Do I need Commercial Auto Insurance for a Business vehicle?

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ig77
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Do I need Commercial Auto Insurance for a Business vehicle?

Post by ig77 » Wed Jul 11, 2018 10:43 am

I recently purchased a SUV in the name of my business. Do I need to get commercial auto insurance for that vehicle or can I get the regular personal auto insurance? The premiums on the commercial insurance is outrageous and would like to know if I really need it.

Thanks!

Broken Man 1999
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Re: Do I need Commercial Auto Insurance for a Business vehicle?

Post by Broken Man 1999 » Wed Jul 11, 2018 11:14 am

What does your current insurance provider say?

I would imagine the rate for commercial use is much higher because the vehicle is a primary asset in use by the business, which means the liability risk to the insurance company is greater.

When I bought my last wheelchair van, I faced additional questions because the van was built for use by nursing homes, ALFs, etc. It was approved by DOT to transport people in wheelchairs, specifically.

However, since the vehicle was not used commercially, just as my transport, regular auto polices are written.

What will your vehicle be used for, specifically?

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

ig77
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Re: Do I need Commercial Auto Insurance for a Business vehicle?

Post by ig77 » Wed Jul 11, 2018 11:43 am

The business is a software business and I will primarily use it for my transport (to and from clients).

123
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Re: Do I need Commercial Auto Insurance for a Business vehicle?

Post by 123 » Wed Jul 11, 2018 12:00 pm

Your automobile policy will state what it covers and often what it doesn't cover, i.e. exclusions. How coverage works can vary by state. Maybe your policy just needs an endorsement to cover business use, which might entail some expense or policy adjustment.

You may also want to review and see if you could be advantaged with a commercial license plate for your vehicle. The value of a commercial license plate varies by state and area. In some cases they allow you to use parking spaces that would not otherwise be available to a private vehicle.

Some kinds of buinesses, like personal development of software, are sometimes hard to clearly document as an active business to deduct various, legitimate expenses, like mileage. Sometimes doing little things, like have an insurance endorsement or policy for business use of a vehicle makes a lot of things easier to do, like deducitng other business expenses.

Do you have a business license from your city?
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ig77
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Re: Do I need Commercial Auto Insurance for a Business vehicle?

Post by ig77 » Wed Jul 11, 2018 12:32 pm

I do have a business license from my city.

Are you suggesting getting a personal auto policy and getting it endorsed for use by business? That would help in deducting business expenses?

Rupert
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Re: Do I need Commercial Auto Insurance for a Business vehicle?

Post by Rupert » Wed Jul 11, 2018 12:48 pm

ig77 wrote:
Wed Jul 11, 2018 12:32 pm
I do have a business license from my city.

Are you suggesting getting a personal auto policy and getting it endorsed for use by business? That would help in deducting business expenses?
Call your insurance company (or an insurance company, if you don't presently have any auto insurance) and ask them what to do. It may matter whether the vehicle is used exclusively for business or is a mixed business/personal use vehicle. If the vehicle is titled/registered to your business, I'm not really sure you can add it to a personal policy, but maybe I'm wrong about that.

Jack FFR1846
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Re: Do I need Commercial Auto Insurance for a Business vehicle?

Post by Jack FFR1846 » Wed Jul 11, 2018 1:31 pm

What I always do when I have an insurance question is call my independent agent. They explain to me the answer and all relevant facts surrounding the question.

If you buy insurance from a captive company who may have (literally) high school students manning the phones, perhaps it's time to consider a change. For a time, I switched from my independent agent to Metlife, who had an office right in our facility. Every single time I went there, I got a different answer (same question every time) from yet a different high school aged kid. Just so you understand where I get the "high school student" term.
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drawpoker
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Re: Do I need Commercial Auto Insurance for a Business vehicle?

Post by drawpoker » Wed Jul 11, 2018 2:18 pm

ig77 wrote:
Wed Jul 11, 2018 11:43 am
The business is a software business and I will primarily use it for my transport (to and from clients).
Are you planning to use any signage on the vehicle to identify your business? What kind of license plates does it carry, private passenger registration? Or commercial?
Laws vary from state to state. Only your own insurance agent, or DMV office, can answer your question.
For ex; in NJ, even very small home-based businesses like lawn mowing, pet sitting, errands running service, etc can not use signage on vehicles. If they do, the state deems them automatically to be "commercial vehicles", thus requiring commercial plates (much more expensive) and the accompanying insurance.

ig77
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Re: Do I need Commercial Auto Insurance for a Business vehicle?

Post by ig77 » Wed Jul 11, 2018 8:18 pm

drawpoker wrote:
Wed Jul 11, 2018 2:18 pm
ig77 wrote:
Wed Jul 11, 2018 11:43 am
The business is a software business and I will primarily use it for my transport (to and from clients).
Are you planning to use any signage on the vehicle to identify your business? What kind of license plates does it carry, private passenger registration? Or commercial?
Laws vary from state to state. Only your own insurance agent, or DMV office, can answer your question.
For ex; in NJ, even very small home-based businesses like lawn mowing, pet sitting, errands running service, etc can not use signage on vehicles. If they do, the state deems them automatically to be "commercial vehicles", thus requiring commercial plates (much more expensive) and the accompanying insurance.
No signage on the vehicle. It has private registration plates.

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Pajamas
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Re: Do I need Commercial Auto Insurance for a Business vehicle?

Post by Pajamas » Wed Jul 11, 2018 8:20 pm

Doesn't standard personal vehicle insurance usually specify that it doesn't cover the vehicle if it is being used for commercial purposes?

You should be careful to understand the IRS guidance on personal use of business vehicles in this situation. So many business owners treat their businesses as a tax dodge for personal expenses. Even something so simple as claiming sales tax exemption for items that are actually for personal use can cause real problems. In some situations you need to keep a diary of vehicle milage and usage to be able to differentiate between business and personal use.

jman36
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Re: Do I need Commercial Auto Insurance for a Business vehicle?

Post by jman36 » Wed Jul 11, 2018 8:41 pm

The small business (located in NJ) I work for provides company cars to a few employees. When looking to reduce our insurance rates this year we asked our broker if making the policy out to the individual would be an option. Definitive no, reason offered was the vehicles are titled and leased under the company name.

ResearchMed
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Re: Do I need Commercial Auto Insurance for a Business vehicle?

Post by ResearchMed » Wed Jul 11, 2018 9:09 pm

The only rational thing to do is to double check with the insurer you are using or plan to use.
Reason? THEY will need to decide whether to pay any claim, based upon complete information they may uncover.
IF you have a claim, that is not when you want to find out that you had the wrong insurance and were not covered.

RM
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Candor
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Re: Do I need Commercial Auto Insurance for a Business vehicle?

Post by Candor » Fri Jul 13, 2018 8:11 pm

There is a potential for any claim to be denied for material misrepresentation if the vehicle is being used commercially and you only have a personal policy. Like others suggested you really need to call your provider.

skor99
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Re: Do I need Commercial Auto Insurance for a Business vehicle?

Post by skor99 » Sat Jul 14, 2018 5:31 am

Yes, if the name on the title of your vehicle is your company’s name then the insurance will have to be commercial auto and not personal. The other option is to title the vehicle in your name and then get mileage deduction for business miles driven with proper documentation of the business use. Please verify this with your accountant, but I believe this is correct.

scifilover
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Re: Do I need Commercial Auto Insurance for a Business vehicle?

Post by scifilover » Sat Jul 14, 2018 6:46 am

If your business is organized as a sole proprietorship, normally you can ask your insurer to rate the vehicle for business use. Usual surcharge is 25% above base rate since usage will be greater than someone going to and from work. Business auto policies are intended for those with employees who will be driving the vehicles owned by the business.

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