy unless it’s absolutely necessary.

Below, we’ll explain some of the additional auto insurance protection that may be helpful when covering the business use of a personal vehicle. Purchasing the following insurance types could lead to a full-coverage car insurance policy:

• Collision coverage: This takes care of the damages to your vehicle if you’re involved in a car accident. This differs from minimum-liability car insurance, which simply pays for damages caused to other vehicles when you’re at fault.
• Comprehensive coverage: It offers protection against losses caused by theft, vandalism, and various environmental factors. The business use of a personal vehicle can often leave cars vulnerable to these issues, so comprehensive car insurance is well worth consideration.
• Personal injury protection: This pays for most medical expenses incurred by those in your personal or company car during a work-related accident.
• Medical payments coverage (MedPay): This pays most medical bills for you and your passengers and can be used to cover lost wages.
• Uninsured/underinsured motorist: If a motorist who doesn’t have enough insurance coverage causes an incident, this policy covers the unpaid damages to your vehicle caused by that driver.

Carefully Select An Insurance Provider

Choosing an insurance provider is just as important as selecting your type of coverage. Before you settle on a certain policy, it’s best to find a trusted provider that offers coverage for the business use of a personal vehicle.

Below are some key points that may help as you compare multiple car insurance quotes for the business use of a personal vehicle:

• Company background: It’s usually pretty easy to find reputable car insurance companies. Company information and consumer ratings can be viewed online to help you judge factors such as customer service.
• Price and coverage: Compare potential costs and coverage options from the best car insurance companies to understand what each one offers. Look for providers that offer significant discounts on commercial or HNOA insurance. Also, watch for hidden fees that sometimes get added at the last minute.
• Service quality: Look for providers that pair extensive coverage with superb customer service. Consider the ease of payment and lead time in processing claims as well.

Consider Other Types Of Vehicle Protection

For the business use of a personal vehicle, your top considerations will likely be personal auto, commercial auto, and HNOA insurance policies. If you’d like to keep your car more protected, you could add the following additional coverages:

• Original equipment manufacturer (OEM) endorsement: An OEM endorsement ensures that you’ll avoid aftermarket parts when repairs need to be done to your car. Aftermarket components are often used by insurance companies to reduce costs, but they’re sometimes of a lower quality than OEM parts.
• Guaranteed asset protection (GAP): Gap insurance will cover the balance of your auto loan if your car gets totaled or stolen before you’ve paid it off.
• Extended warranty coverage: An extended warranty, also known as a vehicle service contract, is offered by automakers or third-party providers. These plans cover repair costs for specific car components and serve as protection plans after your factory warranty expires.

The three coverages above are add-ons that aren’t required when you purchase an insurance policy. However, it’s good to know about them to make an informed decision when purchasing protection for the business use of a personal vehicle. Keep in mind that some car insurance companies sell extended warranty contracts, but it’s not always common.

Conclusion: Insuring A Personal Vehicle For Business Use

In most cases, you’ll need to get a commercial car insurance policy if you use your car for personal use. To find the best rates for commercial auto coverage, compare quotes from multiple companies and ask insurance agents about discount opportunities.

Other Recommended Car Insurance Companies

If you need to shop for commercial car insurance for your personalized vehicle, you should check out our top-rated companies: State Farm and Geico.

State Farm: Best Overall Provider

State Farm is our top-rated company for both personal and commercial auto insurance, with 4.7 out of 5.0 stars overall. This is because State Farm offers great coverage along with many different savings opportunities, from its good student discount to its two usage-based safe driving programs, Drive Safe & SaveTM and Steer Clear.

State Farm’s commercial auto insurance includes the six standard types of coverage. The company is known for its excellent customer satisfaction, as evidenced by its first place rankings in many J.D. Power consumer studies.

Geico: Best For Discounts

Geico haș been doing commercial auto insurance for over 70 years, and on top of that, the company is known for its excellent rates. Geico’s commercial insurance covers cars, vans, pickup trucks, box trucks, food trucks, and service utility vehicles.

You can manage your commercial auto policy using Geico’s highly-rated mobile app. The app allows you to make payments, enroll in autopay, get proof of insurance, and view installment schedules.

Business Use Of A Personal Vehicle: FAQ

Below are some frequently asked questions about insurance and using personal vehicles for business purposes:

How We Rate Insurers

Our review process aims to deliver consistent and unbiased assessments of car insurance providers. While there are multiple qualities that make a car insurance company successful, our review team focuses on those we believe are the most important for consumers:

• Cost: Cost can be difficult to compare between insurers because so many factors impact annual premiums. The cheapest insurer for one driver may not be the cheapest for another. To determine our cost score, we look at insurance rate estimates generated by Quadrant Information Services, discount opportunities, and consumer reports.

• Coverage: To determine our coverage score, we look at the number of coverage options available as well as coverage limits and deductible options. Our ratings also take into account additional services and benefits like roadside assistance.

• Reliability: It’s important that an auto insurer is able to meet its claims obligations. Companies with a strong financial strength rating from AM Best score best in this category. Established insurers with a long history of reliable service also receive positive marks.

• Service: We comb through customer reviews on sites like the Better Business Bureau (BBB) to learn about customer experiences. Insurers with a low volume of complaints score well in this area. We also consider the claims process, giving higher ratings to car insurance providers that offer easy-to-use claims apps.

*Data accurate at time of publication.