If you’re self-employed and using your car to conduct your business transactions, personal auto insurance will leave you high and dry if it’s proven you are engaged in business activity when an incident occurs. This is because there is a specific category of auto insurance for work-related automobiles. Called commercial auto insurance, this type of coverage has a number of accompanying misconceptions.
Here are six commercial auto insurance myths you need to know.
1. Seasonal Business Means Seasonal Insurance
Let’s say you have a classic car you only use in the summer months to conduct guided tours of your city and the car is sequestered away in a garage for the rest of the year. While you know you definitely need commercial insurance during the tourist season, you’re mistaken if you think it’s OK to let it lapse in the off season. Insurance companies give discounts for continuous coverage, so the insurance could be more expensive to restart each year. Additionally, if the car is damaged in the garage during the off season and you’ve allowed coverage to lapse until the following season, it won’t be covered.
2. Commercial Premiums Must Be Paid in Advance
While some commercial auto insurance quotes include discounts for full up-front payment, most insurers do not require pre-payment. In fact, some even offer interest-free financing of premiums to help businesses manage their cash flow better.
3. Commercial Policies Always Cost More Than Personal Policies
This is largely dependent upon the driving record and other circumstances surrounding the purchaser of the individual policy. If they’re members of a high-risk group and the car is parked in a ZIP Code known for thefts and damage, one person’s private policy might well cost more than your commercial policy. Other considerations include the amount of the deductible, coverage limits and types of coverage.
4. Part-Time Business Use Makes Commercial Insurance Optional
So, your teen just got a part time job delivering pizzas to help offset the cost of the new car you just helped them get for their birthday. To keep the premiums lower you added the car to your family policy to take advantage of the multi car discount.
Then, your child gets into a fender bender while delivering a deep-dish spinach and mushroom with extra tomato sauce. The other driver gets a photo of the damage to both cars with your kid wearing the pizza delivery shirt. Your insurance company takes one look at the picture and denies your claim because the accident obviously happened while the car was being used for deliveries. Commercial use means commercial insurance—period.
5. Employees Are Automatically Covered
This one depends upon the nature of the coverage you purchased. If you have a “permissive use” clause in your policy, anyone who works for you can drive and be covered—as long as they have permission to drive the vehicle.
6. Minimum Coverage Is Sufficient
Accidents tend to result in damage exceeding the minimum limits. If one of your business vehicles is found to be at fault in an accident and your coverage doesn’t measure up, you’ll have to pull the difference between what the policy will pay and what the reparations will cost out of your business. Keep in mind: people are more prone to file lawsuits when they learn a business entity is involved because they’ll smell a payday.
Bottom line, if you’re doing business with your vehicle, get commercial auto insurance—period. Additionally, you’re much better off with maximum coverage than trying to get by with the minimums. All you need is one really bad accident to shut your business down if you’re inadequately insured.
And, just so you know, that’s not a commercial auto insurance myth.