7 Differences Between Private & Commercial Car Insurance That Every Car Owner Should Know

Different people buy a car for different reasons. While some people buy it as a luxury or a status symbol, others buy it for easing their daily commute to work. Several people purchase a car to aid their commercial or business activities. No matter what is your reason for buying a car, it must be covered under a car insurance policy. After all, you have spent your hard-earned money to purchase it and would hate to see it get damaged or destroyed in a mishap.

A car insurance policy covers your four wheeler from any damages or losses during an accident, natural calamities, manmade disasters and fire. It also provides personal accident coverage to the owner and covers any accidental third party liabilities that you may be responsible to pay for.

Types of Car Insurance

Before buying insurance for your car, you must be aware of the type of car insurance ideal for your needs. Most people know of comprehensive and third party liability insurance as the two types of car insurance plans offered by motor insurers in India. These are the two types of car insurance plans based on the scope of coverage.

However, there are two types of car insurance plans available in India based on the purpose of vehicle usage. They are private car insurance and commercial car insurance. Let us know about both these car insurance plans in detail.

Read Also: Why Do You Need Third Party Insurance?

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.

A private car insurance policy provides coverage from third party liabilities as well as any loss or damages caused to the 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

Difference Between Private and Commercial Car 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 Car 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.

Can I Convert my Commercial Car 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 best car insurance.

In a Nutshell

The major difference between a commercial and private car insurance policy is that the first one is meant for commercial cars while the latter is designed for private cars. Although several differences exist between both these types of insurance policies, the purpose for which you are using your car majorly decides the kind of four wheeler insurance policy you need to purchase.

Written By: PolicyBazaar - Updated: 04 August 2020
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