If you use your vehicle for business, your auto insurance premium is influenced by more than just your driving record. From how your vehicle is used to what you haul, where you travel and how much coverage you need, commercial auto insurance covers risks usually excluded under personal policies. Here’s what Canadian business owners need to know.
It’s easy to compare your auto insurance rates to friends, family and coworkers – especially if you drive similar vehicles, live in the same area and even share the same insurer.
But if you’re a small or medium-sized business owner using your vehicle for work, your insurance premium is calculated very differently. Commercial use introduces additional risks, responsibilities and coverage requirements that don’t apply to personal auto policies.
In this article, our commercial insurance advisors share key factors insurers consider when determining your auto insurance premiums and why yours might be higher.
Personal vs. commercial use
A personal-use vehicle is typically limited to everyday activities like commuting to a fixed workplace, running errands or taking weekend trips.
Using your vehicle for commercial purposes often include:
- Increased time on the road.
- Making deliveries or service calls.
- Hauling equipment, tools or materials.
- Having an adapted unit with permanently attached equipment such as a slip tank, crane, etc.
- Transporting employees or clients.
- More than one authorized driver.
Each of these factors increase the likelihood of a claim. As a result, the risk profile of commercial use vehicles alters the risk exposures which can raise your premiums.
If you are using your vehicle for commercial or business purposes and only have personal auto insurance, your policy may be void in the event of a claim.
Different vehicles, different risks
Not all vehicles are assessed the same way by insurers.
A compact SUV, cargo van and heavy-duty truck carry different risk profiles based on factors like size, repair costs, mileage and historical claims data. Even small fender benders can impact your premiums.
That means even if you and a friend both use your vehicles for business, different makes or models result in different insurance premiums.
Territory and travel considerations
Personal auto policies generally provide coverage only within Canada and the United States.
You may need specialized coverage if your business involves:
- Transporting goods across borders.
- Regular long-distance travel.
- Operating in multiple provinces or jurisdictions.
These travel and territorial risks are factored into your premium and won’t be reflected in a friend’s personal auto policy.
Higher coverage limits and protection options
Most personal auto insurance policies offer full collision and comprehensive coverage – especially for leased or financed vehicles. Some clients can start removing coverage if the vehicle is older, fully paid off and the value is less than what is worth insuring it for in the event of a collision. Premiums will also be determined by the driver’s history and vehicle type.
For business use, Acera Insurance advisors typically recommend collision and comprehensive coverage that includes:
- Higher liability limits, often $2 million or more.
- Physical damage coverage, including collision and comprehensive for theft, vandalism and non-collision losses.
- Optional endorsements tailored to how you use your vehicle and your industry.
It’s easy to assume that $2 million in liability coverage is enough, but legal fees, settlements and court awards can quickly exceed that amount when an accident involves grievous injury or death.
It’s important to remember that commercial auto insurance is designed to protect your business from liability and vehicle related losses, not just damage to your vehicle.
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Information and services provided by Acera Insurance, Acera Benefits and any other tradename and/or subsidiary or affiliate of Acera Insurance Services Ltd. (“Acera”), should not be considered legal, tax, or financial advice. While we strive to provide accurate and up-to-date information, we recommend consulting a qualified financial planner, lawyer, accountant, tax advisor or other professional for advice specific to your situation. Tax, employment, pension, disability and investment laws and regulations vary by jurisdiction and are subject to change. Acera is not responsible for any decisions made based on the information provided.