Although the personal auto and commercial policies are a packaged product and contain many similarities, there are distinct differences that are very important. Many small business owners, such as contractors, will use a pickup truck or van for work that is insured on their personal auto policy. Doing so puts the vehicle owner at risk for several reasons:
Most personal insurance policies exclude coverage when the vehicle is being used for business. If the insured is driving a van for work purposes and is involved in an at-fault accident, according to the exclusion in the policy, the company can elect not to pay the claim. Why aren’t most drivers aware of this? They never read the terms of the policy and typically forget warnings from an agent the minute they leave the office or hang up the phone.
Typically, the personal auto liability limit is $300,000 or $500,000. This is an insufficient limit when using a vehicle for business purposes.
The personal auto policy does not provide coverage for tools or equipment that are inside the vehicle being used for business.
The differences between personal auto insurance and commercial insurance are there because the risk is different from individuals and families and a business.
A commercial auto policy contains much higher liability limits that are necessary because of the higher asset value of a company versus a household. Where a personal auto policy’s highest limit is $250,000, the commercial auto policy offers limits as high as $4 million dollars.
Types of Vehicles
The personal auto policy insures only personal passenger vehicles with a limit of about 10,000 pounds, whereas the commercial policy will insure any type vehicle from passenger autos to super heavy dump trucks and tractor trailers. Many commercial policies will also insure mobile equipment used in heavy construction projects.
Number of Vehicles
Most personal auto policies limit the number of insured vehicles to four passenger vehicles, although an individual or family can have multiple policies if needed. The commercial policy does not limit the number of vehicles to be insured or the number of drivers on the policy.