The auto insurance sector is very complicated, and there are so many terms and conditions in it that you are bound to miss out on a few. Since for almost everything there has been a clear distinction between personal use and business use, the same applies to car insurance policies.
If you use your car for business and have personal car insurance policies, you might get into big trouble. Car insurance companies require business owners to get separate business auto insurance policies to insure their cars. Personal auto insurance is not permitted while business use of the car.
What would happen if you try to claim your car insurance for a road accident while using your car for business? Not only the auto insurance company can reject your claim, but they might also drop you from the policy.
But why is there a need for a business car insurance policy when all you do with your car is run errands and meet clients? Why does your personal car insurance not cover business use? We’ll look into that in detail in this article. Let’s get started.
Business vs Personal Use
Before we get into the details, it is important to first establish the meaning and definition of the core words. Personal use of a car refers to a person using their car for doing basic things such as commuting to and from work, going to get groceries, on a road trip, driving around the city, etc.
Personal use is when you are driving your car just for your needs or wants, and not for operating a business in any way. General auto insurance policies are perfectly okay for this use of a car.
Business use of a car or a vehicle can mean a lot of things. For example, if you have a car that you use as an Uber or Lyft for your part-time job, or maybe you use the cars to deliver things. These are all strict business uses and can be agreed upon by all.
But did you know that if you use your car to meet clients regularly, pick or drop them off, or get anything for your business regularly, it would be put under “business use” of the car?
If you get in a car accident while you were dropping off a business client, your claim on personal car insurance can be rejected because it was a case of business use of the car. So that’s what makes business and personal use different. Now let’s see why companies do not allow the two to mix.
The difference in Insurance Policies
If you are thinking that there is some big difference in coverage when it comes to business car insurance and personal car insurance, there is not. Both types of policies are very similar, with only one or two things being different.
In some cases, business car insurance policies might cover one or two extra things that are needed in specific businesses. Business car insurance is also much more expensive than personal auto insurance policies and comes with higher coverage limits as well.
So if all the difference between these two types of policies is coverage limit and a few other things, why do insurance companies require business owners to get different policies and not use their personal car insurance policies?
Increased Risk of Accident
The answer to that question comes from understanding the increased risk of a road accident. When you are using your car for personal use, your driving range and frequency are limited; you go to your office, come back home, repeat with occasional grocery shopping, etc.
Insurance companies get all the details and use them to calculate your risks of getting in a car accident and making a claim. When it comes to personal use, the risk of you getting in a car accident is comparatively low. Hence, the prices are low (only if other factors such as driving record, and past insurance claims do not increase the price)
When it comes to business use of a car, there is no limit or pattern to your driving. One day you could be driving near your office and the next day you might have to reach the end of the city to drop off a client. It also includes driving to business sites which could be in remote parts of the city.
Wherever you drive, when you are using your car for business use, the frequency and distance you drive increase drastically. And statistically speaking, the more you drive, the more likely you are to get in a car accident.
When using your car for Uber or Lyft, things can be understood easily. You cannot drive your car more than an Uber or Lyft while using your car for personal use. So to offset this increased risk of a car accident, insurance companies want you to get business car insurance policies.
Business car insurance policies include liability insurance, collision damage waiver, comprehensive coverage, etc. All these covers are very similar to what you would get in personal auto insurance, but with a higher coverage limit.
So if you are planning on using your car for business, consider getting business car insurance because if you don’t, it is almost certain your insurance company would reject your claim on personal auto insurance and you might end up paying hundreds of thousands of dollars, if not millions.
If you are a small business owner, then consider getting a Hired and Non-Owned Auto insurance policy (HNOA). This policy is meant for small businesses which use non-owned cars for business purposes. People who use their cars for Uber or Lyft should get Rideshare auto insurance. Click to investigate and get the best rates for auto insurance policies.