A vehicle used for business purposes is likely not covered on a personal auto policy. For example, a pickup truck used by an electrical contractor for operating their business is not afforded protection under a personal auto policy. Although some personal auto policies may provide limited protection, such policies are uncommon and increase cost. Personal auto policies do not contain the specific coverages and higher limits of insurance needed to protect a business.
The reason behind this issue is because a personal auto policy is designed to protect individuals and assumes a vehicle will be used for personal use, whereas business use is altogether different. Business use may mean towing a work trailer, moving inventory, and making extra trips that would otherwise not be performed. A business auto policy is designed to protect businesses for this increased use of the vehicle as well as other business-specific coverage needs.
But to be fair, certain vehicles may serve two purposes, personal and business. So, how does one properly protect themselves and their business? First, let’s understand business use.
What is Business Use?
Driving a car to work is not considered business use. Thus, using our electrical contractor example, the pickup can be driven to the job site and home without issue. It can run out for lunch and perform errands during the day like any other personal vehicle. But once its use becomes “engaging in a business”, coverage is at risk. For example, picking up building materials, hauling equipment, or moving workers between jobsites all are a part of running a business and can fall under business use. If a vehicle has a business sign on it, that is a good indication it is engaged in business use. Examples of claim denials due to business use are:
- Pizza delivery
- Snow plowing
- DoorDash, Uber Eats, and other food delivery
- Uber, Lyft, and other ride sharing (reference Insuring Your Uber, Lyft, DoorDash, or Grubhub Gig)
Incidental business use is typically not an issue. We have not seen a claim denied for travels such as picking up office supplies, running lunch orders, or even a one-time move of an office.
Can a Claim Be Denied?
Yes. An insurance claim against a personal auto policy can be denied if the driver was engaged in business at the time. A popular exclusion on personal auto policies states it will not cover the policyholder (driver) while they are “engaged in any business.” Note that the exclusion isn’t just for the vehicle, but the policyholder themselves. This means that if the policyholder were to cause an accident while driving for the business, not only could the insurance company deny coverage for the vehicle but also liability protection for the policyholder.
