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Written By Lubna Umar


What is a commercial or business vehicle?

In Canada, A commercial vehicle is a motor vehicle used primarily to transport materials, goods, tools or equipment that relates to your occupation. It also includes trailers that are intended for use with said commercial vehicles.

What is commercial auto insurance?

Commercial auto insurance, also called commercial car insurance, commercial vehicle insurance or business auto insurance, is insurance protection for commercial motor vehicles. Vehicles used for business purposes are not covered under a personal auto insurance policy and must be covered under commercial insurance. You will need to apply for IRCA (Individually rated commercial auto insurance).

IRCA eligible vehicles are non-fleet automobiles used for commercial purposes rather than personal use. They are rated based on the driver’s driving record, claims history, coverage, limits and deductible.

Do I need commercial auto insurance?

The rule of thumb is that if any aspect of your job requires you to drive on a regular basis, you need commercial auto insurance. This does not include your daily commute, which is covered by your personal policy.

Sometimes the distinction between a personal vehicle and commercial vehicle is clear:

  • If you drive a vehicle with a gross weight of at least 10,000 pounds or a load capacity of at least 2,000 pounds, it needs commercial insurance. The same is true if your vehicle has specialized equipment such as hydraulic lifts or loading ramps.
  • If you have a normal car, but driving is a core part of your employment (e.g. driving instructor, taxi driver, or pizza delivery person), you require commercial car insurance. Without your vehicle, the commercial enterprise could not exist.

Other times, the distinction between personal and commercial use is less obvious:

  • Let’s suppose that you are a handyman driving between job sites with your tools in the trunk, or a self-employed landscaper. For both of these examples, commercial car insurance is still required.
  • If you occasionally use your vehicle for business reasons, but it is not a regular occurrence, you probably don’t require commercial insurance, but check with your insurer. They may modify your existing personal policy to cover occasional business use, but it won’t cost as much as a dedicated commercial policy.

If you’re ever not sure if your vehicle use counts as commercial use, ask your insurance rep.

Frequently asked questions about commercial auto insurance

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

A commercial auto insurance policy is similar to a personal insurance policy. In Ontario, they both require that coverage include accident benefits coverage, third-party liability coverage, direct compensation property damage and uninsured automobile coverage. Most importantly, commercial use of a vehicle is specifically excluded from a personal policy.

With commercial insurance, additional coverages are available to cover specialist equipment (e.g. an aerial ladder on a fire truck), or industry-specific usage. Some popular commercial add-ons include coverage for trailers attached to your vehicle, and loading/unloading liability for delivery vehicles.

Since commercial vehicle use comes with additional risk, it requires a policy that offers more robust coverage than a personal car insurance policy.

What coverage does a commercial auto insurance policy provide?

Mandatory coverages and the availability of optional coverages will vary by province, but the most common commercial auto insurance coverages provided in your policy include:

  • Accident benefits coverage: Compulsory almost everywhere in Canada. It varies by province but in general provides compensation for medical and rehabilitation treatments, funeral expenses, loss of income due to disability and death.
  • Third-party liability coverage: Also known as Civil Liability in Quebec, provides coverage if while driving your company's vehicle, the driver is held legally liable for injures to someone else, or for damages to another's property. If the driver is held liable for more than the coverage, your company may be responsible for the balance. Third-party liability coverage is compulsory in all provinces and territories, although the minimum amount of coverage needed may vary.
  • Uninsured, underinsured or unidentified motorist coverage: This coverage is universal across Canada. While it may be called something different, or split into two or more coverage types, the principles are the same. Uninsured, underinsured or unidentified motorist coverage provides payment (the amounts vary among the provinces) if the person driving your company vehicle is injured or killed through the fault of an uninsured/underinsured driver, or by an unidentified vehicle like in a hit-and-run.
  • Direct compensation - Property damage: In Ontario, Quebec and New Brunswick, Direct Compensation - Property Damage coverage provides for damage to your vehicle and any property inside that is permanently attached, because of an automobile accident where your company vehicle's driver is not-at-fault or partially not-at-fault.
  • Collision coverage: Collision is an optional coverage that is the portion of your policy that protects your vehicle if it is damaged in an accident. There is usually a deductible.
  • Comprehensive coverage: Comprehensive coverage, like Collision, is optional. It protects your vehicle against loss or damage resulting from something other than a collision. Comprehensive coverage usually applies in the case of loss or damage from falling or flying objects, theft and vandalism. There is usually a deductible.
  • Family protection coverage: Family Protection provides coverage for the vehicle's driver from the actions of an at-fault, uninsured or underinsured driver. If available, Family Protection ensures coverage up to your commercial auto insurance policy's limits regardless of the other person's coverage levels.

What happens if you get into a collision while using your personal vehicle for business?

It will depend on the specific circumstances, but if you get into an accident while driving for business, and this use isn’t specifically covered by your policy, the insurer could deny your claim.

This means you would have to pay out-of-pocket for repairs and other ensuing costs. On top of this, your policy could be cancelled for failing to notify the insurer of your vehicle’s intended use. When you get around to finding a new insurance policy, you’ll face higher premiums as a result of your prior indiscretion.

Can I use a commercial vehicle for personal use?

In most cases, yes, as long as you have permission from the owner, you can use a commercial vehicle for personal use and the commercial insurance will cover you in the event of an accident. However, if your commercial vehicle is larger than a pick-up truck, it would probably be easier, and cheaper, to use a normal car for personal errands.

How much does commercial auto insurance cost?

It is hard to say exactly how much it will cost you to insure your commercial vehicle, as there are a number of variables at play, but you can expect to pay more than you do for your personal policy.

From an insurance perspective, a commercial vehicle is riskier than a personal one. Commercial vehicles can be large and highly specialized, meaning they will cause a lot of damage if involved in a collision, and the parts will cost a lot to fix or replace. Even if your commercial vehicle is a normal-sized car, the insurance policy will cost more, owing to the assumption that commercial cars spend more time on the road, often during rush hour traffic.

Who has the best commercial auto insurance?

It is impossible to say which company has the best commercial insurance, without first understanding the coverage your business requires. To get a better idea of how much it might cost to insure your commercial vehicle, complete our free online quoter to see multiple rates in one place. With this information, you can make an informed decision about which company is best for your business. We understand that your business is your livelihood, and you can trust RATESDOTCA to help you find a great deal.

I’m a rideshare driver. Do I need a commercial car insurance policy?

If you drive for Uber, Lyft or any other rideshare company, check with your insurance company to see if you need additional coverage. Some rideshare companies have partnered with Canadian insurers to provide blanket coverage for all drivers on their platform.

In Ontario, Quebec and Alberta, Uber has an agreement with Economical Insurance. From the moment you log into the app, to the moment the passenger leaves your vehicle, this commercial policy takes precedence over your personal coverage. The commercial premiums are paid for by Uber, and not charged to individual drivers.

Does my insurance go up if I drive for Uber?

It’s possible that your personal car insurance policy will increase if you are a rideshare driver. The additional usage will lead to more wear and tear on your car, and more time on the road increases your chances of getting into a collision.

How can I save money on commercial auto insurance?

When you run a business, every dollar counts. The cost of your commercial auto policy is determined by multiple factors. Some of them are more or less out of your control, like the location of your business, but there are steps that you can take to keep your costs down:

  • Reimburse employees for driving their own vehicles, rather than owning lots of company cars.
  • If your employees must drive company-owned vehicles, screen your new hires to ensure they have at least three years safe driving behind them. They will have to be named on your company policy, so better drivers will ensure lower insurance rates.
  • For company cars, opt for sensible, mid-size sedans rather than flashy sports cars. Generally speaking, the more valuable the car, the higher the insurance premium.
  • Reassure your insurer that your vehicles are safe from theft by parking them in a secure location, installing alarms and GPS tracking.
  • Whenever it comes to insurance, you should always try to take advantage of multi-line discounts, or insurance bundles. If you own the building in which your business is located, bundling commercial auto and commercial property insurance together will probably lower both premiums.

Do I need commercial car insurance if I work in food delivery?

If you work for a ride share company like Uber and Lyft, they have insurance policies to cover ride share drivers, but the same may not apply for drivers who deliver fast food or take out for apps like UberEats and DoorDash. Learn more about commercial car insurance for food delivery drivers.

Lubna Umar

Lubna Umar is an SEO Content Manager at RATESDOTCA. She has produced a wide variety of content, including academic essays, pieces of fiction and financial literacy guides. In her free time, she can be found exploring the café culture in Toronto or any other major city.

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