There’s no doubt that cars and other vehicles are essential for our society. What once was made as a mode of transportation now supports full economies, and almost every person and business has an actual need for vehicles. Along with cars, there’s a need for car insurance. Auto insurance policies such as collision insurance, personal injury protection plan, liability coverage, etc are all essential (and mandatory) to have to safely drive the car. 

But why do auto insurance policies vary in terms of uses? Why are there separate plans and policies for personal use and business use of cars? What makes the two different and most importantly, should you insure your car for business use? As with most things, the devil is in the details, and you need to be aware of a few things about car insurance policies if you intend to use yours for business uses. 

Personal Use and Business Use

What is the personal and business use of a car? While the exact specifics of what constitutes “business” use depends on the auto insurance company, there are some general uses that can be easily classified in either one of them.

Personal use of a car is when you get a nice car and use it daily to do basic, personal things that do not directly earn you money. For example, dropping your kids at school, going for errands, driving to work, taking a trip, going for a casual drive, etc. A personal auto insurance policy would be enough for all these purposes. 

But when you use your car for other activities that directly are related to revenue-generation, or are done for a company, it is called business use. Driving your car for Lyft or Uber, going on worksites, picking or dropping off clients, employees driving your car for the company’s work, etc. 

These are very well-cut differences, but as we mentioned earlier, the devil is in the details. Some auto insurance companies might allow the use of cars for business uses now and then. So if you crash your car while going to a worksite, your personal vehicle insurance can be claimed. 

Some companies might reject your claim for the most trivial reasons. For example, if you crash your car while going to meet a client, or while attending a call regarding your business. It all depends on what the company deems to be a violation of its terms of services. So should you play this dangerous Russian Roulette and risk getting into a financial crisis? Absolutely not. 

Getting Business Auto Insurance

If you intend to use your car for business purposes regularly or fairly often, then it is better that you buy business auto insurance. There are multiple benefits of getting a business auto insurance policy, both in terms of coverage and saving money. 

Let’s say that you own a small business and have one or two pick-up trucks for transporting a few things, and sometimes use your car to help in the business. Even in this case, the insurance company can reject your claim on personal auto insurance as your business requires the use of cars often. You should get business auto insurance instead of general auto insurance. 

If you drive for Uber or Lyft but also use the car for personal uses, then getting rideshare auto insurance would be the best option for you. With rideshare auto insurance, you don’t have to pay the hefty prices of business auto insurance, and it switches automatically from business to personal auto insurance. 

For large-scale businesses where there’s frequent use of vehicles, trucks (fleet of trucks), etc., having business auto insurance is not only necessary but also mandatory. If one of your vehicles gets in an accident and does not have proper auto insurance for business use, not only you could be looking at a big fine, but legal actions can be taken against your business.

The other benefit of getting auto insurance for business use is you can write it off as business expenses and get tax benefits. But what makes auto insurance for business use different from the ones for personal use? Let’s take a look. 

Auto Insurance for Business Use: What’s Different?

In terms of coverage, auto insurance policies for business and personal use are almost identical, with only a few tweaks here or there. Some companies might offer specialized insurance policies made just to suit a specific type of business, such as transportation businesses (with large fleets of trucks) or delivery service providers. But where vehicle insurance policies for business differ from personal policies is the coverage. 

Since the liability can be much higher when it comes to vehicles used for business, the cost of liability coverage is very high compared to the cost for personal use. Where liability coverage for personal use usually has the maximum coverage limit for bodily injury of around $200,000 to $300,000, for business policies, this number is usually at around $1 million. 

The same is true for other policies as well, such as collision insurance and comprehensive coverage. While you can find the cheapest auto insurance for personal uses easily, it is a bit difficult to find the same for business uses. But since you are getting a higher coverage limit, higher prices is something unavoidable. But the silver lining here is that you can get tax benefits with it, something not possible with auto insurance for personal use. 

Getting auto insurance for business use is absolutely necessary, and the policies should have higher coverage limits to make sure it’s capable of large insurance payouts. Failing to do so will not only result in heavy financial losses but also your business getting sued.