For many people, their personal car doubles as their business car.
It prevents the need to shell out money they might not have (or want to commit) for a second vehicle.
It makes insurance cheaper since business auto policies are markedly more expensive.
It saves on the additional second-vehicle costs of parking, gas, registration, and maintenance too.
It’s a way to write off some of the cost that you would ordinarily have to eat otherwise since personal vehicles are not tax-deductible in most instances.
Unfortunately, there is a big, and I mean huge, problem here…
One of the statements above is a car insurance myth and in fact, is completely wrong!
Using your personal car for business activities may actually be more costly than beneficial, particularly if you happen to have an accident without the right type of auto insurance coverage.
This is the truth of the matter: depending on how you use your personal car, your auto insurance company may deem your vehicle as a commercial vehicle meaning your personal car insurance won’t cover everything.
Not All Auto Insurance Is The Same
What most people don’t realize is that how you use your vehicle is just as important as what you drive, and has a tremendous impact on your auto insurance.
That’s why there is that question on that auto insurance application that asks you for the intended use for the car you are insuring.
The insurer needs that information because it has to determine what kind of coverage you will need for that car based on its intended usage.
See…the how is just important as the what when it comes to your car insurance.
So, even if you buy a vehicle that is typically considered to be a “family vehicle” like a boring old sedan or minivan, what you do to and in that car will go a long way in determining if you need commercial auto insurance or just a personal policy.
Do You Have A “Commercial Vehicle”?
Three of the more common ways to tell if you will fall into the commercial vehicle category are :
- If you make permanent upgrades to your vehicle such as hitches/racks for towing/holding equipment or built-in toolboxes, and
- If your business involves being paid for the transportation of people or commercial goods
- If your personal vehicle is used primarily for business (>50% of the time) regardless of the nature of that business
For instance, let’s say you run your own personal delivery service, and during a routine delivery, you hit someone.
The police are called to get an accident report and you contact your insurance carrier to file the claim.
They investigate and deny your claim, determining that your car is a commercial vehicle since you are transporting commercial goods.
It doesn’t matter that you are using your Honda Odyssey with a child seat in the back and Baby On Board suction hanger in the window, clearing signifying a “personal vehicle”.
The fact that you use (and were actually using it when the accident occurred) the car for commercial purposes is all that matters for insurance purposes.
BUT, it actually gets worse…
Personal Auto Insurance ≠ Commercial Insurance
The story gets even worse if you are driving the car for business purposes at the time you are involved in a car accident.
Should you get into one, your business may be open to legal action as well, especially if your insurance company denies your claim, as we covered earlier.
The other party(ies) can choose to go after your business to pay for the damages and other expenses that they couldn’t collect from your insurance company.
It’s not always set in stone, and there have been some exceptions to the rule but in general, the company can very well be held liable for what happens in the employee’s vehicle during the normal scope of business.
What Does All OF This Commercial Insurance Talk Mean?
Well, it means that if you are in the business of making deliveries (floral, people food, etc) or have customized your car to haul around work stuff (general contractor, pool/landscape service, etc.)–and use your personal car–you might want to call your auto insurance provider to find out what its rule is for requiring commercial auto coverage.
It also means that if you own a business that requires employees to use their own cars for business-related travel, deliveries, hauling, etc. you should contact your insurance providers pronto.
It’s important to have all your bases covered and leave no gaps in coverages that could cost you in the future.
You may also want to think about shopping for new insurance to see if you can get a comprehensive package at a better rate, since saving money never hurt either.