What is the Difference Between Private and Commercial Car Insurance?

It takes years of savings for people to buy a car and a well-planned budget to further maintain it. As expensive as cars are, their repairs are just as expensive. Therefore, it is necessary to have car insurance. Based on this purpose there is private and commercial car insurance available in India.

Now, let us discuss commercial car insurance vs private insurance to understand their differences more clearly and to know more about their benefits.

Team Digit

What is Private Car Insurance?

Private car insurance is a motor insurance policy that provides insurance against cars used for private purposes.

A private car insurance policy insures the owner of any damage caused to the car due to:

In cases of natural calamities
Accidents
Theft and fire
Against third-party liabilities that are against damages caused to another car during an accident
Personal accident cover for the owner-driver of the car in case of accidents

However, this insurance does not include cars involved in any kind of business or in commercial services like transporting goods or people.

What is Commercial Car Insurance?

Commercial car insurance provides insurance against damages to cars that are used for commercial purposes. Cars that are used for cab services where they transport people from one place to another are applicable for a commercial car insurance policy. It provides financial protection to the cars where the damage can directly affect the business of the car owner.

This policy insures the owner against any damage caused to the car due to:

Accidents
Natural calamities
Theft or fire
Third-party liabilities in case of accidents that cause damage to another car
Accident cover for the owner-driver of the car in cases of fatal injury or death
Financial aid in case of accidents to any employee or paid driver apart from the owner

What is the Difference Between Private and Commercial Car Insurance?

The difference between private and commercial car insurance is listed in the table below:

Category for Comparison	Private Car Insurance	Commercial Car Insurance
Risk Involved	Private cars have lesser risk exposure. Therefore, the premium is also low.	Commercial cars are more exposed to risks and have higher chances of getting into accidents. Thus, the premium is on the higher side.
Legal Mandate	It is mandatory for car owner’s to have a third-party liability cover with their motor insurance policy.	Owners must have a third-party liability cover, a legal liability cover for paid drivers, and a personal accident cover for the passengers.
Cover for Towing Disabled Car	Private car insurance does not cover the charges of any damage caused by the vehicle while being towed to a garage.	The charges for the damages caused by the vehicle while being towed to a garage are covered by the insurance policy.
Premium Rates	The premium rates depend on the cubic capacity. The rates are lower than that of a commercial car insurance policy.	The rate of premium depends on the cubic capacity, vehicle age and the risk involved. It is usually higher than a private car insurance policy.
Documents required to claim the insurance	A copy of FIR (if required), a copy of insurance policy, cash receipts (in case of reimbursements), original repair bill, Registration Certificate, Driving License, and Taxation Book.	FIR, Vehicle Permit, Policy document, Fitness Certificate, Registration Certificate, Load Challan, Driving License, Taxation Book, Permit, Copy of FIR, and Trip Sheet.

Can Private Car Insurance be Converted to Commercial Car Insurance?

A private car insurance policy cannot be converted into a commercial car insurance policy. To use a private car for commercial purposes car owners must buy a new commercial car insurance policy. However, a few necessities must be taken care of before buying commercial car insurance. The requirements for changing a private car into a commercial car are as follows:

Change the vehicle registration from private to commercial. This can be done online or by visiting the Regional Transport Office.
After the registration process is complete, the owners can buy commercial car insurance.

Therefore, owners must choose the right motor insurance for their vehicles based on its purpose. This article will guide you to get a clear idea of a few things about commercial car insurance vs private insurance.

FAQs About Commercial Car Insurance vs Private Insurance

All

Can one use a private vehicle for commercial purposes?

If a private car is used for commercial use then any claim during that period is inadmissible for that vehicle.

Can a private vehicle be used for commercial purposes?

Yes, a private vehicle can be used for commercial purposes. However, it needs to be registered as a commercial vehicle first. Owners cannot use a car registered as a private vehicle for commercial purposes. It will make them subject to legal penalties.

Which factors influence the premium of commercial vehicle insurance?

The factors that influence the premium of commercial vehicle insurance most are: the vehicle’s age, model, insured declared value, fuel type, location of registration, Sub class – GCV/PCV/Tractor etc.

Need Help?

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