How Insurance Rates Change When You Use Your Car for Business

In certain states, entrepreneurship is more common than others. I was born in a small town in California but moved to Atlanta, Georgia with my family in the middle of my childhood. Since I still have family in California, I realized the way of life is completely different out there than it is in Atlanta. In Atlanta, it is hard to find a person that doesn`t have a side-gig for extra money or just for fun. There are DoorDash, Uber-Eats, Lyft, Instacart, Shipt, Amazon, and other gig-jobs that many people out here participate in with your car for business. There are even those who create businesses from the inside of their home and deliver their products themselves.

It is amazing to see so many people being productive, but the downside of unconventional work is that you are usually considered a 1099-contract worker. This means you have to use your own equipment (like your car), be your own accountant and file your own taxes, and even pay for your own business insurance policies.

Unfortunately, many entrepreneurs do not realize the responsibility that falls on them when they take on 1099-contract work. So they never know they should take into consideration if they need specific insurance policies or if policy rates for car insurance based on business or pleasure are higher.

Are your rates altered if you use your car for business?

Your rates are usually altered if you use your car for business because you pose a greater risk to insurance companies than those who drive their car for personal reasons only. There are even teen drivers who complete their online driving classes, get their licenses, and immediately use their cars for business purposes. 

As a teen driver alone, you already pose a risk to insurance companies because you are a new driver.

Most, if not all, states require all drivers to have personal vehicle insurance. The personal insurance must at least be liability insurance, but if you are driving your car for business reasons, your personal coverage may not cover damages from accidents so you may need to purchase additional coverage. 

As a business driver, you are actively traveling on the roads more than others, which is why you are a greater risk to Insurance companies. Those who provide delivery services with their car have a higher chance of getting into a car accident than someone who only drives their car to and from their job one time throughout the day. 

Car Insurance for Cars Used for Business

Knowing that people do drive cars for business purposes, insurance companies offer commercial auto policies. This policy type is intended for vehicles owned by businesses or a contract worker using their personal vehicle for work. Contract workers can also get a hired and non-owned policy from insurance providers.

Outside of driving more frequently, you are considered a greater risk because you are generally more distracted while driving for business reasons. You are worried about deadlines, order accuracy, and customer service, all while operating a vehicle on sometimes busy roads.  

All of those things are also usually being managed through your phone, so you are more likely to get a ticket while using your car for business because an officer can easily assume you are texting and driving. In states like Georgia, it is not just illegal to text and drive, but it is even illegal to simply have your phone in your hand while driving.

For those who do not know, your driving record also impacts your insurance rates, so getting a ticket (no matter what kind) can cause your personal rates to be higher. Insurance providers offering someone insurance for their car as a business vehicle take into consideration the same factors as those who are purchasing just personal insurance. 

What is the rate difference between personal and commercial car insurance?

Unfortunately, there is no specific, definitive percentage difference available between personal, commercial, and hired and non-owned insurance policies because each insurance company is different and takes into consideration different factors for determining a rate.

As mentioned previously, insurance providers take into consideration the same factors as the ones they do for people getting personal insurance policies. Those factors can be gender and age, marital status, location, credit score, driving record, age and safety of a car, and driving activity. 

With the additional knowledge of the policy being for a vehicle used for business purposes, the insurance company typically puts the client under a microscope and closely deciphers the drivers` profession and driving activity. 

For instance, if you are a business and you provide your employee with a business car and he is a pilot, you will not be charged as high of a rate as you would if your employee was a delivery driver for you. The same scenario applies to an individual person obtaining insurance for a business car. The reason for this is because the two different types of workers drive their business car less frequently, which means one has less of an opportunity to get into a car accident. 

If you are a delivery driver that only delivers up to five miles from your main place of work, you can get a lower rate than someone who travels out longer distances. The longer you are on the road, the more likely you are to have an accident. 

Where your business car is stored also plays a factor because it can be easily damaged or stolen if stored in an unsecured location.

Speaking with Your Provider about Business Car Insurance

Ultimately, it is best practice to talk with your insurance provider about your rates, the factors associated with determining your rates, and if you even need a special type of insurance for your specific circumstance. 

Teen drivers are sometimes offered discounts with their insurance provider for grades, special classes, so it is a possibility that you can receive discounts too. It never hurts to ask! Regardless, each provider will be able to provide you with rates and discounts, and you can use those numbers to decide which company is most suitable for you and your business needs.

Imani Francies writes and researches for the auto insurance comparison site, She earned a Bachelor of Arts in Film and Media and specializes in various forms of media marketing.