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Written By Shivani Kaul

Content Manager

Updated

What is a commercial or business vehicle?

A commercial motor vehicle is a vehicle used for the purpose of business, for the transportation of persons or goods, according to the Motor Vehicle Act in Canada.

A commercial motor vehicle could be:

  • A vehicle with a gross vehicle weight exceeding 4,500 kgs and used to transport goods, materials or merchandise, equipment, or tools.
  • A vehicle with a seating capacity of more than 10 passengers, including the driver. Such a vehicle can be used to carry customers for business reason.
  • Trucks, tractors, trailers, or combinations of such heavy vehicles.

What is commercial auto insurance?

Commercial auto insurance provides protection for vehicles that are used for business purposes. For example, businesses within the construction, retail, and restaurant industries require commercial car insurance.

Commercial vehicle insurance is designed to protect company-owned vehicles to ensure that business owners are not vulnerable to costly risks and losses in case things go awry. Business auto insurance covers medical expenses, lost wages, and replacement vehicle costs.

In Canada, automobile insurance is mandatory across all provinces and territories, but requirements for mandatory coverage may vary by province. Mandatory automobile coverage typically includes third-party liability, accident benefits and physical damage coverage. Additional auto insurance coverages such as collision, specified perils, comprehensive and all perils coverages are available as optional add-ons.

If you use a privately-owned vehicle for commercial purposes, 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 and claims history.

Do I need commercial auto insurance?

Auto insurance is mandatory in Canada for all vehicles. The primary determinant for requiring commercial auto insurance is the intended use of your vehicle.

Whether you drive a luxury vehicle, a pickup truck, or a small fleet of branded company vans, you need a commercial auto policy if you use the vehicle for:

  • Regularly transporting equipment, tools and materials, such as a contractor or renovation expert driving a pickup truck to a site.
  • Occasional personal use.

If your job requires you to drive on a regular basis, you may need commercial auto insurance. This does not include your daily commute, which is covered by your personal policy.

Here's what distinguishes a personal vehicle from a commercial one:

  • If you drive a vehicle with a gross weight of at least 4,500 kg, 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.

Sometimes 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 usage counts as commercial use, ask your insurance provider.

Mandatory and optional commercial car insurance coverage

In Canada, the mandatory or minimum amount of policy coverage required by law for a vehicle owner to purchase varies in each province and territory. These mandatory premium requirements may change depending on which province you purchase your vehicle and for what purpose. No matter where you live in Canada, driving a vehicle without insurance is a serious offence. If you are caught driving without insurance, you will likely be considered a "high risk" driver by insurance providers and may be charged a higher premium.

Before purchasing a licence plate, renewing your vehicle registration, or buying a temporary permit, you need to purchase car insurance.

Mandatory and optional commercial auto insurance in Ontario

Insurance type  Mandatory coverage Optional/Additional coverage
Third-Party Liability $200,000 minimum. Provides coverage in the event of a lawsuit resulting from an accident where you are at fault. Coverage can be increased to $500,000, $1 million, or $2 million, with up to $2 million limit.
Uninsured Automobile Insurance Provides up to $200,000 in coverage if you are injured or killed by an uninsured driver, or if your vehicle is damaged as a result of a hit-and-run by an unidentified, uninsured motorist. Family Protection Coverage is an optional coverage that includes additional coverage of up to $1 million in the case of a hit-and-run by an uninsured motorist.
Statutory Accident Benefits Provides coverage if you are injured in an accident, regardless of who is at fault. Covers medical expenses that aren’t covered by OHIP. Coverage limits can be increased.
Collision Coverage (Also Upset Coverage) Optional Covers the costs of repairing or replacing your vehicle following a collision with another vehicle, an object, or property.
Comprehensive Coverage Optional Covers damages caused by named perils identified under the Specified Perils coverage, as well as losses from other perils like falling or flying objects, theft, fire, hail, windstorms, missiles, and vandalism.
Specified Perils Coverage Optional Covers damages caused by named perils such as theft, attempted theft, explosions, natural disasters like fire, lightning, windstorm, hail, rising water, earthquakes, and also other perils specified in your policy. Specified perils do not cover damages due to vandalism, breakage of glass, etc.
Direct Compensation-Property Damage (DC-PD) Optional DCPD is a standard coverage, but drivers in Ontario can opt to remove it. It covers damage to your car, or loss of use of your vehicle, if someone else is at fault. It must  have involved another insured vehicle. Removing DCPD coverage disqualifies you from these benefits and you cannot sue for vehicle damage, either. 
All-Perils Coverage Optional Combines collision/upset and comprehensive coverage. Also provides additional protection if a household member or an employee steals your vehicle.
OPCF 20: Coverage for Transportation Replacement Optional Covers the cost of your transportation replacement and rental car insurance if you were to get into a car accident or if your vehicle is stolen.
OPCF 27: Liability for Damage to Non-Owned Automobile(s) Optional Covers if you damage a borrowed or rental vehicle. The coverage limit is usually around $25,000 to $50,000.
OPCF 39: Accident Waiver/Forgiveness Optional Protect your premium from rising when you have your first at-fault accident.
OPCF 43: Waiver of Depreciation Optional Protects you by removing your insurer's right to deduct depreciation from the value of your vehicle when settling a claim. This coverage is for new vehicles with fewer than 5,000 kilometres.
OPCF 44R: Family Protection Coverage Optional Protects you if you or a family member is injured, regardless of whether you or your family members are in the car when the accident occurs
OPCF 49: Agreement Not to Recover for Loss or Damage from an Automobile Collision Optional Removes DCPD coverage from your insurance policy. 

How much does commercial auto insurance cost?

The cost of commercial auto insurance in Ontario can vary depending on the type of vehicle, business, and usage of the vehicle.

Commercial auto insurance premiums can be thousands of dollars annually per vehicle, varying based on risk exposure, coverage requirements, and the repair or replacement costs of the specific vehicle model.

Factors that affect commercial auto insurance rate

There are several factors that impact commercial auto insurance premiums. These factors include:

  1. Driving record: The driving history of your employee plays a significant role on a commercial auto insurance premium. Clean records can lead to lower premiums, while records with accidents or violations can increase costs.
  2. Vehicle type and usage: The type of vehicles you use ( a trailer, truck, van, or car) and how they are used (local delivery or long-haul transport) affect the premium. More expensive vehicles or those used for high-risk purposes typically cost more to insure.
  3. Coverage limits and deductibles: If you have higher deductibles and lower coverage limits it will result in lower premium and vice versa (if coverage limit is high with lower deductibles, it would result in higher premiums). A balance of both can help manage the cost of premium.
  4. Driver experience: The experience level of your drivers matters. Inexperienced drivers are considered higher risk, which can increase premium.
  5. Vehicle repair and replacement cost: The cost to repair or replace your vehicles also impacts premiums. Newer vehicles with advanced technology can be more expensive to repair.
  6. Traffic density: Operating in high-traffic areas increases the likelihood of accidents, which can raise insurance costs.

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Frequently asked questions about commercial auto insurance

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

A commercial auto insurance policy has some similarities to a personal insurance policy, but they are different products.

In Ontario, both commercial and personal auto insurance require that coverage include accident benefits coverage, third-party liability coverage, 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.

Commercial auto insurance costs more than personal auto insurance due to higher coverage limits. Personal policies cover one driver, while commercial policies cover multiple drivers and vehicles, including those with poor driving records.

Premiums depend on a range of factors, such as:

  • Occupational hazards and industry risks
  • Vehicle types and number of vehicles used in business
  • Driving frequency and route
  • Employee driving records
  • Coverage and policy limits
  • Claims history

Small businesses with fewer vehicles and drivers typically pay less than businesses with large fleets.

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 costs. On top of this, your policy could be cancelled for failing to notify the insurer of your vehicle’s intended use. You’ll face higher premiums on your next policy as a result.

Can I use a commercial vehicle for personal use?

In most cases, yes. If 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.

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, saving 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:

  • If your employees must drive company-owned vehicles, screen your new hires to ensure they have 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 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.

Shivani Kaul

Shivani Kaul is a communications professional specializing in editing, writing, and content strategy, with a particular focus on personal finance and mortgages. Her expertise stems from a strong educational background and diverse international experience.Academically, Shivani holds a Digital Marketing Management certificate from the University of Toronto, a Business Communications certificate from the University of British Columbia, a Master's degree in Mass Communication from Symbiosis Institute of Media and Communications, and a Bachelor's degree in English from the University of Delhi.


Her professional journey is marked by significant roles in prestigious media organizations across multiple countries. She has previously worked as an editor at PMNA/The Canadian Press for The Globe and Mail, Toronto Star, and freelance writer for the Investor's Digest of Canada. Additionally, Shivani has contributed her skills to reputed news media groups in India and the Middle East. Her expertise in SEO ensures that the content she produces not only engages readers but also achieves optimal visibility in digital spaces.

Experience
  • Mortgage
  • Credit Cards
  • Real Estate
Education
  • University of Toronto
  • Symbiosis Institute of Media and Communications
  • University of Delhi

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