Depending on their insurer, business owners have several options when insuring a vehicle for business use. Knowing what your options are can help to save you money and ensure you are adequately protected.
Some insurance companies will allow you to add the company car to your car insurance. However, others will require you to purchase a separate policy. If you’re wondering whether either of these options costs more than insuring a car for personal use, read on to find out more.

How Does Business Car Insurance Work?

Most insurance companies treat personal and commercial car insurance as separate entities. Unlike personal car insurance, which protects individuals against damages or losses in case of an accident, business car insurance provides coverage for companies and their owners if someone suffers damages, losses, or injuries in an accident caused by a business-use vehicle.
When shopping for a new insurance policy as a business owner, always ask whether the company expects you to purchase commercial coverage. This way, you can obtain higher coverage limits, which can be helpful in many situations. Moreover, if you plan to let your employees use the company vehicle, purchase a commercial policy for multiple drivers.
Bundling policies may also be a viable option to reduce your insurance costs, especially if you have cars for personal use alongside your business vehicle.

Other Options

Some insurers won’t require you to purchase an additional policy for business use but have this listed under the add-ons on a personal policy. How this works varies from one company to another, and it may depend on your exact risks and liabilities.
For example, if you’re the sole employee at the company who drives your vehicle, your risks will be lower than if you allow several employees to use the car.
On the other hand, if you or your employees are driving the vehicle multiple days a week for several hours, you’ll have a much higher chance of getting into an accident. Plus, the add-on option on the personal policy may not provide enough coverage for you. Also, the insurance company may not offer you this option because they’ll consider you a higher liability client.

Does it Cost More to Insure Company Vehicles?

Whether you purchase a separate commercial policy or have an add-on to your personal insurance, it will cost you more to insure a car for business use. One of the reasons behind this is the time factor. When you’re driving a personal vehicle to run errands, like grocery shopping or travelling to and from work, you have lower chances of getting into an accident because you spend fewer hours on the road. Whereas if you use your vehicle to transport goods, tools, or passengers or perform services, you will be driving much longer, and your risks of an accident will be higher too.
Another reason insuring the car for business use costs more is liability. If you or your employees cause an accident while running work-related errands, those who suffer damages or injuries as a result of this accident can take legal action against your company.
For insurance companies, settling claims for business costs a lot more than for individuals. Therefore, they’ll charge you more for insurance.

How to Determine Whether the Price of Business Car Insurance is Worth Paying?

Considering the higher cost, you might also wonder whether you even need to insure your car for business use.
To answer this question, you need to look at your risk. If you occasionally transport work supplies in your personal car, your risks will be lower. You probably won’t need commercial car insurance, although it’s worth double-checking with your insurer. By contrast, you might need to insure the said vehicle for business use if:

• The car is owned by your company or registered under your company name.
• You use it to transport goods, food, or any other kind of supplies.
• You use it to transport passengers as part of a paid transfer service, including ride-share.
• You use it for messenger services.
• You have work equipment, such as tools or insulated boxes, in your vehicle.
• Your employees drive the car for work-related errands.

If any of this applies to you, make sure to clarify this with your insurer or broker when purchasing a new car insurance policy. If you’re in an accident (whether at fault or not) while using your car for business purposes, your personal vehicle insurance won’t apply.
Likewise, if you buy a personal insurance policy and you fail to notify your insurer that you’re using the car for business, your claim in case of an accident will be denied, and your insurer may even drop you.

Final Thoughts

Insuring a car for business use is more costly and for a good reason. With the higher cost also comes higher coverage. This is often necessary for businesses as their liability is far greater when compared to driving personal-use vehicles.
If you’re thinking about switching your car to company use, it’s worth evaluating your risks, but it’s usually a worthwhile investment. If you’re looking for auto insurance or simply need more advice, then contact Marathon Insurance Group today, and we’ll see how we can help.