How Business-Use of Your Personal Vehicle May Affect Your Auto Insurance

By Ryan Hurlbert on March 5th, 2010
Auto Insurance

How you use your vehicle can seriously impact the auto insurance premiums you pay. It turns out that a mile spent commuting is riskier than a mile of pleasure driving, and using your car for business is riskier still.

Pleasure Use

If you have a vehicle that is not driven for commuting or business, your auto insurance company may rate it for "pleasure use only" and charge you a reduced auto insurance premium. The savings can be significant, so be sure to ask for it. You may be required to submit annual mileage statements verifying your low mileage claim, but it may be worth the effort.

Personal Use

Personal use is the default rating for most insurers. Personal use includes commuting, errands, and trips that the average person makes. The premium is higher than pleasure use because the risk is so much greater.

When you commute, heed the advice given to John Book in the movie Witness, "Be careful out among them." Your fellow commuters shave, read, eat, dress, and put on makeup while behind the wheel. The road gets crowded, and when you combine a lack of space with a lack of attention, you get fender-benders and lots of risk. Luckily, this risk last an hour or two, and for the majority of the day your car is safely parked.

Business-Use of a Personal Auto

A vehicle that is driven all day, every day for work is exposed to greater risk. Auto insurance companies rate this type of use as business-use, and charge a higher premium, typically 30% or higher, to offset the greater risk. Failure to disclose this use could be grounds for canceling or non-renewal of your auto insurance policy--and getting insurance after being canceled is often expensive.

Professionals Who Should Add Business-Use

It is easy to see why an outside salesman who spends the day visiting clients would need business-use coverage. After all, traveling salesmen are not called "road warriors" for nothing. Realtors are another obvious choice for this type of auto coverage.

But what about the manager of several retail outlets that visits each store location? It depends. If the manager drives to one location each day and spends the entire day there, the risk is the same as any commuter. However, if the manager drives to multiple locations each day, or commutes to a central office and then visits other locations, there may be a need for business-use coverage. The same applies to any profession where work is performed at a client's location.

Do You Need Business-Use Coverage?

Jumping in your car and running to the donut hut for two dozen glazed with sprinkles does not necessarily mean you need to add business-use coverage to your auto policy. Incidental use, even if you do it every day, does not qualify as business-use.

However, if you delivered donuts to multiple locations on a regular basis as a regular part of your job, you may need business-use coverage. And if your job is delivering those donuts, or pizzas, or newspapers, your personal auto policy may not cover you at all. A vehicle that is registered to a company, or is available for others to drive on a regular basis may not be covered by a personal auto policy.

Compare Quotes

Be sure to tell your agent how you use your car when you purchase auto insurance, or if your use changes. Find the cheapest car insurance, no matter how you use your vehicle, by comparing car insurance prices.

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