Insuring your vehicle for business or commercial use

21 September 2020
Getting a vehicle insured for business purposes can be a different process to getting it insured for personal use. Here’s how it typically works in Australia.

If you run a business which requires or involves the use of company vehicles, it may be sensible to consider insuring them, just as you might if you owned the vehicles personally. However, many general insurers typically won’t provide cover for a car being used for commercial purposes under a standard policy, which may mean a bit of extra research is required.

If you use your own vehicle or a company vehicle for business, as well as personal use, it can also be a good idea to make sure your car is covered when it is being used for business purposes.

Generally speaking, there are two main ways of insuring vehicles that are used for business purposes:

  • Personal car insurance that covers ‘business use’
  • Dedicated commercial car insurance

What is the difference between business and commercial car insurance?

Business use car insurance may be useful for individuals who use a car for personal purposes, as well as in the course of business. For example, this could be the case if you are a real estate agent or a tradie.

Commercial car insurance is often used to cover vehicles that are exclusively used for business purposes. For example, this may be useful if you have a mobile business, or you need to deliver products as part of your business.

This is compared to car insurance where your car is used for personal use. This covers private use such as general day-to-day commuting.

Business car insurance
Source: JP WALLET (Shutterstock).

Business car insurance

You may be able to get a standard car insurance policy that covers you for business use. When you take out a car insurance policy, the insurer will typically ask you how you use your car and you will need to specify whether it is used for personal or business use.

If you insure your car for business use, this is designed to extend your insurance to cover work-related driving. If you are not insured for business use, you might not be covered for damage to other cars, or your own car if damage occurs when your car is being used for business purposes.

Insuring your car for business may affect your car insurance premium. For example, the insurer may take into account the additional time you may spend on the road.

The insurer may also offer you the option of adding cover for your tools of trade being stolen or damaged while inside your car (this cover option can be referred to as ‘business items’). Adding this optional extra can also increase your premium.

Not all insurers will offer cover for business use, so you may have to check with the individual insurer. It’s also a good idea to check the terms and conditions to see if any exemptions apply. For example, some insurers will not cover ridesharing or food delivery services.

While a business use car insurance policy can work for occasional business use, it may not be appropriate if your vehicle is essential to you for commercial purposes, or used mostly for commercial purposes. In this case, you may need to take out a dedicated commercial car insurance policy.

Commercial car insurance

Commercial car insurance may be worth considering if you own or are responsible for one or more vehicles used mostly or exclusively for business purposes.

Some Australian insurers that offer personal car insurance also offer a commercial motor vehicle product for businesses ranging from a single vehicle to multiple vehicles. This can include cover for trucks, 4WDs, earth-moving vehicles and so on. Insurers will typically offer comprehensive, third party property damage or third party fire and theft cover.

Insurers that offer commercial car insurance sometimes only do so through licensed brokers, which means obtaining insurance for your business’s vehicles may be less straightforward than applying online for a personal car insurance policy, in some cases.

Ridesharing car insurance

Some insurers will cover your car if it is used for ridesharing services like Uber, DiDi and Ola. Insurers may offer this as part of a standard comprehensive car insurance policy, third party property damage policy, third party fire and theft policy or compulsory third party (CTP) insurance policy. You will need to tell your insurer that you are using your car for ridesharing services and this may affect your car insurance premium.

Is business car insurance mandatory?

Whether you opt for commercial car insurance or car insurance that covers business or ridesharing use, legally speaking your vehicle needs to be insured under at least a CTP policy, regardless of where in Australia you live and work. However, a CTP policy doesn’t cover you for the costs of damage to your or anyone else’s car or property. For a higher level of coverage, you may want to take out a comprehensive car insurance policy or a third party property damage or third party fire and theft policy.

Main image source: NAN728 (Shutterstock). 

This article was reviewed by our Sub Editor Jacqueline Belesky and Finance Editor Sean Callery before it was updated, as part of our fact-checking process.

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