Wouldn't it be great if you could use your assets for business and reap the maximum rewards from them? Using personal assets, such as vehicles, for business use or to help run your small business is a smart financial strategy to optimize your resources and investments.
However, this approach raises important questions about auto insurance coverage. When is it appropriate to use your personal car for business, and how can you ensure you're adequately protected?
Personal insurance baking up trouble
Suppose a bakery owner uses her personal vehicle to make a delivery to a customer, but she finds herself in a bind after getting into an accident. Her personal auto insurance denies coverage as she was performing a business function during the time of the accident. Because the business owner doesn't carry commercial auto insurance, she's left with no risk protection and no claim payout to help repair her car or cover the other driver's damages.
Figuring out your auto insurance needs can appear complicated, especially when your vehicle is being used for both business and personal use.1 That's why it's important to distinguish between personal and commercial auto insurance to protect yourself and secure your investments.
Personal and business auto insurance: Understanding the difference
Personal auto insurance protects your vehicle for normal day-to-day private use. A personal policy can adequately cover regular commutes to a single job site and occasional drives to business meetings or team catch-ups.
On the other hand, if your work requires you to drive to multiple locations or to transfer products or passengers daily, a personal auto insurance policy won't be enough. Moreover, using a personal vehicle for business purposes continually puts it through additional demands and risks, causing increased wear and tear. All these go beyond the scope of a personal policy.
Notably, personal auto insurance is unlikely to even cover a claim for any accident while using the car for business purposes.
When is commercial coverage needed?
In the US, commercial auto insurance is mandatory for company vehicles explicitly used for business purposes. However, confusion can arise for individual car owners who may be self-employed or using their own vehicles for a rideshare business.
Put simply, commercial auto insurance covers vehicles used for any business purpose. It protects vehicle owners and their businesses from the financial implications of accidents and other risks associated with business use, including increased wear and tear. Furthermore, if a vehicle is being used for ridesharing services like Uber or Lyft, the vehicle driver will require additional liability coverage for their passengers, which needs to be included in their commercial auto insurance.
Using a personal vehicle for business purposes also involves several legal requirements and considerations for insurance coverage that vary by state.2 The consequences of non-compliance may include penalties, including state fines, liability for damages and injuries resulting from accidents, increased insurance premiums or even policy cancellation, as well as possible legal action from affected parties.
Commercial auto insurance: Key differentiators
- Ownership: Tailored for vehicles owned by businesses, not individuals or families
- Vehicle types: Covers a much wider range, from sedans to heavy-duty trucks
- Usage: Policy type varies based on how often the vehicle is used and for what purpose
- Policy limits: Offers higher limits for enhanced protection of the vehicle, business and stakeholders against accidents and claims
Examples of state-specific auto insurance regulations
California: You must inform your insurer if using a personal vehicle for business. Failure to do so could result in claims denial. California law requires minimum liability coverage, but using a vehicle for business may necessitate higher limits or commercial coverage.
New York: All vehicles must have minimum liability coverage, but using a vehicle for business purposes may require additional coverage. Business owners who fail to maintain proper insurance could face penalties such as fines or suspension of vehicle registration.
Texas: A mandatory minimum liability insurance is required, and using a personal vehicle for business may require commercial auto insurance. Non-compliance can incur fines and legal action.
Understanding rideshare insurance coverage
Rideshare insurance is a subgroup of auto insurance that fills the coverage gap between personal and commercial auto insurance. While companies such as Uber and Lyft offer some rideshare insurance coverage, it may be insufficient when a driver is logged into the company app but hasn't yet picked up a passenger.3
Driving for a company such as Uber or Lyft without your own rideshare coverage could leave you uninsured during certain parts of your shift when neither personal nor the rideshare company's policies cover potential damages.
Comprehensive rideshare insurance offers coverage when the vehicle owner is offline, waiting for a customer or on the way to pick up a customer, to complement the coverage provided by commercial insurance during an active ride.
Tailored solutions for your auto insurance: The Gallagher edge
Whether you're using your vehicle for business deliveries or rideshare service, navigating the complexities of commercial auto insurance can seem complex, particularly when the rules vary with location and personal use is also involved.
However, securing the right insurance is crucial for safeguarding your business and personal assets. It's not only a legal requirement but also provides peace of mind and financial security for you and your business stakeholders.
Understandably, each business is different, and there's no one-size-fits-all policy that works for everyone. That's why you and your vehicle need a well-informed insurance policy that gives comprehensive protection without unnecessary costs. It's also essential to understand your state's regulations to ensure you have the appropriate policies in place.
At Gallagher, you can rely on the expertise of professionals with decades of experience to find the most appropriate insurance coverage to avoid potential future complications.
Contact a Gallagher Small Business Insurance advisor today to find the right coverage for you and your business.
Sources
1"Using Personal Vehicle for Work: What the Law Says", UpCounsel, 28 Dec 2024.
2 Fairlie, Mark. "Commercial Car Insurance Laws by State", Business.com, 4 Jun 2024.
3"Missouri Rideshare Car Accident Attorney Ridesharing Accident", Page Law, accessed 15 Apr 2025.