A vehicle used for business purposes is likely not covered on a personal auto policy. For example, a pickup truck used by an electrical contractor for operating their business is not afforded protection under a personal auto policy. Although some personal auto policies may provide limited protection, such policies are uncommon and increase cost. Personal auto policies do not contain the specific coverages and higher limits of insurance needed to protect a business.
The reason behind this issue is because a personal auto policy is designed to protect individuals and assumes a vehicle will be used for personal use, whereas business use is altogether different. Business use may mean towing a work trailer, moving inventory, and making extra trips that would otherwise not be performed. A business auto policy is designed to protect businesses for this increased use of the vehicle as well as other business-specific coverage needs.
But to be fair, certain vehicles may serve two purposes, personal and business. So, how does one properly protect themselves and their business? First, let’s understand business use.
What is Business Use?
Driving a car to work is not considered business use. Thus, using our electrical contractor example, the pickup can be driven to the job site and home without issue. It can run out for lunch and perform errands during the day like any other personal vehicle. But once its use becomes “engaging in a business”, coverage is at risk. For example, picking up building materials, hauling equipment, or moving workers between jobsites all are a part of running a business and can fall under business use. If a vehicle has a business sign on it, that is a good indication it is engaged in business use. Examples of claim denials due to business use are:
- Pizza delivery
- Snow plowing
- DoorDash, Uber Eats, and other food delivery
- Uber, Lyft, and other ride sharing (reference Insuring Your Uber, Lyft, DoorDash, or Grubhub Gig)
Incidental business use is typically not an issue. We have not seen a claim denied for travels such as picking up office supplies, running lunch orders, or even a one-time move of an office.
Can a Claim Be Denied?
Yes. An insurance claim against a personal auto policy can be denied if the driver was engaged in business at the time. A popular exclusion on personal auto policies states it will not cover the policyholder (driver) while they are “engaged in any business.” Note that the exclusion isn’t just for the vehicle, but the policyholder themselves. This means that if the policyholder were to cause an accident while driving for the business, not only could the insurance company deny coverage for the vehicle but also liability protection for the policyholder.
Proper Coverage
Two options exist for personal vehicles used in a business:
- Business Auto Policy: Move the vehicle to a business auto policy. Starting liability limits are typically $1,000,000. It will cost more than a personal auto policy, but is more affordable than one may think. The most important point is that it provides the business the coverage it needs. Insuring personal autos on a business insurance policy is done often. A business may purchase a vehicle for the personal use of an owner, for salespeople, or any other reason. The combined personal/business use of these vehicles is discussed with the insurance company, the vehicles are listed on the business policy, and appropriate coverages are selected.
- Endorsed Personal Auto Policy: Talk to your insurance agent about your business operations and ask if the personal insurance company can expand (endorse) the policy to cover them. Many insurance companies today can extend coverage for ridesharing (Uber, Lyft), and a few others offer protection for other limited business use.
Drive Other Car Coverage
A related protection worthy of mention is drive other car coverage. Business auto policies may contain higher limits than personal auto policies, but can contain coverage gaps for personal use. Therefore, if a driver is provided a business vehicle for their personal use, they should also maintain a personal auto policy on their other vehicles to insure those gaps are filled. If they have no other vehicles, for little cost “drive other car” coverage can be added to a business auto policy to provide personal-auto type protections for that specific driver.
Questions regarding commercial auto insurance? Contact us. Not a client of ours? Let us earn your business! Each client is assigned a personal agent in our office, given their email address, and provided a phone number that rings right on their desk.
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I need some car insurance for my business.
Venus, thank you for contacting us. We’ve given your contact information to one of our sales executives that specializes in your industry and they will reach out to you. Please check your email. Thank you again.
I have a pickup that I use for personal use and while out and about I will sometimes go by and pickup a rent payment from a tenant. Or I get a call to show a property I have for sale which it is not often since I am semi-retired and maybe sale 2 to 3 house’s a year. Used a lot more for personal than business. Am I ok under the personal policy?
That is a great question you posed – we contacted your insurance company and they advised that as of now, your vehicle is fine to be used while completing those tasks occasionally. Now if you were doing this every day or several times a week, that would be a different story; we would then have to reconsider either updating the usage of your vehicle to “business” in lieu of pleasure or having it on its own separate business auto policy.
However, since this is not a regular thing that occurs, you are fine to keep your coverage the way it is. If we can assist you with any other questions, please do not hesitate to contact us again. Have a wonderful rest of your week!