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The Differences Between Commercial and Private Car Insurance

Potential buyers purchase cars for a variety of reasons. Some buy it for luxury or comfort and others for commercial or business requirements. However, obtaining proper insurance plans is essential whether an individual owns a private car or a commercial one. 

A well-rounded car insurance policy provides coverage benefits against damages caused by an unfortunate accident. Paying for the damages can cost an individual substantially. Hence, it is essential to obtain such insurance plans and gain financial stability. 

Both private and commercial cars have separate usages depending on which, two insurance plans are available.  

Also Read: Car Accidents: The Definitive Guide

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Also Read: What to do After a Car Accident?

What is private car insurance?

Private car insurance covers damages caused to a car used for personal or private purposes. Individuals, who own a car that cannot be legally used to transport goods, etc., can obtain this plan. 

When buying a comprehensive car insurance policy for your private car, you get cover for third-party losses as well as your own car damages from theft, fire, floods etc. Additionally, it comes with a personal accident cover under which one can get financial aid during accidents resulting in permanent disability or death. 

What is commercial car insurance?

Owning a car or vehicle for commercial purposes must have a commercial car insurance plan to protect themselves from financial losses during an accident. As commercial vehicles run longer distances, they are more prone to damage than private cars. Such damages can negatively impact a car owner’s business resulting in substantial losses. 

Generally, cab or taxi owners can obtain this plan and enjoy coverage benefits. Similar to private car insurance, this insurance policy covers own car damages as well as damages caused to a third-party person, property or vehicle from an accident. 

Besides offering personal accident cover, it extends coverage benefits to paid drivers and employees against permanent disability or death. 

Also Read: 6 of the Best Driving Gadgets that You Need Today

Differences between commercial and private car insurance

By referring to the following table, one can clearly understand the differences between private and commercial car insurance policies. This table will help you make an informed decision regarding which policy to choose. 

CategoriesPrivate car insuranceCommercial car insurance
Risks involvedThe risk levels of a private car are lower than that of commercial cars. It is because private cars’ usage is much less and therefore the chances of risks are lower. Consequently, there are fewer chances of damages for which one needs to claim against an insurance plan. In the case of commercial cars, the risks of damages are more as they are used frequently for commercial purposes. Hence, policyholders of such a policy are prone to raise more claims. 
Policy coverPrivate car insurance policies provide coverage against damages caused by third-party accidents, theft, fire and other natural or artificial disasters, as well as personal accidents. Insurance for commercial cars provides financial protection to a policyholder’s business against damages from accidents. It also covers own car as well as third-party damages. In addition, it covers the personal accident injuries of a driver. 
Premium ratesThe premium rates for private car insurance are lower as the risks involved are less. Further, policy premiums for a private car insurance plan depend on the cubic capacity only.  As the risks involved are higher in the case of commercial vehicles, the insurance premium is higher. It depends on factors like vehicle age, the number of risks involved, and the cubic capacity. 
Documents required during claimsWhile claiming against a private car insurance policy, policyholders must submit their car registration certificates, driving license, and taxation book. For the commercial vehicle insurance claim process, the documents list includes fitness certificate, load challan, registration certificate, driving license, permit, FIR copy, taxation book, and trip sheet for the commercial vehicle insurance claim process. 
Legal mandatesPotential buyers must mandatorily get a third-party insurance cover under their motor policy to obtain this insurance policy. In the case of commercial motor insurance, one needs to primarily obtain a third-party liability cover along with legal liability cover for paid drivers. Further, individuals should also get personal accident cover for car passengers under their insurance plans. 
ExclusionsSome of the exclusions under this insurance plan are:

Coverage in case of business or commercial use of a car

Passenger cover (Note: Policyholders can obtain passenger cover add-on policy against additional charges)

Coverage extended to personal drivers who are not included under an insurance plan
Here are some exclusions under an insurance plan for commercial cars:
Coverage for personal uses

Regular wear and tear

Mechanical or electrical breakdown

Damages from radiation or nuclear attacks

Car damages due to usage beyond limitations

Damages caused by someone else driving the car other than the mentioned persons in the policy

Also Read: Autonomous Technology: How Driverless Cars Will Impact These Industries?

It is imperative from the aforementioned section that based on a car’s usage; individuals should obtain a particular type of insurance plan for maximum benefits. For instance, frequent drivers who use cars for transportation and other commercial requirements must obtain commercial insurance.

Alternatively, individuals for whom the primary purpose of owning a car is comfort and convenience should consider getting private car insurance. In case of further clarity, referring to the table above can be a good start and help you select the best insurance policy.

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