Personal vs Commercial Auto Insurance: Choosing the right coverage for your vehicle

If you use your vehicle for business purposes, you might be wondering if you need commercial auto insurance, especially if you already have coverage for your vehicle through a personal insurance policy.

Choosing the right coverage can be confusing since there are quite a few factors to consider. Will your personal policy cover your employee operating your business vehicle? Does it cover larger vehicles like trucks, vans, and construction vehicles? The answer to these questions is often that a personal automobile policy isn’t enough to properly protect your business vehicles. 

Let's discuss how a commercial auto insurance policy could better protect your business vehicle and help your venture move forward without putting on the brakes.

For the most part, both types provide similar coverage up to the limits outlined in the policy, however there are differences in terms of the coverages and protection they provide. In order to determine which policy is right for you, let's start by reviewing the difference between the two types of automobile insurance options.  

Personal auto insurance is designed for vehicles that are driven for personal use.  For example, if you use your vehicle to commute to and from work, run personal errands, and take leisure trips, then your vehicle is likely considered a personal vehicle and a personal auto policy would be a good fit.

Though the various types of coverage and limits can vary by province, a standard personal auto policy contains multiple coverage options, some of which are mandatory (legally required in Canada), and some are optional.

• Third-party liability: Provides financial protection should an at fault accident result in damages or injury to another person or their property
• Accident benefits: Provides coverage for medical, rehabilitation and other expenses for injuries sustained in an accident, regardless of who is at fault

• Collision: Coverage for damages caused to your vehicle resulting from a collision with another object, regardless of fault
• Comprehensive: Coverage for damages from events such as fire, theft or vandalism
• Additional coverage options: These include options such as All Perils, Family Protection, and Specified Perils

Commercial auto insurance is intended to cover vehicles that are used for business purposes.  If you use your vehicle to deliver goods, meet clients, transport materials or passengers, or drive to job sites, then your vehicle might be considered a commercial automobile.

Similar to a personal auto policy, commercial auto insurance policies also include mandatory and optional coverage options including coverage limits which vary by province, but these policies are specifically designed to cover vehicles that are used for commercial purposes.  Commercial policies also provide additional benefits and coverages that are not available with a personal auto policy such as covering a larger range of vehicle types while also extending coverage to employees who may drive the vehicle. In addition, given the increased exposure to liability and property damage with a business vehicle, commercial auto policies also offer higher coverage limits than with a personal auto policy. 

Although insurers may offer various options, there are three types of commercial auto insurance in Canada:

1. Individually Rated Commercial Auto insurance (IRCA)

This type of insurance is a good option for businesses with fewer vehicles (this number can vary by insurer but is typically less than 5). As the name suggests, each vehicle is rated individually and the premiums for each are priced accordingly.

2. Fleet insurance

If your company has multiple vehicles, this type of coverage might be useful. Rather than rating vehicles individually, they are rated as a group of vehicles. 

3. Garage insurance

This type of insurance is for businesses that handle or store customer vehicles, such as an auto repair shop or dealership. It provides coverage to customer vehicles while on the premises as well as liability coverage for the business.

If you own a business or work for a company that requires use of a vehicle,  commercial auto insurance could be beneficial. While the list of businesses that could benefit from this coverage is quite extensive, a few exmples are listed below.

Scenario: You arrive at the building where your client meeting is scheduled, and you accidentally hit the client's fence while parking your company vehicle.

Solution: The liability portion of your Commercial Auto insurance would cover the damage to the client's fence. And since you opted for collision coverage on your vehicle, the damages to your vehicle would also be covered.

Scenario: You and your employee (who's driving) are enroute to a client's house. Your employee accidentally collides with a motorcyclist, who suffers injuries and damages to his bike. You also experienced injuries as the passenger in your company vehicle.

Solution: The vehicular damages and bodily injuries to the motorcyclist would be covered by the third-party liability portion of your commercial auto insurance. In addition, the Accident Benefits portion of the policy would cover the medical treatment for your injuries.

Scenario: You drive to a new location to complete a quote. You've parked on the street as permitted. But when you return, you notice your truck has been stolen.

Solution: Since you had opted for the comprehensive coverage option (all perils) with your commercial auto insurance, the theft of your truck is covered.

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