You’re a Sole Proprietor—Do You Need Commercial Auto Insurance?

The distinction between personal and commercial vehicles is clear for many businesses: the company either owns the vehicle or does not. However, the situation can be more complicated for sole proprietorships or independent contractors. If you own a pass-through business, then the lines between your personal life and commercial life may be somewhat blurrier.

In general, there's a clear cut-off if you own a vehicle or multiple vehicles you use solely for business purposes or if you have a vehicle primarily driven by employees. In these cases, you'll need commercial insurance. But, what if you own a single vehicle that you use for both personal and business uses? The answer isn't always straightforward.

1. Defining Your Business Usage

To begin, you're going to need to think about the nature of your business and how you use your car to support it. Is your vehicle an integral part of your business operations, or do you directly provide services to clients using it? If so, you'll almost certainly need to purchase commercial auto insurance, even if you also (or primarily) use your vehicle for personal usage.

Aside from these clear-cut situations, you should consider what percentage of your vehicle's use is commercial. If you're simply driving alone to and from client homes or businesses, for example, then you may opt to keep only your personal insurance coverage. When dealing with these edge cases, you'll need to consider the benefits of taking out a commercial policy.

2. The Advantages of Commercial Insurance

Commercial insurance offers many advantages over individual policies, so it's an option worth considering even if your business doesn't require it. In many cases, the most significant benefit comes from higher coverage amounts. With business policies, you can usually choose to purchase more liability coverage, allowing you to protect your business assets more effectively.

This extra coverage is critical since your business may be vulnerable if you're involved in an accident while conducting business activities. Higher limits ensure that an accident while driving to a meeting or other business activity won't put your business assets at risk. Depending on the type of business activity, your individual coverage may not protect you in these cases at all.

Commercial coverage can also provide added benefits if you typically transport business equipment, documents, or other related items. Most individual policies won't cover business assets under collision or comprehensive coverage, so a commercial policy can help protect these critical items. Along with higher liability limits, these added protections can help keep your business safe.

Consider getting commercial auto insurance if you spend any time using your vehicle for business purposes. Contact policy providers to learn more.