Car Insurance

Difference Between Private and Commercial Car Insurance Policy

By Admin
Feb 23, 2021
difference between private and commercial car policy

While some people buy cars for personal use, some buy them for commercial purposes and make a living out of them. Irrespective of the reason you bought your vehicle, it is imperative to buy a car insurance policy for the same. You definitely do not want to lose your hard-earned money by paying for damages out of your own pocket, in the event of a mishap.

The terms and conditions, along with the coverage, differ with the type of policy you buy for your car. Through this article, you will be able to get a better understanding of how private and commercial car insurances differ from each other.

What are the major types of car insurance policies?

  • Based on the scope of coverage – Comprehensive car insurance and Third-Party Liability car insurance
  • Based on purpose of vehicle usage – Private car insurance and Commercial car insurance

What is a private car insurance policy?

A private car insurance policy is one that provides coverage for cars that you will use for personal use. Legally, you cannot use such cars for commercial purposes like transporting goods or using them as a cab or taxi. Such an insurance policy provides coverage against damages to the vehicle caused by an accident, earthquakes, fires, floods, theft or strikes. Note that it also covers third-party liabilities and provides personal accidental cover for the owner. 

What is a commercial car insurance policy?

A commercial car insurance policy is applicable for those cars that are to be put to use for commercial purposes. This insurance cover is ideal for users whose businesses can be hampered if their car (used as a taxi) is heavily damaged. This too provides cover against third-party liabilities that consist of accidental injuries or deaths caused to the third party and property damages. In commercial car insurance plans, it’s not just the -owner, but also the employees who get the personal accidental cover. 

Now, to help you further understand the major differences between the two based on various aspects, we have curated this comprehensive table for you.  

Categories

Private

Commercial

Risk Level

Since the private cars used are less than a commercial vehicle, the chances of it meeting with an accident automatically drop. As a result, the premiums drop too.

A commercial car is used a lot more than a private car. A cab is on the road virtually throughout the day, making it much more prone to accidents. Naturally, the premiums are higher in this case. 

Legal Obligations

A private car owner must buy cover against third-party liabilities. 

A commercial car owner not only requires cover for third-party liabilities but also liability cover for the employed drivers and personal accidental cover for the passengers travelling in the car as well. 

Personal Accident Cover (PAC)

In this, PAC helps the car owner get compensation in the event of a serious accident that can lead to permanent disability or death.

A commercial car insurance policy provides PAC to the paid driver and the passengers travelling in the car. This protects the car owner from any legal liabilities if the people travelling in his/her car meet with an accident.

Damages caused by towed disabled car

If there is any damage caused by your towed disabled car, a private car insurance policy will not provide cover for such expenses. 

In case of a towed disabled commercial car causing third-party damages, you can still gain cover from your car insurance policy.

Premiums

The premiums are low since private cars are not used that often, and hence have a lower probability of accidents. 

The premiums are generally on the higher side because of the amount of time the car is on road. In other words, due to the high-risk factor of accidents, the premiums are costlier.

Claim Procedure

To make a private car insurance claim, it is not always necessary to file an FIR immediately and carry out the on-site inspection. However, this can differ from insurer to insurer.

To make a commercial car insurance claim, it is mandatory to have an FIR filed, along with an on-site inspection by the insurance service provider. However, this can differ from insurer to insurer. 

Documents Required

  • Registration certificate
  • Driving Licence
  • Tax Records
  • Registration certificate
  • Driving Licence
  • Tax Records
  • Vehicle Permit
  • Load Challan
  • Trip Sheet
  • Fitness Certificate
  • Copy of FIR

FAQs about Private and Commercial Car Insurance policies

1. Is it possible to convert your commercial car insurance into a private one?

Yes, your commercial car insurance policy can be converted into a private one. However, this is only possible once you have successfully converted the registration of your commercial car to a private one. For this, you need to visit the RTO and follow the procedure issued by the authority. 

2. Is it possible to convert your private car insurance into a commercial one?

Yes, your private car insurance policy can be converted into a commercial one, once you have registered the vehicle as a commercial one. For this, there will be an extensive fitness test for the car before it can be passed to be used for commercial purposes. 

3. Will my private car insurance policy be valid for commercial purposes? 

No, you cannot use your private car insurance policy for commercial purposes because it is only valid for private use. In case your commercial car meets with an accident, you will not be legally equipped to make a claim for damages with a private car insurance policy. 

In a nutshell, we can say that the basic difference between private and commercial car insurance policies is based on the purpose for which the car is bought. If you are trying to renew or buy new insurance policies for any of the two purposes, you can do that via online platforms to get better and faster results. 

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