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CAR INSURANCE

Difference Between Private And Commercial Car Insurance

Joan Mathews Joan Mathews 23 March 2020

Private car insurance and commercial car insurance are very different from each other. Read this article to find out the differences in their features as well as the benefits they offer.

Commercial Car Insurance

The manner in which a car is utilized plays a big role in deciding the kind of motor insurance availed for it. A vehicle meant for commercial use will not have the same insurance cover as that of a car purchased for personal use. A commercial vehicle,whose purpose is to transport paying passengers or employees, finds itself on the roads more frequently than a private car. Insurance companies therefore consider the risk associated with the commercial vehicles higher than that of private vehicles. In this article, we will look at the areas of differences between insurance offered to private vehicles and commercial vehicles.

Private Car InsuranceCommercial Car Insurance
MeaningA comprehensive privatecar insurance policy will cover the policyholder’s financial losses arising as a result of an accident, theft, natural calamity or fire. It will also cover third-party losses and provide personal accident (add-on) to the owner.A comprehensive commercial car insurance covers damage or loss of commercial vehicles. It will provide coverage for incidents like theft, loss or damage to commercial vehicles. In case of an accident involving the policyholder's car and another vehicle, any loss to the other vehicle as well as injury or death of a third party shall be covered.
Who is Covered?The standard car insurance policy provides accident cover to the owner of the car (policyholder) in case of a fatal accident. Commercial insurance generally covers hired drivers and passengers. The policy protects the policyholder and his or her business from exposure to liabilities that arise from a serious accident.
Risk and PremiumsWith a private car, the risk is comparatively less. Given that its usagefrequency will be less (compared with commercial cars), the insurance company will set a lower premium rate.The risk involved with driving a commercial car is greater. The number of kilometres that the car runs is more and thus the risk exposure is higher. This in turn leads to a higherpremium rate being charged.

Do I Buy A Personal or Commercial Car Insurance Policy?

If an individual is simply using his or her car for driving to and from work, getting around town, etc. then a personal car insurance policy would be the right choice. In case the individual is using his or her car to perform any of the below tasks on a regular basis, then he or she would be required to avail a commercial insurance policy:

  • Drive clients or employees
  • Transport goods or equipment
  • Charge passengers a fee to ride in the vehicle
  • Charge people a fee for transporting goods in the vehicle

A commercial car insurance policy generally has higher liability limits when compared with personal car insurance. It offers financial protection against additional legal challenges that the injured entity might file against the business or employees on account of an accident.

Comparing Car Insurance Policies

Before availing a personal car insurance policy or commercial car insurance policy, one must ensure to compare the benefits, features and premiums rates. There are many motor insurance products available in the market, and hence, an individual must dedicate some time and effort into evaluating how best one policy fits his or her needs. This way, the user will be making an informed decision about his or her car insurance purchase.

Joan Mathews
Written by Joan Mathews
Joan has over 4 years of experience writing for the BFSI industry. She enjoys watching mystery TV series, listening to 80s classics and spending time with her furbabies.