When Does a Business Owner Need Commercial Auto Insurance?
by adminIf you legally have a car on the road in Canada, then you already have insurance – but if you use your vehicle for work, do you have the right auto insurance?
Large businesses that operate a fleet of vehicles for work-related purposes must have commercial insurance, but what happens if you are a small business owner using your vehicle for work-related activities?
Understanding the Differences Between Personal and Commercial Auto Insurance
As the name suggests, personal auto insurance provides coverage for vehicles primarily for personal use. Whether you are a commuter on your way to work or a parent shuffling kids to various after-school activities, your personal insurance protects you from third-party liability, accidents, and uninsured drivers.
But what if your personal vehicle is occasionally used for business purposes? For example, do you work part-time for a food delivery service or occasionally use your vehicle to transport items on behalf of your business? In these cases, do you need commercial insurance coverage? The answer is that it depends.
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In essence, commercial auto insurance is very similar to personal auto; it provides liability coverage, accident benefits, and protection against loss or damage. However, the amount of coverage, types of situations covered, and types of policies available will differ.
Three Ways to Evaluate Whether you Need Commercial Insurance for Your Vehicle
When you break it down, evaluating your need for commercial insurance coverage is pretty straightforward. Here are three questions to ask yourself:
1. Who owns and operates the vehicle?
If your vehicle is registered under the name of your business and you use the vehicle for work, the answer is simple – you need commercial insurance coverage.
However, suppose the vehicle is in your name and isn’t regularly used to transport materials or engage in other business-related activities. In that case, you are likely sufficiently covered by your insurance. The key is how often your vehicle is used to run business-related errands. If it’s more than a few times per month, it may be time to talk to an insurance broker about commercial insurance.
2. How is the vehicle used on a day-to-day basis?
On an average day, is your vehicle used to transport business-related goods or merchandise, meet with clients, or carry around equipment like tools and building supplies? If the answer to any of these questions is yes, then you need to have a commercial insurance policy.
Not only does your personal auto insurance potentially not provide enough coverage, but it may not provide the right coverage. If your vehicle is carrying expensive tools or merchandise and is involved in an accident, your personal insurance would not cover vehicle repairs or replacement costs of damaged goods.
3. What type of vehicle are you insuring?
Heavier vehicles designed and used for commercial work, like large trucks and commercial vans, are expensive to repair and can cause significant damage if an accident occurs. You need commercial insurance if you own a large commercial vehicle and use it for work-related activities.
The cost of commercial insurance
Many people believe that commercial insurance will be considerably more expensive than personal auto insurance. However, not only does this fail to take into account the added protection – which could save you from significant losses – it also fails to consider the other benefits of insuring a personal vehicle for commercial purposes.
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When it comes time to file your taxes, you can deduct several expenses related to your commercial use vehicle – as long as you have commercial insurance.
- Licence and registration fee
- Gas
- Insurance
- Interest on financing costs
- Lease costs
- Maintenance
- Repairs
- Parking
When it comes to your insurance coverage, it always pays to have the right policy for your vehicle and use.