Main Difference Between Commercial and Private Car Insurance

The biggest difference between commercial and private car insurance is the amount of risk. Most private auto insurance policies don't cover the business use of a vehicle, so it’s very important to get commercial car insurance for a vehicle's business purposes

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Tonya Sisler has a Bachelor’s Degree from the University of South Carolina in Journalism and has worked for 15+ years in management. She has also completed a proofreading certification and is currently a professional writer.

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Brad Larson has been in the insurance industry for more than a dozen years. He started out as a claims adjuster for a national carrier. He has since switched to the agency side of the business. Brad is licensed in all P&C lines.

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Reviewed by Brad Larsen
Licensed Auto Insurance Agent Brad Larsen

UPDATED: May 12, 2022

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If you need the facts about commercial vs. private car insurance, you’ve come to the right place. Car insurance is required whether your vehicle is used for personal driving or for a business. There are not many differences between commercial and private car insurance. The biggest difference is the amount of risk.

Car insurance companies are most concerned with how likely a policyholder is to have a future claim. This is the driver’s risk. The higher the risk, the more costly the car insurance premium will be.

Commercial vehicles are those that are used or owned by a business to be used to conduct business for the company. Vehicles that are used to haul equipment, transport materials, deliver goods, or transport people are considered business-use vehicles.

Most private auto insurance policies do not cover the business use of a vehicle, so it is vastly important to get commercial coverage if a vehicle is used for a business. Commercial car insurance is the only insurance product that will protect the company’s vehicles.

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Increased Risks of Commercial and Private Car Insurance

In general, commercial vehicles have a higher amount of risk than private autos. Commercial vehicles are more likely to be driven every day. They are more likely to be driven many miles as well, and many of those miles will be on highways and in urban areas.

All of these driving factors increase the likelihood that commercial vehicles will have a claim for an accident or other loss in the future. The increased risk of commercial vehicles is the source of most of the differences between private and commercial vehicles.

Increased risk costs more when it comes to auto insurance because you have to plan for it with more coverage or higher levels of coverage.

Both commercial and private car owners can lower their risk and their insurance rates, but it is usually much easier to do as a private car owner rather than a business owner. Business owners have more risk factors that are out of their control.


One area of increased risk in commercial car insurance that is vastly different from personal auto insurance is the fact that many businesses have employees driving the covered vehicle. Employees might be occasional drivers, running errands and the like, or they might be the sole operators of the vehicle, such as with a trucking or transportation company.

No matter the business or operation, having more drivers operate a vehicle on a frequent basis increases the risk. Many business owners must look at employee driving records prior to hiring and once or twice a year; this is certainly not necessary for drivers for their personal cars.

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Coverage Levels Available for Commercial and Private Auto Insurance

The increased risk of having an accident or other loss makes companies need to buy higher limits and more coverage than drivers with private car insurance have. First, companies must buy higher levels of liability coverage, which pays for damages caused to other drivers and their vehicles.

Experts advise that private car owners buy liability coverage in amounts of hundred thousand dollars amounts, but that commercial companies buy liability coverage in million-dollar increments.

For business coverage, the Insurance Information Institute advises that the bare minimum of liability coverage that is recommended is $500,000

Just like an individual, a company can be sued after an accident to cover damages if the insurance limits are not enough. Some states even allow for compensation for items such as pain and suffering. However, more people are likely to sue a company than an individual, believing that a business has more assets and that large judgments won’t be putting a family out on the street.

Additionally, businesses might also need to purchase required coverage such as medical payments coverage and uninsured and underinsured motorist coverage. Even if the business is in a state that doesn’t require such coverage, most companies should really consider such options to protect the financial health of the company and its employees.

Furthermore, many businesses need their vehicles to function, so they have to buy coverage to ensure that damaged vehicles will be repaired quickly. Collision and comprehensive are a necessity for a company to repair damages from accidents and other perils such as floods, fire, and theft. Additional insurance options that should be considered include GAP insurance, towing, and loss of use insurance.

Similarly, businesses likely also need commercial car insurance in part, because many businesses lease their vehicles rather than owning them outright and full coverage is a must. Businesses also generally don’t keep vehicles as long as private owners do. Sometimes, private owners can drop collision and comprehensive when the worth of the vehicle has depreciated so much that the coverage costs more than the vehicle is worth. Most businesses don’t have this option.

The Differing Costs of Commercial vs. Private Auto Insurance

With all of the factors of higher risk, higher liability limits, and increased coverage, commercial car insurance is likely to be more expensive than private coverage. Certainly, the higher cost of business car coverage likely keeps many small businesses from having the coverage.

Despite the higher risk for lawsuits and the danger of loss of use, fewer than 50% of small businesses had commercial car insurance as of 2008, according to a study released by the National Association of Insurance Commissioners.

According to the report, most small businesses were relying on employees’ private insurance, which can turn into quite a tricky situation in terms of liability, responsibility, and compensation.

However, any business has to understand that the high cost of commercial car insurance is actually protecting the business from even greater financial losses. Car accidents cost thousands of dollars in injuries and vehicle damages for both parties involved. Those costs can be very high, but they can skyrocket if lawsuits are filed.

Few smaller companies have the assets to pay for damages, lawsuits, and high judgments. Even if the lawsuit is unfounded, lawyers must be hired to defend a business. Such events can spell the end of many smaller businesses and even some larger ones too!

Finding Commercial And Private Coverage

It is not hard to find coverage for either private or commercial car insurance and should be reviewed at least once a year, according to the National Federation of Independent Business. In fact, most insurance companies that supply private car insurance also sell commercial car insurance. The same is also true of those companies that supply business liability insurance; many also sell commercial auto coverage.

Finding coverage with an insurance company that you already do business with is one good way to start a search for commercial car insurance. Discounts for bundling coverage are one advantage of getting coverage from a company that you are already accustomed to, along with the familiarity of the company.

The purchase process for commercial car insurance coverage is very similar to the search for private car insurance. You can get quotes from agents, through representatives at call centers, or through the Internet.

Many insurers who sell commercial car insurance offer online quotes just like for private insurance coverage.

You also have the option of finding business auto insurance quotes using quote comparison websites. You fill out one application, and then you receive several rate quotes for coverage from different companies.

You shouldn’t just get quotes from one or two providers. It is imperative that you get as many quotes as possible from different insurance companies if you want to find a lower price; that means shopping around, according to the U.S. Small Business Administration. This is as true for commercial car insurance as it is for private car insurance.

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Quote Basics For Commercial and Private Car Insurance

Getting quotes for private or commercial car insurance is not hard to do, but there are a few tips that you should follow so that your efforts have the best results possible. It also doesn’t matter where you get quotes from, though each different method has its benefits and drawbacks. Certainly, quote comparison websites give you the most back for your efforts, as you get many quotes with just one application.

First, you need to assess your business’ risk or your risk as a private driver. Then based on your company’s or individual risk, you need to choose your coverage limits. Utilizing an agent or car insurance specialist during this stage can certainly be helpful.

It is important to know how much coverage you need so that you don’t buy too little or too much. Also, when you are getting quotes, you need to get them all for the same amounts of coverage. Then, you will be able to compare all of your quotes equally, because they will all provide the same coverage.

Next, get as many quotes as possible from as many different insurance companies as you can. Get quotes from big companies, small companies, and everything in between. Make sure to do a little bit of research on each insurance provider to make sure they are legitimate and reputable. 

Once you get your quotes, then it is time to buy. Remember that a good reputation and a strong financial base are much more important in an insurance company than the lowest price.

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