Do I Need Commercial Car Insurance?

Published: August 31, 2015

Updated: May 15, 2018



Many consumers believe that their personal auto coverage is sufficient to cover them for commercial vehicles, which in most cases is simply not true.

There is a blurred line between personal and commercial auto insurance, but actually insurance companies are not the perpetrators of this issue. Brokers are very clear about the differences and indeed what defines commercial auto insurance as different from a personal policy. As such, commercial coverage offers different policies compared to personal insurance, and most companies offer a variety or all of the following:

Any auto liability – Coverage holder can extend policy to cover more than once vehicle and even fleet. In the Province of Ontario the definition of a fleet is five of more vehicles, including autos that have been leased. Hired and non-owned vehicles are subject to the any auto liability coverage.

Trailer interchange – Trailers that are not owned by a company are covered.

Rental reimbursement – Temporary replacement and pay-outs against lost vehicles.

Individual named insurance – With individual coverage you can operate non-owned vehicles and have coverage in the event of a claim.

Non-owned coverage – Covers employees operating non-owned vehicles on behalf of your company.

So, why do consumers sometimes make a mistake when ignoring commercial insurance in favour of personal auto insurance?

Problems tend to arise when determining what a vehicle is used for and what classifies commercial insurance as different to personal coverage. The Province of Ontario sums up its definition of a commercial vehicle as:

“An automobile used primarily to transport materials, goods, tools or equipment in connection with the insured’s occupation, and includes a police department vehicle, a fire department vehicle, a driver training vehicle, a vehicle designed specifically for construction or maintenance purposes, a vehicle rented for thirty days or less, or a trailer intended for use with a commercial vehicle.”

This summary is similar nationwide and is indeed the general way commercial vehicle insurance is classified around the world. The reason commercial vehicle insurance is different to a normal personal policy is because a commercial auto is subject to different risk liabilities and pay-outs could potentially be bigger in the event of an accident.

When assessing whether you need this kind of coverage you should consider what you use your vehicle for. Even if your car is a daily driver for taking the kids to school and making supermarket runs, you will still need commercial auto insurance if you also use the car to carry your tools for your construction business. Any vehicle that is used for business purposes needs commercial coverage, including carrying supplies (pizza and newspapers included) and delivering or picking up goods.

The specific type of vehicle is also important, with vans, trucks, and utility vehicles with a gross weight of 10,000 pounds and above automatically designated for commercial coverage, while it is a similar story for vehicles with a load capacity of 2,000 pounds and higher. If vehicles features non-standard equipment like hydraulic lifts and arms, bathrooms, and other equipment that would not be found in a normal car, then they are also classified as for commercial use.

Simplified, all this means that a vehicle needs commercial auto insurance if it is used in a business capacity, no matter how small. Again, any good insurance company will help you understand the finer details and where exactly your best coverage lies.