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When Should Small Contractors Switch from Personal to Commercial Auto Insurance?

March 30th, 2023 | 6 min. read

By Daniel J. Middleton

It’s a sunny spring morning in Central New York. You woke up energized and immediately started loading your truck with 2x4s and tools for the job you landed weeks ago. You’re turning into a small contractor, and it feels great. Things are looking up.

You take a sip from your cup of piping hot morning coffee before you back out of the driveway. But you glance down to switch the radio station for what seemed like a split second and narrowly miss your Mercer Street neighbor, Kathy, who was just passing by in front of your house.

You quickly hit the brakes before going beyond the end of the driveway, and while there’s some spilled coffee in the cupholder, you’re no worse for wear. But then it dawns on you that, had you hit Kathy’s CUV, the accident would have been your fault.

And you’re using your truck for work.

You ask yourself, “Would my personal insurance policy cover this?”

It won’t. That’s where a commercial policy comes in.

You simply didn’t know that your truck needed commercial insurance. There’s no way you could have. But don’t be hard on yourself. The insurance industry could do a better job of educating policyholders.

For many small contractors, the word “commercial” sounds daunting. Insert “insurance,” and “commercial insurance” sounds even worse!

Step up to “commercial auto insurance,” and you’re on the canvas for a ten-count!

If you’re a small contractor looking to switch from a personal auto policy—or are married to a small contractor—have no fear. Like so many other things in the insurance world, it’s not as complicated as it seems.

As an insurance agency in the middle of blue-collar CNY, we’ve saved many small contractors from unexpected turmoil by getting them the critical commercial insurance coverage they need for their businesses, including commercial auto insurance.

In this article, you’ll learn about properly insuring your truck, van, or even a sedan and the short path to making it happen.

Switching from Personal to Commercial Auto Insurance

Personal auto insurance policies in New York State are filled with exclusions. Simply put, exclusions are policy provisions that remove coverage for certain things. And those things won’t be covered by your plan after a loss.

One of the biggest exclusions is the use of the vehicle.

Driving a vehicle for contracting work that is insured on your personal auto policy leaves you exposed to liability risks that will cost you dearly. Your insurer will likely decline any accident claim that arises from operating that vehicle for commercial purposes.

Let’s say you’re using a van for work. You’ve got a roof ladder mounted to a heavy-duty rack, a decent collection of power tools in the back, and haul materials for a given job when needed.

You’re using your van in the scope of your business and making daily trips to Radisson to finish a project at a client’s house.

Common questions new small contractors ask about commercial auto insurance.You’ve recently added lettering on the side of your van to advertise the business because things are picking up, and word of mouth is strong. These are all indicators of a commercial endeavor. You’ve stepped into a professional situation that requires the appropriate insurance coverage.

You may have already set up insurance for your business, like a general liability policy, but never thought much about the vehicle you use for work.

This is the time to make the switch from a personal auto policy to a commercial auto policy.

Your general liability policy—if you’ve set one up—and your personal auto insurance policy will not cover damage to your vehicle during the course of work, nor will they cover your liability for any damage your vehicle causes while on the road.

But how would you know that since no one took the time to explain it clearly to you? It’s not your fault, so don’t feel too bad about missing the details. That’s why you’re here reading this article and arming yourself with the necessary info to make an informed decision about your auto policy.

You’re off to a good start.

Unique Commercial Auto Insurance Coverage

Auto insurance on the commercial side has similar coverages to personal auto. The main difference is that the policy is rated appropriately for commercial use and factors in greater liability.

So, a commercial auto policy will rate higher than a pleasure-use or commute-use personal auto policy. Regarding a commercial policy, liability limits are available at higher thresholds than the personal auto portion.

Almost all commercial auto insurers establish $1 million as a baseline for your liability limit, with some going higher. Personal auto policies, meanwhile, often cap your liability limit at $500,000.

Several coverages come standard, such as bodily injury, property damage, collision, comprehensive, and more, which you can read about in detail in our forthcoming commercial auto insurance guide.

But aside from these standard protections and benefits, you can add customized coverages to your existing commercial auto policy, depending on your business needs.

Say your main truck is too small for a material and supply run. If a job in Mattydale requires you to rent a larger truck for the day from your local U-Haul, you can add Hired and Non-Owned Auto Coverage, for instance.

Renting or hiring that U-Haul truck for commercial use requires coverage beyond your standard commercial auto policy. Hired and Non-Owned Auto Coverage extends the liability protection you need while renting the U-Haul truck for the Mattydale job.

You cannot add Hired and Non-Owned Auto Coverage to personal auto policies.

Another benefit of Hired and Non-Owned Auto Coverage exists if you need to send an employee—let’s say, Josh—to the hardware store to buy a few boxes of drywall screws. Since Josh drives his personal vehicle, this creates a non-owned exposure for you.

Josh is driving on behalf of you, the small contractor. What if Josh heads off and crashes into a car because he took a sharper-than-expected turn pulling into the accessway for the Home Depot parking lot?

Who covers the accident? His personal auto coverage doesn’t extend liability protection to you while driving on your behalf. Hired and Non-Owned Auto Coverage takes care of this liability exposure.

Also, consider that commercial businesses using heavier vehicles can’t call a regular towing service to handle a vehicle breakdown. Conventional tow trucks are designed and built to haul SUVs, pickup trucks, and passenger cars.

Heavier commercial vehicles require Commercial Roadside Service. This coverage offers what you’d expect: vehicle towing, lockout and key replacement service, flat tire assistance, mobile mechanic service, and more, but it is intended for commercial vehicles.

If you’ve modified your truck for your business—adding a ladder rack, a built-in tool chest, or a snow plow blade—you’ll want to cover those through a commercial auto policy. A personal auto policy will not extend coverage to those additions.

What Will a Commercial Auto Insurance Policy Cost Me?

Asking this question forces us to ask others. What kind of business are you in? What kind of vehicle is assigned to the business and how many?

Figuring how much a commercial auto policy will cost you is contingent on the type of work you do and the vehicle(s) you use to complete that work. The distances you drive also matter. All this and more makes it difficult to pinpoint a range that works for most small contractors.

But, being that we’ve written hundreds of policies for small contractors throughout Central New York, we can say this: while a commercial auto policy is typically more expensive than your personal auto insurance, know that, at the very least, you’re spending insurance dollars on a product that will help you in your business when you need it.

A personal auto insurance policy cannot offer commercial protection this way.

But say you’re paying $900 for a vehicle on your personal auto policy. Bumping up to a commercial policy might cost you $1,200 or $1,300. That additional three or four hundred dollars open you up to a level of protection that will cover you for auto claims related to your business.

That $1,200 or $1,300 commercial auto insurance premium is typically for $1 million of appropriate liability protection that should cover you for any number of possible mishaps on the road.

Quoted rates from your insurer may be slightly lower or higher.

Why Should I Switch from Personal to Commercial Auto Insurance?

Proper commercial auto insurance, which kicks in swiftly, can maintain your business reputation if an accident happens.

Following an accident, if you have a commercial auto policy, you will exude greater seriousness and professionalism in the eyes of your customers. And since you’re financially protected, you’ll be back to work the next day.

With a proper commercial auto policy, you’ll avoid hassles, surprises, and perhaps a cancelation by your personal insurer due to a policy exclusion.

Don’t wait to make the switch. Accidents are sudden and random. Word spreads quickly when something goes wrong. Don’t jeopardize your business reputation.

Out-of-pocket expenses and frustrating calls with your current insurance provider can be avoided.

How Do I Make the Switch?

You didn’t wake up an insurance expert this morning, and that’s okay! That’s why we’re here. You are now a more informed member of the business community who is ready to take the next step to protect that business. We’ll take it from here.

We’ve witnessed too many contractors not get their accident claims paid because they were improperly insured.

Once you reach out to us, we’ll consider the type of contracting work you do so that you have a policy quote that resembles your specific trade.

We’ll seamlessly move your vehicle from the personal insurance policy to the new commercial one, as we have with our existing trade clients throughout the years.

If you want to learn about another policy that will benefit you, read Proper Tool Insurance for Small Contractors.

But if you’re ready to talk about your current auto policy, call 315-635-2095, and a Horan insurance specialist will gladly help. You can also click the Get a Quote button below. We’re looking forward to hearing from you.

Daniel J. Middleton

Daniel is an accomplished content creator. He has been working in publishing for almost two decades. Horan Companies hired Daniel as its content manager in November 2022. The agency entrusted its messaging to him. Since then, Daniel has written insurance articles, service and pillar pages, and more. All in an effort to educate CNY readers. He's helping them understand the world of insurance so they can make informed decisions.