If you drive your car to meet a client or make a quick delivery, and you’re in an accident, will your personal car insurance cover you? It can be a bit confusing to know what classifies as ‘using your car for business’ and what doesn’t.
Here’s a breakdown of what insurers consider personal, business and commercial vehicle use so that you can make sure you’re fully covered.
What do you use your car for?
When insuring your car, your insurer will ask you what you use it for. Whether you use it for private, business or commercial purposes will influence their view on how risky it is to insure you and, accordingly, what premium they should charge.
It’s important to understand the difference, because if there’s an accident whilst you’re not using your car for what you said you were, your insurer might reject the claim. Here are clear definitions of what private use, business use and commercial use mean in the insurance world:
Private use: According to the insurance ombudsman, private use refers to using your car only for private and social purposes. This also includes driving to and from work, but not any other type of business-related travel.
Business use: This is when your car forms an important part of your job, but is not used directly to generate income. For example, a salesperson or a financial advisor who goes to see clients. You may also use your car for private use.
Commercial use: This is when your vehicle is used directly to generate an income. Typical examples of what constitute commercial use include transporting paying customers, stock, equipment, staff, or materials to help you do your job. For example, an Uber driver, plumber, building contractor or electrician.
When is your personal policy enough?
Standard comprehensive car cover is designed to cover you against the risks you are exposed to when using your car to drive your family or friends around, or when driving to work.
The ‘occasional’ business trip is usually also covered, but it’s best to check with your insurer on what exactly their policy is. Generally, as soon as you start using your car more than ‘occasionally’ to carry out business, it’s very likely that you won’t be covered.
You’ll usually be okay in terms of cover on your personal policy if you you use your car occasionally for:
- Grabbing coffee or breakfast for colleagues on your way to work;
- The occasional business meeting or errand; and
- Your daily commute to and from work.
What is classified as business use?
It’s best to check with your insurer but generally, as soon as you need your car to do your job (say more than once or twice a week), you will need to add business cover to your personal policy.
Think of it like this: if you go out twice a week to have a work-related meeting away from the office or to drop off a parcel at the post office, your personal policy should still cover you. But as soon as you make business related trips like this daily, your car has become an essential part of your job and you will need to extend your personal policy to a business one.
You’ll notice that your premium does increase as soon as you add business use to your policy. This is because driving for business generally means spending more time on the road, which means you’re at a greater risk of having an accident.
When should you consider commercial car insurance?
When you are using your vehicle for commercial purposes, you are exposed to a range of different risks as compared to a parent driving their kid to school. As a result you’ll need more/extended cover in most instances to make sure you are fully protected in case something goes wrong.
Let’s say you're a plumber. In addition to the usual cover for theft and accidents, you would also require cover for your tools, to protect your business against claims from customers on workmanship or damage to their property, and loss of income when your tools are stolen and you can’t work.
Or you might transport people for a living, like an Uber driver. In this case, you would require a much higher level of passenger liability cover to protect yourself against passengers suing you for being injured while you are driving.
Most commercial policies are specifically tailored towards providing you with the cover you need. The specific use of your vehicle is looked at to ensure that you are fully covered and don’t put your income/business at risk.
So chat to your insurer if you’re unsure, but here are a few examples of where you are likely to need a commercial policy:
- You transport goods or passengers for a fee like an Uber or Lyft driver;
- You use your vehicle to transport your tools or work equipment like a plumber or contractor; and/or
- Different employees use the vehicle or the business owns the vehicle.
What cover do you need when driving a company car for personal use?
This depends on who is financially responsible when the car is damaged and what agreement you have in place with your employer. For instance, your employer might have business insurance that covers any damage caused whilst it is being used for work, but if it is damaged whilst it is being used for personal reasons, then you could be held financially responsible. In this case, it would be wise to take out the appropriate personal insurance to cover you if you are ever in such a situation. It’s always best to iron out the details when getting a company car to make sure that you are adequately covered.
Rather be safe than sorry. If you are struggling to figure out which of the three categories is the right one for you, contact your insurer and tell them your story. They will be able to guide you toward the correct cover that both suits your needs and protects you from the risks you face.
At Naked, we will cover your car for private, domestic or leisure use but also when using it is an essential part of doing your job. If this is what you’re looking for, grab a quote here.