What Small-Business Owners Should Know About Car Insurance Quotes

The line between work and personal life blurs when you own a small business, and that can complicate financial matters, including the type of car insurance quotes to get.

The big question: Should you shop for a personal or a commercial car insurance policy?

The answer depends on the type of vehicle and how you use it. Although a personal auto policy provides coverage for some business use, it probably isn’t enough if you use the vehicle primarily for business, according to industry trade group Insurance Information Institute.

Personal car insurance policy exclusions

And even if you use the car only occasionally for a tiny, part-time business, you still might need commercial insurance. Personal auto policies exclude coverage for certain business uses such as delivering products or transporting passengers for hire. (Think Uber drivers.) A caterer, even a part-time sole proprietor, would have no coverage under a personal auto policy if he or she suffered an accident while delivering food to clients. The “livery exclusion” in personal auto policies is why ride-sharing drivers need to make sure companies such as Uber and Lyft provide sufficient coverage while they’re working for them.

Personal auto insurance policies also don’t cover business-owned vehicles and certain types of vehicles that are clearly designed for business use, such as tow trucks. Pickups with ladder racks and toolboxes permanently attached would also count as business vehicles and require commercial policies. So would vehicles with catering and cooking equipment installed, including food trucks.

A commercial policy is also a must if you have employees who drive the vehicle or you need more liability insurance protection than a personal auto policy can provide. Many insurance companies recommend at least $1 million in liability protection on a commercial car insurance policy and $500,000 as a bare minimum, according to the Insurance Information Institute. Typically $500,000 is the maximum liability offered for personal auto policies, while commercial auto liability policies can go into the millions.

Extra cost is worth it

Generally you’ll pay more for commercial than personal auto insurance because of the higher liability limits and the greater risks a commercial policy is designed to cover. But the extra protection is worth the price if you use your vehicle for business purposes.

If you cause an accident while violating the terms of your insurance policy -- delivering products using a car insured on a personal policy, for instance -- the insurance company likely will deny the claim. You’d be on your own to fix the car. Worse, if you injured other people or damaged their cars, the victims could sue and come after your assets.