The severity of commercial auto insurance claims rose 78% between 2014 and 2023, according to a report from the Insurance Information Institute (Triple-I). That data point underlines how expensive an auto insurance claim can be when company vehicles are involved. But when do you need commercial auto insurance vs. personal auto insurance?
You may need commercial insurance if you use a vehicle for business purposes — even if you’re an independent contractor or solo entrepreneur. Before shopping for a policy, here’s what you should know, including how much it might cost and how to lower your expenses.
- Commercial auto insurance protects you financially if you or an employee is in an accident while driving for work-related purposes.
- If your company owns or leases the vehicles it uses for business, you’ll need a commercial auto policy.
- Although commercial auto insurance can be more expensive than personal auto insurance, it also tends to provide much higher coverage limits.
Commercial auto insurance vs personal: Understanding the key differences
You’re probably familiar with personal auto insurance, the coverage you must have if you drive a private passenger vehicle on public roads. Personal auto insurance protects you financially if you get in an accident while driving and can protect your vehicle from perils such as hail, theft or vandalism when you’re not driving.
Commercial auto insurance is different because it offers financial protection for vehicles owned or leased by a business and driven primarily for work-related purposes. With a commercial auto policy, business owners can get the right level of coverage for the cars, trucks or vans their company uses. Coverage limits and the values of the insured vehicles tend to be higher for commercial auto insurance, so premiums tend to be higher as well.
| Personal auto insurance | Commercial auto insurance | |
|---|---|---|
| Who is covered? | The person named on the policy, plus their household members | The individual or business that owns or leases the vehicle(s) and the employees who drive them |
| Usage | Personal use; business use is excluded | Business use; personal use may also be covered |
| Policy limit | Separate coverage limits for bodily injury and property damage liability | Combined bodily injury and property damage liability coverage limits, commonly $500,000 to $1 million |
| Premiums | Varies based on coverage, but usually cheaper than commercial | Usually more expensive than personal policy premiums |
Do you need commercial auto insurance?
You don’t need a commercial auto policy if you use your vehicle to get to and from work. That’s considered commuting, not business use.
You may not need a commercial auto policy if you occasionally use your personal vehicle for business reasons. For instance, freelancers and sole proprietors who work from home or travel infrequently to visit clients may not need a separate commercial policy.
However, if you use the vehicle for business purposes or the car is titled in the company’s name, you’ll most likely need commercial auto insurance. Your insurance agent can help you determine the best type of policy for your situation.
When is commercial auto insurance required?
You must have a commercial auto insurance policy when your business owns or leases a vehicle. You might also need a commercial policy if:
- An employee drives a company vehicle
- The job involves transporting people or goods for a fee
- You haul or tow heavy equipment for work-related purposes
- You use your vehicle to provide a service, such as food delivery
- Your personal auto policy excludes the use of your vehicle for work
Who needs commercial auto insurance?
You will need a commercial auto policy if your company uses a vehicle(s) to conduct its business. Both small businesses and large corporations need commercial car insurance.
Here are some of the types of businesses that should have commercial auto insurance:
- Construction and general contractors
- Plumbers, electricians and HVAC technicians
- Catering, food delivery and restaurants
- Landscaping, lawn care and garden centers
- Transportation, taxis and limo drivers
- Heavy truck hauling
- Goods or materials delivery
- Businesses whose employees travel to clients, meetings or job sites
Risks of using personal insurance for business use
It can be tempting to skip buying commercial auto insurance. But relying on personal auto insurance when using a vehicle for business can put you at serious financial risk.
“In most states, auto coverage is required for all registered vehicles — if someone does not properly insure a registered vehicle, there can and will be fines, penalties and potential loss of driving privileges,” says Michael Silverman, founder and president of Silver Lining Insurance Agency in New York City.
Below are some considerations:
Your claim may be denied. Your personal auto policy may not cover business use, especially if your insurance contract expressly excludes it. If you’re in an accident while using your vehicle for business and your insurer denies your claim, for example, you’d have to pay for everything out of your own pocket. Also, your insurer could decide you are too risky to insure and cancel your policy, leaving you uninsured. Lapsed coverage can lead to higher premiums in the future.
Your coverage may not be sufficient to pay for damages or repairs. Even if the claim is approved, you might not have adequate coverage on a personal auto policy to cover all losses. For instance, your policy might cover the cost of damage you cause to someone else’s vehicle or property. But what if you were delivering a large shipment of building supplies? If your policy doesn’t cover damaged goods, you or your business must absorb the cost.
You could be liable for additional expenses. Accidents can get very expensive, especially if the other party is injured and requires medical care. Not only might they sue you for damages, they may sue your company, too. A commercial policy with much higher liability limits can protect you and your business.
Legal and business implications of not having commercial coverage
In addition to the personal and financial risks of driving without commercial insurance coverage, you may face legal and business ramifications.
First, it’s against the law to drive without auto insurance in almost every state. If you or your employees will be operating a vehicle, your business must be sufficiently insured, with minimal exceptions (New Hampshire residents can be self-insured).
If an accident prevents you from conducting business as contracted with vendors or customers, you could be sued for failing to keep your end of the agreement.
Lawsuits and other legal actions can be expensive — enough so that paying your legal costs and damages could put you out of business.
How much more expensive is commercial auto insurance?
On its website, The Hartford says its commercial auto customers pay an average of $574 a month, or $6,884 per year, for coverage. Progressive’s website states its customers pay between $257 and $1,041 monthly for commercial coverage.
For a personal auto insurance policy with full coverage, you’ll pay an average of $1,895 per year – $158 per month. For state-minimum liability coverage, the average annual premium is $502.
The price you pay for commercial auto insurance will depend on several factors, such as:
- Vehicle type, age, weight and features
- Vehicle use
- Type of business
- State
- Garaging location
- Number of drivers
- Driving history of employee drivers
- Coverage limit
Average cost comparison: Personal vs. business auto insurance
| Personal auto insurance | Business auto insurance | |
|---|---|---|
| Average annual premium (full coverage) | $1,895 | $6,884 |
| Average monthly premium | $158 | $574 |
Why is business auto insurance more expensive?
Insuring a vehicle for your business may cost more for several reasons:
- Coverage limits. Commercial auto insurance coverage limits are usually much higher — often between $500,000 and $1 million.
- Type of business and vehicle usage. Your premiums depend on the type of business you run and the risk it presents. Some companies present a greater risk, whether due to the nature of the business, the amount of time the vehicle is on the road or the number of vehicles insured.
- Employee drivers. Commercial auto insurance often covers multiple employees who may have a range of experience behind the wheel. If your employees have a poor driving history, it could drive up your premiums.
- Vehicle type and weight. Commercial vehicles are often larger and more expensive.
How to lower the cost of commercial auto insurance
If you’re a small business owner struggling to afford the cost of commercial auto insurance, here are a few ways you might lower your premium:
- Review your coverage. Don’t pay for more coverage than you need. Review your coverage limits and make sure they make sense for your business.
- Enforce safe driving habits. Safe drivers lower your risk, which can reduce your costs. Regular driver training and using telematics (which track a driver’s behavior) may also result in lower premiums.
- Compare multiple quotes. As with any insurance product, shop around and compare quotes from multiple companies to find the right fit for your budget.
- Change your deductible. You can lower your premiums by raising your deductible if you have the amount in savings. Just make sure you’ll be able to meet a higher deductible in the event you need to make a claim.
- Bundle your policies. Some auto insurance companies offer bundle discounts when you purchase more than one line of insurance. For instance, you might save by bundling a commercial auto insurance policy and a business owner’s policy (BOP) from the same insurer.
Keep in mind that you may be able to deduct your commercial auto premiums as a business expense. Talk to a licensed tax professional for guidance.
“It’s not always more expensive,” Silverman says, “although it can frequently be more. This is the case due to the potential of multiple people driving the vehicles and potential additional exposures.”
Personal vs. business car insurance: Which one should you choose?
Generally, you should choose personal auto insurance if the vehicle is in your name and:
- You mainly use your car for personal reasons
- You rarely or never drive for work-related purposes
You might need commercial auto insurance if:
- The vehicle is titled in the company’s name
- You use the vehicle primarily for business purposes
- You have employees who use the vehicle for work
Your insurance agent will help you identify the right policy for your situation.
Can you have both policies at the same time?
Yes, you can simultaneously have a personal and a commercial auto policy.
An alternative option: Hired and non-owned auto insurance (HNOA)
You may need hired and non-owned auto (HNOA) coverage if your business regularly rents or leases vehicles. This type of insurance also covers your employees when they use their personal vehicles for work.
Frequently asked questions
Can I use personal auto insurance for business purposes?
Generally, it’s unwise to rely on your personal auto insurance when driving for business purposes. You risk insufficient coverage or even claim denial, meaning you’ll need to pay out of pocket for damages to your vehicle and injuries and damages sustained by the other parties involved in an accident.
Plus, costs from accidents like this have risen sharply, as noted by the Insurance Information Institute in a 2024 report, and there’s a risk your business may not be able to withstand the expense.
Does commercial auto insurance cover personal use?
Yes, you may be covered by your commercial auto insurance if you use the vehicle for personal reasons. However, before you depend on your commercial auto policy to cover personal use, review your policy to see what is — and isn’t — covered.
Resources & Methodology
Sources
- AmTrust Financial. “Risks, dangers of being uninsured.” Accessed April 2025.
- Insurance Information Institute. “Commercial auto insurance declines in underwriting profitability; increasing economic and social inflation continue to influence costs, says Triple-I/CAS.” Accessed April 2025.
- Insurance Information Institute. “Insuring your business: small business owners’ guide to insurance.” Accessed April 2025.
- IRS.gov. “Topic no. 510, Business use of car.” Accessed April 2025.
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