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When do I need business auto insurance? You may need business auto insurance because personal auto insurance isn’t the type of financial product that’s designed to cover business vehicles.
Unfortunately, the definition that you use to define the business use and the definition that the insurance company uses can be dramatically different.
You may need to compare business auto insurance rates and then buy a business car insurance policy that meets your needs. You can do so by reading our article What do standard auto insurance companies offer?
Read on and find out if your freelancing job or that side job that you took delivering food has changed your needs for auto insurance.
Type your ZIP code into our free and helpful tool above to find affordable business auto insurance quotes that will protect your car and your bottom line.
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One of the things that makes it difficult to understand what personal auto insurance covers and what it doesn’t is the usage classification.
There’s a long list of risk determinants that insurance companies use to calculate premiums and vehicle usage is one of these.
It’s believed that how a vehicle is used can have an effect on how likely a household is to have a loss.
What can be confusing is that there are three different types of usage classes that can be used on a policy and each has a different bearing on rates.
Here’s a breakdown of what each use means:
While some types of business use are permitted in private passenger vehicles, there are very specific exclusions that make it so that not all business use is permitted.
One of the biggest requirements is that you must be the registered owner and the title holder of a vehicle to insure the automobile under your name.
If the automobile is either owned or registered to a business entity, you’ll automatically need business auto insurance on the vehicle.
This is because of the way that insurable interest works.
Since the automobile is registered to the business, it’s the business that is obligated to buy coverage and the business that is at risk of being sued for a loss.
It’s also the business that would be at a financial loss if something were to happen to the automobile. Combine all of this information together, and you can see why any vehicle registered to a business entity will need to buy commercial insurance.
What you would typically be best off buying would be full coverage. Let’s take a look at a table showing the average rates for full coverage in each state.
States | 2015 Average Annual Rates | 2014 Average Annual Rates | 2013 Average Annual Rates | 2012 Average Annual Rates | 2011 Average Annual Rates |
---|---|---|---|---|---|
Idaho | $679.89 | $673.13 | $650.57 | $639.19 | $641.96 |
Iowa | $702.46 | $683.67 | $668.09 | $656.84 | $648.99 |
Maine | $703.82 | $689.12 | $674.94 | $667.66 | $662.28 |
Wisconsin | $737.18 | $716.83 | $689.77 | $666.79 | $669.99 |
Indiana | $755.03 | $728.93 | $704.50 | $724.44 | $710.36 |
Vermont | $764.02 | $746.79 | $734.82 | $726.57 | $716.14 |
South Dakota | $766.91 | $744.28 | $717.30 | $690.95 | $669.20 |
North Dakota | $773.30 | $768.09 | $743.27 | $714.75 | $688.74 |
Ohio | $788.56 | $766.66 | $738.68 | $714.05 | $697.61 |
North Carolina | $789.09 | $768.28 | $739.91 | $720.47 | $708.10 |
New Hampshire | $818.75 | $795.50 | $773.30 | $755.76 | $746.57 |
Nebraska | $831.02 | $805.99 | $773.64 | $751.18 | $732.21 |
Virginia | $842.67 | $836.14 | $809.40 | $781.38 | $768.95 |
Wyoming | $847.44 | $844.33 | $804.52 | $796.14 | $791.14 |
Kansas | $862.93 | $850.79 | $815.82 | $785.72 | $780.43 |
Montana | $863.52 | $868.55 | $842.74 | $821.68 | $816.21 |
Alabama | $868.48 | $837.09 | $811.75 | $788.07 | $784.38 |
Tennessee | $871.43 | $855.56 | $829.38 | $794.53 | $767.82 |
Missouri | $872.43 | $845.39 | $819.79 | $799.14 | $790.27 |
Utah | $872.93 | $852.66 | $820.92 | $805.32 | $809.35 |
Hawaii | $873.28 | $858.16 | $844.16 | $844.12 | $861.95 |
Minnesota | $875.49 | $856.62 | $823.70 | $800.24 | $777.17 |
Illinois | $884.56 | $854.10 | $819.27 | $806.21 | $803.04 |
Oregon | $904.83 | $894.10 | $856.26 | $818.07 | $804.59 |
Arkansas | $906.34 | $900.18 | $868.13 | $843.07 | $829.13 |
New Mexico | $937.59 | $920.42 | $888.83 | $866.19 | $869.85 |
Kentucky | $938.51 | $917.49 | $904.99 | $888.46 | $872.48 |
Washington | $968.80 | $952.10 | $914.04 | $891.04 | $889.82 |
Pennsylvania | $970.51 | $950.42 | $930.48 | $915.83 | $904.47 |
Arizona | $972.85 | $961.88 | $926.52 | $899.91 | $899.33 |
South Carolina | $973.10 | $936.69 | $904.22 | $880.82 | $857.70 |
Colorado | $981.64 | $939.52 | $887.57 | $849.74 | $835.50 |
California | $986.75 | $951.75 | $922.69 | $891.68 | $881.07 |
Mississippi | $994.05 | $957.59 | $925.13 | $902.95 | $895.69 |
Oklahoma | z$1,005.32 | $985.58 | $931.41 | $902.90 | $881.50 |
West Virginia | $1,025.78 | $1,032.45 | $1,021.37 | $1,005.68 | $992.57 |
Alaska | $1,027.75 | $1,050.09 | $1,058.15 | $1,053.54 | $1,053.48 |
Georgia | $1,048.40 | $991.25 | $949.33 | $922.05 | $912.49 |
Nevada | $1,103.05 | $1,083.42 | $1,047.74 | $1,024.09 | $1,029.87 |
Texas | $1,109.66 | $1,066.20 | $1,017.81 | $974.68 | $959.87 |
Maryland | $1,116.45 | $1,096.37 | $1,071.35 | $1,056.82 | $1,048.86 |
Massachusetts | $1,129.29 | $1,107.76 | $1,080.48 | $1,048.06 | $1,011.14 |
Connecticut | $1,151.07 | $1,132.78 | $1,109.03 | $1,082.28 | $1,068.18 |
Delaware | $1,240.57 | $1,215.69 | $1,187.18 | $1,153.59 | $1,134.60 |
Florida | $1,257.13 | $1,208.77 | $1,209.70 | $1,196.57 | $1,160.13 |
Rhode Island | $1,303.50 | $1,257.40 | $1,210.55 | $1,176.05 | $1,148.97 |
District of Columbia | $1,330.73 | $1,324.39 | $1,316.48 | $1,289.49 | $1,276.99 |
New York | $1,360.66 | $1,327.82 | $1,301.49 | $1,273.70 | $1,236.77 |
Michigan | $1,364.00 | $1,350.58 | $1,264.20 | $1,171.94 | $1,110.64 |
New Jersey | $1,382.79 | $1,379.20 | $1,369.70 | $1,334.59 | $1,303.52 |
Louisiana | $1,405.36 | $1,364.17 | $1,307.72 | $1,275.10 | $1,281.55 |
U.S. Average | $1,009.38 | $981.77 | $950.92 | $924.45 | $908.43 |
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You must be covering a private passenger vehicle for your personal auto insurance to provide coverage. This means that compacts, coupes, sedans, wagons, and minivans that are used for appropriate types of business can be covered under a personal policy.
Some policy forms, however, won’t extend business use coverage to a pickup truck or a van that’s used for any type of professional purposes.
According to the Insurance Information Institute, other types of vehicles that must be covered under a business insurance policy include:
Now that you know what types of automobiles are excluded, it’s time to learn what types of business uses are excluded under the policy.
Here are some of the usage types that would automatically make you ineligible for personal insurance even if you drive your automobile for both business and pleasure:
You might wonder what the difference is between commercial and personal insurance and the answer is in what types of coverage is offered.
Let’s take a look at a quick video outlining the differences between the two forms of coverage before we dive in for more detail.
You’ll get commercial liability coverage, protection geared towards insuring employees while they’re driving a business vehicle, and the option to buy a combined single limit policy which can provide you with millions of dollars in protection.
There’s a major difference between liabilities and risk, so you may think you don’t need a business auto policy, but assuming you don’t need one can lead to serious consequences.
Ask your agent if you’re covered to drive your vehicle for business in your situation. If you’re not, start using a rating comparison tool online and you can easily see how much commercial insurance will run you.
Once you compare the instant quotes, make a selection and bind coverage.
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Personal auto insurance will cover you to drive to and from work but is limited in how much protection is afforded when you’re driving for business.
While many standard policies will cover business users, there are specific limitations written into the policy that you’ll need to know about before you assume your coverage is adequate or appropriate.
Start comparing business auto insurance rates now by using our FREE quote tool above. While not all business professionals need business insurance, there are many scenarios where a business auto policy is the only type that’ll provide protection.
Read on and find out more about the difference between personal and business policies before you start to build an insurance portfolio.
Personal auto insurance is designed to provide coverage for social and domestic use.
While the average person does use their vehicle to commute to and from work or even to travel between work locations, you can’t expect your standard auto insurance to pay when the vehicle you’re driving is used solely for business.
This is because vehicles used in business face unique risks and these risks aren’t used to determine premiums under a standard policy.
Read our article What do standard auto insurance companies offer to learn more.
While no personal auto insurance plan will afford coverage for an automobile used primarily for business, it’s possible that business use in your personal vehicle will be covered.
To determine whether or not this is true, you’ll need to review the terms, conditions, and exclusions that make up the policy.
As a policy is being underwritten, the agent will ask exactly how the vehicle is being used on a regular basis.
You can select from either pleasure, commute, or business use. While commute and business use sound the same, they are actually very different.
Commuters drive to and from a main work location and business users will drive from one job to another or from one client to another throughout the course of a day or week.
How insurers classify business use is very similar to how business use is defined by the IRS.
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If you use your automobile for private and business use and it’s registered under your name, it’s possible that you could be fine carrying strictly a personal auto policy.
For your insurer to pay, you must notify the insurer that you’re driving for business so that you can be charged the right rates for the risk that you’re presenting.
This is because usage is a major factor used to determine auto insurance rates.
While business use is the highest risk class and comes with the highest sticker price, it’s a class that gives you the option to buy standard insurance without needing a business policy.
If you’re changing your policy from pleasure or commute usage to business usage, you will notice a jump in your rates. This rate difference varies from carrier to carrier, but it’s much less than what you would pay for a commercial policy.
In some scenarios, you have no choice but to buy a business policy even when you own your vehicle and when you drive for both business and personal use. This is because there are types of use that are listed in the named exclusions portion of a policy.
Some of the various business exclusions written into a personal policy include:
Auto policies come in several forms. If one doesn’t cover you, there’s another form that will fill in the gaps.
A Business Auto Coverage Form is a commercial policy that is designed to provide business liability coverage to autos owned by a business or used in conjunction with a business.
Autos don’t just include private passenger automobiles. The term also includes:
While not everyone needs business coverage, if you carry the wrong insurance, you could face claims denial. It’s also important that you know personal auto insurance only protects claims made against you and your personal assets.
If an injured policy files a claim against your business, personal insurance won’t pay. Here are some examples of situations that create a need for a Business Auto Coverage Form:
Read on to learn more about using your business vehicle for personal use.
Your personal auto insurance might cover some business usage, but a business policy won’t cover any personal usage unless you have a specific endorsement.
If your business vehicle is your personal vehicle, be sure to add the Drive Other Automobile Coverage Endorsement so that you’re covered across the board.
If you’ve been carrying the wrong type of insurance for your vehicle, now’s the time to correct the error. Start to price the cost of either personal or commercial auto insurance and then select the best policy based on price and reputation.
If you want to price the cost quickly, use a price shopping tool online for instant quotes and you can conveniently shop the market for coverage.
If you are ready to buy business auto insurance, start comparing small business auto insurance rates now by entering your ZIP code in our FREE quote tool below.
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