7 Differences Between Private & Commercial Car Insurance That Every Car Owner Should Know
Many vehicle owners assume that car insurance works the same way forRead more
What is Private Car Insurance?
Private car insurance refers to a motor insurance policy designed to cover cars being used for private use. It is a type of insurance policy is meant for cars that cannot be legally used for commercial or business activities, such as transporting goods or people from one place to another.
This car insurance provides coverage from third party liabilities as well as any loss or damages caused to the private car due to fire, theft, floods, earthquakes, accidents, strikes, riots, etc. It also comes with a personal accident cover for the owner-driver of the vehicle.
What is Commercial Car Insurance?
Commercial car insurance is a motor insurance policy that covers cars being used for commercial purposes. It is used to provide protection to commercial cars whose loss or damage can adversely affect the business of the car owner. This type of car insurance is issued to cabs or taxis where the vehicle is used to transport people from destination to another in exchange for money.
Just like private car insurance, a commercial car insurance policy also covers own damages to the car along with third party legal liabilities arising out of causing property damages or accidental injuries/ death of third parties. Besides offering personal accident cover for the owner-driver of the car, it also covers paid drivers and employees against accidental disability or death.
Read Also: Comprehensive Car Insurance Vs Third Party Car Insurance
Key Differences Between Private Car and Commercial Vehicle Insurance
The difference between private car insurance and commercial car insurance seems simple. But there are more differences between the two than meets the eye. If you want to understand how private car insurance differs from commercial car insurance, take a look at the table below:
| Categories |
Private Car Insurance |
Commercial Vehicle Insurance |
| Risk Level |
A private car has lower exposure to risk than a commercial vehicle. This is because a private car is generally used less and the chances of an accident or liability are lower. Thus, it keeps the insurance premium of private car insurance low. |
A commercial car has a higher exposure to risk as it is used more than a private car. The vehicle will be used repeatedly to carry out commercial activities, which makes it vulnerable to accidents and third party liabilities. Thus, it increases the premium of a private car insurance policy. |
| Legal Mandates |
In case of a private car, it is mandatory for the car's owner to have a third party liability cover under his/ her four wheeler insurance policy. |
In case of a commercial car, it is mandatory for the owner of the car to have third party liability cover, legal liability cover towards paid drivers as well as personal accident cover for the car passengers under his/ her motor insurance policy. |
| Personal Accident Cover (PAC) |
Private car insurance provides PAC to the owner-driver of the private car in case there is a fatal accident leading to disability or death. |
Commercial car insurance provides PAC to passengers and drivers who are hired to drive the car. It protects the owner of the car from any legal liabilities arising out of passengers and hired drivers if they get injured in an accident. |
| Towing Disabled Car Cover |
Private car insurance does not cover any damages caused by the insured car while it was being towed to a garage. |
Commercial car insurance covers any loss or damages caused by a disabled insured car while being towed to the garage. |
| Car Insurance Premium |
The premium of a private car insurance policy is mostly higher as it has a higher risk factor because of greater use. |
The premium of a commercial car insurance policy is mostly lower as a private car is usually used less and thus, has a lower risk factor. |
| Claim Procedure |
In order to make a private car insurance claim, a spot survey of the vehicle or an FIR may not be mandatory. However, the exact claim procedure may vary from insurer to insurer. |
To register a commercial car insurance claim, you may have to compulsorily file a Police FIR and get a spot survey done by your insurer. However, the exact claim procedure may vary from one insurance company to another. |
| Claim Documents |
At the time of registering a claim under your private car insurance policy, you may be required to submit your car's registration certificate (RC), your driving license as well as your tax records to the motor insurance company. |
While registering a claim under a commercial car insurance policy, you may be required to submit your vehicle permit, load challan, trip sheet, fitness certificate, copy of FIR along with your car's RC, your driving license and tax records to the insurer. |
Should I Buy Private or Commercial Car Insurance Policy?
The kind of car insurance you need to buy for your four wheeler depends on the purpose for which the vehicle is being used. If you use your car to commute to and from your workplace or to travel around town for personal reasons, then private car insurance is ideal for you.
On the other hand, if you use your car to transport commodities/ goods or drive employees or clients around, then you need a commercial car insurance policy. Moreover, you may also need commercial motor insurance if you charge money to transport passengers or goods from one place to another.
What Happens if You Choose the Wrong Type of Car Insurance?
Choosing the wrong type of car insurance policy has severe financial & legal consequences:
- Insurers may reject your claim, and you will pay for repairs from your pocket.
- Your policy may get cancelled, leaving you and your car unprotected.
- Since you have the wrong policy, you are driving without valid insurance, so you may face heavy traffic fines, licence suspension, or even imprisonment.
Can I Convert my Commercial Vehicle Insurance into Private Car Insurance?
You can convert your commercial car insurance policy into private car insurance only if your four wheeler is legally converted from a commercial car into a private car. Converting a commercial car into a private car is possible by following the guidelines set by the transport department. This may require you to visit your RTO, fill a form to register your car as a private car and pay the registration fee. Your car may also be inspected by authorized officials before being registered as a private car.
Once your car is successfully registered as a private car with the RTO, you can buy a private car insurance policy online or offline. You can also compare private car insurance plans by various motor insurance companies online before selecting the right car insurance.
In a Nutshell
The difference between private car and commercial vehicle insurance directly affects pricing, coverage, and claim validity. Hence, it is important to match your insurance policy to your actual car usage to ensure uninterrupted protection and avoid any legal disputes.
