Did you ever order a pizza delivered from Domino’s or hire a ride from Uber and wonder who insures those rides? Welcome to the slightly complex, occasionally fuzzy line between personal and commercial auto insurance.
Who Needs Commercial Auto Insurance?
Generally speaking, if you use your vehicle to make money, whether it’s mowing lawns, delivering donuts or transporting passengers, you may need the extra protection of commercial auto insurance. Unfortunately, the additional cost often keeps many lone guns from springing for the coverage they need, according to Travis Round, an agent with Steffey Hatoway Insurance in Indianapolis.
“If you put a sign on the side of your truck, you have to have commercial because you’re advertising,” he says. “In an accident, if they see the name of a company on the side of your vehicle, you are now the richest person to ever hit them. They will sue you for everything you have.”
That said, the devil of commercial auto insurance is in the details. Do you own your own business or work for others? Do you work full time, part time or on call? Is your vehicle registered in your name or your company’s name? Each answer can have a bearing on the best type of coverage for you.
Understand the Difference between Personal and Commercial Auto Insurance
Both personal and commercial auto insurance policies must fully meet your state’s minimum insurance requirements. These typically include the Big Three: liability, collision and comprehensive coverage.
- Liability protects you for accident damages you cause to other people and property.
- Collision helps pay to repair or replace your vehicle for damages caused by an accident involving another vehicle or object. But you should also know when to drop collision coverage to cut the cost of auto insurance.
- Comprehensive covers your vehicle for damages not caused by an accident, but instead by animals, weather, vandals or theft.
Your personal auto policy basically covers you and your onboard passengers. But depending on your business needs, you may also need coverage that includes your employees, special equipment, deliverable goods, and passengers.
Additional Insurance Coverage You May Need
Due to the expanded risks to business owners, a number of additional policies often come into play, including:
- Personal injury protection (aka PIP or no-fault insurance) covers driver and passengers for medical expenses resulting from an accident, regardless of who caused it. PIP can also be used to cover wage loss due to an accident.
- Uninsured/underinsured motorist insurance protects you in the event you’re involved in an accident with someone who lacks insurance or whose coverage is insufficient to cover your repairs or medical expenses.
- Emergency roadside assistance covers the services you may need if your vehicle becomes stranded en route, including fuel delivery, tire change, battery charge, locksmith services and towing expenses.
- Personal effects insurance provides coverage for personal items stolen from your commercial vehicle, up to a dollar limit.
- Commercial umbrella policy: Business owners with substantial assets often opt for an umbrella policy to cover the costs of large liability claims and lawsuits that exceed the limits of their vehicle liability policy.
Sounds like a lot of protection, right? On the plus side, most commercial auto policies are tax deductible as a business expense.
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Commercial Auto Insurance for Freelancers, Uber, and Lyft Drivers
So, what about those Domino’s and Uber drivers out there? Is there such a thing as Uber insurance? Are they lining up for commercial auto insurance coverage?
Well, yes and no. Unfortunately, delivery drivers are considered high risk because of their age (typically young), experience (little), speed (fast for quick delivery) and turnover (high).
Fortunately for pizza drivers, the demand for home delivery is strong these days. Insurance companies will probably adapt to the growing, unfilled need fueled by this trend.
While it’s unlikely that pizza companies will suddenly offer coverage for their drivers, there may be an increased incentive by big brands to explore the idea. Or they may consider purchasing back-up insurance to cover lawsuits in cases where their drivers cannot.
As for our Uber chauffeurs, fear not: once they receive a ride request, they are riding with at least:
- $1 million in third-party liability
- $1 million uninsured/underinsured motorist bodily injury
- contingent collision and comprehensive coverage up to the cash value of their vehicle, less a $1,000 deductible.
Once they dial off duty, however, they’re entirely on their own policy.
Because the increased average hours on the road alone puts commercial vehicles at an increased risk of claims, it’s wise to work with an agent to obtain the exact coverage you need before you need it.