Even though personal auto and commercial auto policies are a packaged product and contain many of the same coverages, there are distinct differences that are very important. Most every contractor will use a pickup truck or van for work that is insured on their personal auto policy. Doing so puts the vehicle owner at risk for several reasons:
- Personal insurance policies exclude coverage when the vehicle is being used for business. If the insured is driving a van for work purposes and is involved in an at-fault accident, according to this exclusion in the policy, the company can elect not to pay the claim. Why aren’t most drivers aware of this? They never read the terms of the policy and typically forget warnings from an agent the minute they leave the office or hang up the phone.
- Typically, the personal auto liability limit is $300,000 or $500,000. This is an insufficient limit when using a vehicle for business purposes.
- Although the personal auto policy will never provide protection for tools or equipment, this coverage can easily be endorsed onto the commercial auto policy by using an inland marine rider. Having your tools and equipment stolen from your vehicle while parked at the job site can easily put a major dent in your company’s resources.
The differences between personal auto insurance and commercial insurance are there because the risk is different from individuals, families and businesses.
A commercial auto policy contains much higher liability limits that are necessary because of the higher asset value of a company versus a household. Where a personal auto policy’s highest limit is $250,000, the commercial auto policy offers limits as high as $4 million dollars and can be extended even higher by using a commercial umbrella policy.
Types of Vehicles
The personal auto policy insures only personal passenger vehicles with a limit of about 10,000 pounds, whereas the commercial policy will insure any type of vehicle from passenger autos to super heavy dump trucks and tractor-trailers. Many commercial policies will also insure mobile equipment used in heavy construction projects. Whether your contracting business uses pickup trucks, vans, or heavy-duty box trucks, you will be able to keep all your vehicles and equipment under one commercial policy.
Number of Vehicles
Most personal auto policies limit the number of insured vehicles to four passenger vehicles, although an individual or family can have multiple policies if needed. The commercial policy does not limit the number of vehicles to be insured or the number of drivers on the policy. This makes keeping all vehicles and equipment under one policy much easier to deal with.
Only on a commercial auto policy will you be able to add coverage for additional equipment such as specialty trailer hitches, lift gates, high-reach buckets, and specialty toolboxes. This type of equipment is easily damaged in an accident so why take the chance with a personal auto policy that will offer no coverage at all.
Fairbanks Insurance Brokers is a leading source for contractor’s insurance services.
Here is What We Recommend:
General Liability: Contractors General Liability will be the foundation of protection for your business. The coverage will respond if you or your employees are found liable for bodily injury, property damage, or have a products/completed operations complaint. The coverage also covers defense costs for your business to respond to any lawsuits brought by a third party.
Workers’ Comp: Many states will require contractors to provide workers’ compensation coverage for their workers before they can begin a project. Accidents will happen at the job site that can result in an employee becoming injured and missing work. Your workers’ compensation coverage will provide financial assistance for medical expenses and lost wages.
Surety Bonds: It’s very likely that your state will require you to be licensed before you can begin operations. Most states and customers will require contractors to offer a license or surety bond before you are allowed to bid on a job or begin working.
Commercial Auto: Typically, most contractors will have light and heavy vehicles that require commercial auto insurance to make certain their vehicles can be repaired or replaced in the event of an accident, vandalism, or theft.
Tool Coverage: Also known as Inland Marine Insurance, this policy will provide for reimbursement for expenses to repair or replace tools and equipment. Your tools represent an important part of your livelihood, so we always encourage carpentry contractors to consider this valuable coverage.
For more information and a free commercial insurance quote, contact an insurance professional at Fairbanks Insurance Brokers at (949) 595-0284.