When is commercial auto insurance not the right choice? An internet search for reasons why you should buy commercial auto insurance will likely yield a long list of valid scenarios. If your business model requires multiple vehicles and drivers and that employees carry tools or make sales calls, then a commercial auto insurance policy is probably a good idea. However, not every business, especially small business, needs commercial auto insurance. In fact, switching your personal auto insurance to commercial might just leave you with some coverage gaps.
Let me give a case scenario we came across recently. We had a long-time business insurance customer call the office requesting a quote for NV commercial auto insurance. He told us his accountant had advised him to re-title his personal vehicle in the name of his corporation and then buy commercial auto insurance. This customer has only one vehicle in the house and he is a medical doctor by trade. His personal vehicle is used rarely, if ever, for business purposes and is never driven by any of his employees.
Re-titling this vehicle to his corporation certainly might be a good tax strategy but it does not make a great deal of sense for this particular customer. Let’s examine the reasons why:
- Commercial auto insurance tends to be more expensive than personal auto insurance. Expect a commercial auto policy to cost between 50 and 100% more than your personal auto insurance. The difference in price might very well negate any potential tax savings.
- The coverage offered by a commercial auto insurance is very different than a personal policy. Generally speaking, personal auto policies offer broader coverage for unlisted drivers and automatically transfer to temporary replacement vehicles. For example, a commercial auto insurance will not necessarily transfer to a rental car unless special coverage is added to the policy.
- Coverage such as rental car reimbursement, roadside assistance, and GAP may not be available on a commercial auto policy. Custom accessory coverage may also be very limited compared to a personal auto policy.
- Incidental business use is not excluded by a personal auto policy. So, the occasional sales call or a trip to the store for your business is perfectly fine on a personal policy.
For this particular customer, we advised that he reconsider the decision to switch his vehicle to his corporation based on the several factors. First, the customer travels frequently and uses a rental car on nearly every trip. To provide coverage for the rental vehicles would have added several hundred dollars extra to the commercial auto policy. Second, his personal vehicle was a rather expensive luxury sedan with aftermarket modifications. His personal auto policy provided full GAP coverage and excellent rental reimbursement that could not be duplicated in a commercial policy. Lastly, the price of the commercial auto insurance was nearly double his personal policy.
The bottom line is that you should check with your agent about the pros and cons of switching your personal vehicle over to a commercial auto insurance policy. There are certainly scenarios where it makes sense to do so, but be make sure you understand all the coverage implications. For more information, please call one of our knowledgeable agents today!