Difference Between Private and Commercial Car Insurance

Car insurance is an important financial product that ensures protection against sudden costs arising from damage to you or your car or a third-party due to a mishap. While the Motor Vehicles Act, 1988 mandates all vehicles to have a minimum of third-party liability coverage for all cars, most people have started opting for comprehensive plans that include coverage for own-damage too. Since you can use your car for private or commercial purposes, the car insurance requirements can change accordingly. Today, we are going to talk about some striking differences between private and commercial car insurance to help you identify the one that best suits your needs.

What is Private Car Insurance?

As the name suggests, private car insurance is a motor insurance policy that offers protection to a car used for non-commercial reasons. In India, if you want to use your car for any business activity, you need to register it as a commercial car. All other cars fall under the private car category. Policies offering cover to private cars ensure financial protection against losses arising from an accident, theft, natural calamity, etc. It also offers third-party liability and personal accident cover to the owner.

What is Commercial Car Insurance?

As mentioned above, if your car is registered for commercial use like transport of goods, commodities, or people, then it is classified as a commercial car. Since it is being used for business, it tends to be driven more often, increasing the chances of a mishap. A commercial car insurance policy ensures that you are financially protected against losses arising due to such mishaps.

Difference Between Private and Commercial Car Insurance

Both private and commercial car owners have the option of buying a comprehensive policy or the mandatory third-party liability cover only policy. Here is a quick look at the differences between the two:

Feature Private Car Insurance Commercial Car Insurance
Risks While it depends on the use, private cars are usually at lesser risk of an accident or mishap as compared to commercial cars. Since commercial cars are used for business, they tend to spend more time on the streets as compared to private cars. Hence, the risks are higher.
Who and what is covered? A comprehensive private car insurance policy (standard) offers an accident cover to the car owner in case of a fatal accident. It also offers cover against financial losses arising from an accident, natural disaster, theft, fire, etc. and third-party liability. A comprehensive commercial car insurance policy usually covers hired drivers and passengers in the car. This allows the car owner to stay protected against financial losses arising from an accident or mishap as well as third-party liability.
Deductibles Since the risks are lower compared to commercial cars, the deductibles are lower too. A higher risk of an accident or mishap increases the deductibles for commercial cars.
Premium The car insurance premium rate depends on the age and cubic capacity of the car, among other factors. It is usually lower than the premium of commercial car insurance. The premium rate depends on the age, cubic capacity, and the risks involved. It is generally higher than the premium of private car insurance.
Documents needed for claim While the list can vary, some basic documents needed to file a claim for a private car insurance policy are:

●        Registration Certificate

●        Driving License

●        Police FIR

While the list can vary, some basic documents needed to file a claim for a commercial car insurance policy are:

●        Registration Certificate

●        Driving License

●        Taxation Book

●        Fitness Certificate

●        Permit

●        Police FIR

●        Load Challan

●        Trip Sheet

 

Private Car Insurance or Commercial Car Insurance: Which One Should You Buy?

The type of policy that would best suit your car would depend upon how you plan to use your car. If you are using your car for personal purposes like driving to work and back or visiting friends and family around town, then a private car insurance policy is enough.

However, you might need to consider buying a commercial car insurance policy if you use your car for one or more of the following reasons:

  • Transport equipment or goods
  • Charge a fee to passengers to ride with you
  • Charge a fee to transport packages
  • Regularly drive your employees or clients

Remember, a commercial car insurance policy is designed for cars that have higher risks and are used more frequently than personal cars. Also, if you are ferrying passengers and your car meets with an unfortunate accident, then a commercial car insurance policy can save you from the financial losses that can arise if a passenger files a legal suit.

Summing Up

Even if you have decided between private and commercial car insurance policies, before you buy one, it is important to research your available options and compare them. There are many add-ons that can help you customize the policy as per your specific needs. Ensure that you find the right combination of features, benefits, and premium rates before buying one. Good Luck!

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