Gianetta Palmer is a writer for CarInsurance101.com, copywriter, and essayist. Her work has appeared in EverydayHealth.com, Healthline, and The Dyrt Magazine. She is the author of Scrunchie-Fried and writes a lot about car insurance in her spare time.

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Melanie Musson is the fourth generation in her family to work in the insurance industry. She grew up with insurance talk as part of her everyday conversation and has studied to gain an in-depth knowledge of state-specific car insurance laws and dynamics as well as a broad understanding of how insurance fits into every person’s life, from budgets to coverage levels. She also specializes in automa...

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Reviewed by Melanie Musson
Published Insurance Expert

UPDATED: Mar 13, 2020

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Car insurance companies determine rates through a process called underwriting. Every time a policy renews, the company will conduct an underwriting review to determine if rates should increase, decrease or stay the same. When this happens, the policyholder is often contacted to discuss his or her driving habits. Common questions that come up in an underwriting review are the mileage of the vehicle, who has access to the car and what the vehicle is predominately used for.

The reason that car insurance companies ask how a vehicle is used is that certain types of use create additional risks. If a car or truck is being used heavily for work, that vehicle may need to be covered by a commercial policy rather than a private insurance policy.

Commercial Auto Insurance vs Personal Use Insurance

If the primary function of a vehicle is commuting to and from work or driving for pleasure, a personal auto policy is sufficient. Vehicles that are used every day for heavy driving due to a job may require a commercial policy, however. For example, if you use your vehicle to make frequent daily house calls for clients, that vehicle will spend more time on the road than one used only for regular business commuting; the extra time spent traveling increases the vehicle’s likelihood of being involved in an accident.

  • There are several other reasons that a vehicle may require a commercial or business policy:
  • If the vehicle is used in a taxi service
  • If the vehicle is a delivery car for a company
  • If multiple people drive the vehicle for business purposes
  • If the vehicle is used to haul goods or supplies
  • If the vehicle must be used heavily under adverse conditions, such as off-roading, as part of a job

Because these situations have an increased risk associated with the vehicle, special coverage may be necessary. Even if the vehicle does not require a commercial auto policy, premiums may rise in order to accommodate the added risk associated with using the vehicle for businesses purposes.

The more likely a vehicle is to sustain damage, the more the insurance rates will cost. This is why drivers with a history of accidents pay more for car insurance, and it’s also why certain activities are restricted on regular auto insurance policies. In order to offset the potential cost of claims, insurance companies must raise the rates for vehicles that are most likely to be involved in an accident. If being used for business purposes increases a vehicle’s chance of receiving damage, the policy will be changed accordingly.

Will my car insurance cover my vehicle if I use it for work?

As long as you’ve been honest with your insurance company about the way you use the vehicle, the company should provide the correct type of auto policy. Whether or not the vehicle will be covered in the event of an accident will depend upon the type of coverage included on the policy. For example, a liability-only policy will not cover damage to the insured vehicle regardless of how the auto was being used at the time of the accident.

Assuming that the vehicle carries the correct coverage, any damage caused to the vehicle should be covered as long as the car was being used in a manner consistent with the policy. Certain high-risk behaviors, such as street racing or off-roading, may lead to a claim being denied; otherwise, the accident should be covered whether the vehicle was being used for work or pleasure.

If the insurance company learns that the vehicle is being used for work more often than pleasure or that the vehicle’s use is not consistent with what was reported during the last underwriting review, a new underwriting referral will be generated. At that point, the insurance company will contact the policyholder to confirm how the vehicle is used and come up with an appropriate policy that will meet the driver’s needs.

Being honest with your insurance company is the best way to ensure that your policy will cover everything that it needs to. By understanding your needs, your insurance company can tailor an insurance policy to your situation that will provide the protection that you need.