How Is Commercial Auto Coverage Different Than Personal Auto Coverage?

How Is Commercial Auto Coverage Different Than Personal Auto Coverage?

Question: How Is Commercial Auto Coverage Different Than Personal Auto Coverage?

Answer: A personal auto policy is purchased by an individual to cover losses arising out of the personal use of personally owned or leased vehicles.  A personal auto policy will usually have restrictions that limit or exclude coverage for certain business uses.

If you use your vehicle in business, you should talk to your professional insurance agent about obtaining the proper coverage.

Loading And Unloading:

In addition to covering you for liability arising out of the operation of your vehicle, a commercial auto insurance policy also typically provides coverage for liability arising out of the loading and unloading of your vehicle.  This coverage is typically quite broad and usually provides coverage for liability arising out of the moving of property to or from your covered commercial vehicle.  

For example, you are delivering a new washing machine in your van to a customer.   While you are bringing the washing machine into the house, you scratch the floor and a wall in the home.  This loss would typically be excluded in a general liability policy and would be covered on most commercial auto policies.  Many personal auto policies would exclude this exposure.

Which Vehicles Are Covered:

A personal auto policy will typically cover you, as the insured, for your liability while operating any eligible personal auto within the coverage territory.  So, if you rent a car for personal use or borrow a car for a day from a friend, you will typically have liability coverage under your personal auto policy while doing so.  In contrast, a commercial auto policy is usually more restrictive as respects which vehicles are covered.  Many times, a commercial policy will limit liability coverage to just vehicles specifically listed on the policy.      

Who Is An Insured:

Another key difference between the personal auto policy and the commercial auto policy relates to the use of your autos by others.   In the 2005 ISO personal auto policy (which is similar to most personal auto policies)  any person using “your covered auto” is an insured as respects the liability coverage.   This is a very broad grant.

In the 2005 ISO Commercial Auto Coverage Form, the definition of who is an insured is much more limited.  Liability coverage is afforded to the named insured.  Coverage is also extended to anyone else using a covered auto provided that they had the named insured’s permission . The coverage that is afforded to those using covered autos with the named insured’s permission is further restricted, and excludes:

(1) The owner or anyone else from whom you hire or borrow a covered “auto”. This exception does not apply if the covered “auto” is a “trailer” connected to a covered “auto” you own.

(2) Your “employee” if the covered “auto” is owned by that “employee” or a member of his or her household.

(3) Someone using a covered “auto” while he or she is working in a business of selling, servicing, repairing, parking or storing “autos” unless that business is yours.

(4) Anyone other than your “employees”, partners (if you are a partnership), members (if you are a limited liability company), or a lessee or borrower or any of their “employees”, while moving property to or from a covered “auto”.

(5) A partner (if you are a partnership), or a member (if you are a limited liability company) for a covered “auto” owned by him or her or a member of his or her household.

Medical Payments And P.I.P. Coverages:

The medical payments and P.I.P. coverages that may be provided under some personal auto policies can provide you with excellent benefits that sometimes even apply in situations where you are not even operating an automobile at the time of your injury.  These coverages are generally broader than those that would be afforded to you under a commercial auto insurance policy.

This article is general in nature and may not be accurate in all situations.   Insurance policies vary by insurer and by state, and numerous optional coverages and endorsements may be available.    Talk to your professional insurance agent about your exposures to make sure that you secure the proper coverages for your individual situation.  In some cases, you may need to purchase both a personal auto insurance policy and a commercial auto insurance policy in order to properly cover all of your exposures.

Other Enhanced Insurance articles related to Car Insurance Coverage:

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What Is Uninsured Motorist Protection

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What Is GAP Coverage?

How Much Is GAP Insurance?

Collision Insurance Coverage

Property Damage Coverage

Enhanced Insurance is not written by attorneys. If you’re looking for legal advice, you need to contact a lawyer. Further, insurance practices and forms change constantly and are varied from state to state. For definitive answers in your area, contact a local agent.

While the majority of people want an agent involved in their purchase of insurance, many people want to see if they can save money by buying direct from the insurance company. Others want to try a direct quote to make sure the premium they’re now paying through their local agent is fair. If you want a quote for your coverage, click on the competitive quote button on the right side of this page.

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Jim Ketterson is an insurance expert with more than 25 years of experience in the industry. He has served as a President of an insurance company, an insurance underwriter, and has held various roles in insurance company product management. He has his Chartered Property Casualty Underwriter designation and a MBA in Finance. The information he offers in his posts is general in nature and may not be appropriate, accurate, or applicable in all situations. Before making any important insurance decisions, you should seek the advice of a qualified insurance agent and discuss the particulars of your individual situation. Follow Jim on Twitter @MNinsurancePro

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