PERSONAL VS. COMMERCIAL AUTO COVERAGE

For many Americans, especially small business owners and independent contractors, the line between personal and commercial vehicle use can often be blurry. Let’s take a look at some of the common scenarios.

Can you answer yes to any of the following questions:

  • Are any of your vehicles used for the pickup/delivery of goods?
  • Do you drive for Uber or Lyft?
  • Do you or your kids deliver pizza or food?
  • Do you drive to multiple locations throughout the day for work related events?
  • Do you use your vehicle to transport equipment used in a business?

Answering yes to any of these questions, may mean you need commercial car insurance.

BASIC DIFFERENCES

Personal auto coverage is for personal needs and designed for individuals or a family.  These needs may include commuting between home and work and other personal affairs. Commercial vehicle usage typically involves any activity related to the operations of a business or are done for the exchange of money.

If the actions involve customers or business related promotional efforts, this would require commercial coverage.   If your vehicle is registered or owned by a company or partnership, it is very clear that it requires commercial coverage.  Furthermore, a pickup, van, or utility vehicle with a gross weight exceeding 10,000 pounds or having a load capacity over 2,000 pounds may indicate the need for a commercial policy.  Operating incorrectly under a personal auto policy may result in a denied claim and could leave you exposed to a potentially devastating liability.

UBER AND LYFT DRIVERS

At the moment, Uber and Lyft are giving individuals the ability to earn extra money or make a living offering people rides from their personal autos. However, most Uber and Lyft drivers are only recently becoming aware that they may have a potential issue with their personal auto policy. The reason, personal auto policies specifically exclude coverage for vehicles used for delivering people for a fee, also known as the livery business. Consider Travelers Insurance’s personal auto policy, under the liabilityexclusions section of the policy, it states that coverage is not afforded for:

 

For that person’s liability arising out of the ownership or operation of a vehicle while it is being used to carry persons or property for a fee.

 

As you can see, if you drive for one of the startup car services, your personal auto policy would not provide you with coverage after an accident.

TYPES OF BUSINESSES OR PROFESSIONS THAT MAY NEED COMMERCIAL COVERAGE:

  • Realtors
  • Uber/Lyft
  • Manufacturing Representatives
  • Mary Kay Representatives
  • Pizza/food delivery
  • Contractors/repair people
  • Traveling nurses/in home

Determining which coverage is correct for your application can be difficult.  Here are a few key indicators to answering the baseline question:

  • Type of vehicle- you drive a delivery van or large truck
  • You drive on behalf of a company
  • You deliver goods or people
  • You drive clients on a consistent basis
  • Vehicle is owned in the name of a business 

Still left wondering if you are straddling the line between personal or commercial use? Contact one of our knowledgeable agents to discuss your situation.