A pickup truck can be your personal vehicle Monday night and take you to a jobsite Tuesday morning. A restaurant owner may use an SUV to pick up supplies, and employees often drive their own car to the bank, deliver paperwork, or meet a customer.
So when does ordinary driving become business use for insurance purposes?
For Michigan business owners, the answer matters because personal and commercial auto policies are designed for different types of risk. Simply having a personal auto policy does not necessarily mean every business-related use of that vehicle is covered.
Whether you live and work in Traverse City, Suttons Bay, Elk Rapids, Williamsburg, or another beautiful Northern Michigan area, understanding how vehicles are actually being used is an important part of an insurance review.
What Is the Difference Between Personal and Commercial Auto Insurance?
Personal auto insurance is primarily designed for personal driving, which means commuting to your regular workplace, running errands, visiting family, or taking a weekend trip.
Commercial auto insurance is designed for vehicles used in connection with a business.
That may include:
- Company-owned cars, pickups, vans, or trucks
- Contractors traveling between jobsites
- Vehicles carrying tools, materials, or equipment
- Delivery vehicles
- Employees driving company vehicles
- Vehicles used to visit customers or perform services
- Certain vehicles with specialized equipment
The distinction isn’t always as simple as “I own a business, therefore I need commercial auto insurance.”
Some personal policies may permit certain types of incidental business use, while other activities may be restricted or excluded. Policy language and underwriting guidelines vary by insurance company.
That’s why the most important question isn’t simply who owns the vehicle?
It’s also how is the vehicle being used?
Does Driving to Work Require Commercial Auto Insurance?
Usually, simply commuting from your home to your regular place of employment is considered personal use.
For example, if you live in Kingsley and drive your personal vehicle to your office in Traverse City each morning, that commute by itself is different from operating the vehicle as part of your job.
But the situation can change when you’re regularly driving:
- From one jobsite to another
- To customers’ homes or businesses
- To pick up materials or supplies
- To make deliveries
- While transporting business equipment
- To perform services for customers
The more closely the vehicle’s use is connected to the operation of the business, the more important it becomes to discuss that use with your insurance agent.
When Might a Business Need Commercial Auto Insurance?
There is no single test that applies to every vehicle and every insurance company. However, several situations should trigger a conversation about commercial auto coverage.
The Business Owns the Vehicle
If your LLC, corporation, partnership, or other business entity owns or leases the vehicle, that’s a strong indication that commercial auto insurance should be considered.
The named insured and ownership of the vehicle need to be structured correctly.
Employees Drive the Vehicle
Maybe you own a plumbing company in Traverse City and several employees drive your service vans. Or perhaps your restaurant has an employee who occasionally takes a company vehicle to pick up supplies.
Multiple employees operating vehicles creates exposures that are very different from a household’s personal driving.
You’re Carrying Tools, Equipment, or Materials
This is especially relevant for Northern Michigan contractors.
Electricians, plumbers, HVAC contractors, carpenters, landscapers, painters, roofers, and other trades may spend much of their workday driving between jobsites in Grand Traverse, Leelanau, Benzie, and Antrim Counties.
A pickup or van carrying tools and materials to multiple jobsites is being used differently than a pickup primarily used for personal transportation.
It’s also important to remember that insuring the vehicle does not automatically mean every tool or piece of equipment inside it is covered. Business property and mobile equipment may require separate coverage.
What About Deliveries?
Deliveries deserve particular attention.
A restaurant employee delivering food, a florist delivering arrangements, a retailer delivering merchandise, or a contractor transporting materials can create a business-use exposure.
Don’t assume a personal auto policy automatically covers delivery activity.
If your business makes deliveries—or employees use their own vehicles to make them—tell your insurance agent exactly what is happening.
What If Employees Use Their Own Cars for Business?
This is one of the easiest exposures for a small business to overlook.
Suppose an employee uses their personal car to:
- Run to the bank
- Pick up office supplies
- Deliver documents
- Visit a customer
- Attend a meeting for the business
The employee may have personal auto insurance, but the business can still have a liability exposure arising from the employee’s work-related driving.
That’s where hired and non-owned auto coverage, often called HNOA, may become important.
Non-owned auto coverage can help address certain liability exposures when vehicles the business doesn’t own—such as employees’ personal vehicles—are used for business purposes. Hired auto coverage can address certain exposures involving vehicles the business rents or hires.
The exact protection depends on the policy, so business owners should not assume HNOA replaces the vehicle owner’s own insurance or covers physical damage to an employee’s car.
General Liability Isn’t a Substitute for Commercial Auto
Another common misunderstanding is assuming a business’s general liability policy takes care of an automobile accident.
Generally, auto liability exposures are handled separately from standard general liability coverage.
A business owner may have an excellent general liability policy and still have an important gap if vehicles are being used for business without appropriate auto coverage.
That’s why commercial auto should be reviewed as part of the business’s entire insurance program—not in isolation.
Northern Michigan Businesses That Should Review Their Vehicle Use
Commercial auto isn’t only for trucking companies or businesses with a large fleet of vehicles.
It can be relevant to a one-person operation with one pickup truck.
Businesses that should pay particular attention include:
- General contractors and subcontractors
- Landscapers and lawn-care companies
- Plumbers, electricians, and HVAC contractors
- Cleaning companies
- Property management businesses
- Restaurants and caterers
- Retailers making deliveries
- Real estate and service businesses
- Snow-removal companies
- Businesses with salespeople or employees regularly on the road
A contractor in Williamsburg may have very different needs from a restaurant in downtown Traverse City or a property manager overseeing homes from Suttons Bay to Frankfort.
The policy should reflect the actual operation.
Michigan Auto Insurance Requirements Still Matter
Michigan’s no-fault insurance system includes required auto coverages such as Personal Injury Protection (PIP), Property Protection Insurance (PPI), and residual bodily injury and property damage liability coverage.
Commercial vehicles can also present additional considerations depending on the type of vehicle, its weight, how it is used, what it transports, and the business operation.
Rather than assuming a personal policy meets the needs of a business vehicle, have an agent review the vehicle, ownership, drivers, use, operating radius, and other relevant exposures.
Five Questions Every Business Owner Should Ask
If you’re unsure whether your current auto insurance matches your business activity, start with these questions:
- Who actually owns or leases each vehicle?
- Who drives the vehicles?
- Where are they driving during the workday?
- What are they carrying or transporting?
- Are employees ever using their own vehicles or rental vehicles for company business?
The answers can reveal exposures that aren’t obvious from simply looking at a list of vehicles.
Don’t Wait Until an Accident to Ask
The time to determine whether a vehicle is properly insured for business use is before there’s an accident.
If you’re using a personal car, pickup, SUV, or van as part of your business, don’t guess about whether your current policy applies. Coverage varies by policy and insurer, and the details of your vehicle use matter.
Cardinal Insurance Group works with business owners throughout Traverse City, Suttons Bay, Elk Rapids, Williamsburg, Acme, Kingsley, Frankfort, and surrounding Northern Michigan communities.
We can review how your vehicles are owned and used, who drives them, and how your current insurance program addresses those exposures. From there, we can help you evaluate the coverage options available for your particular business.
Contact Cardinal Insurance Group to schedule a commercial insurance review and make sure your auto coverage reflects how your business actually operates.
Linda M. Fisher, AAI, CIC, CPRIA, CPRM, LIC, LUTCF, TQA
Trusted Guidance. Personalized Service.