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What is business car insurance?

What is business car insurance?

Do you have a small business that you work part-time, such as a catering business or a home-based sales franchise where you need to use your personal vehicle?

Whether it’s a passion project or a way to supplement your income, if you plan to use your personal vehicle for business purposes, you may want to consider buying a business car insurance policy. You will usually be covered for business-related items like tools or products damaged or stolen while in the car. If you later choose to expand the business, making it your primary source of income, you may need to switch to a commercial car insurance policy.

When do you need business car insurance?

You may consider buying business car insurance in Australia if you’re using your personal car occasionally for a side business that isn’t your primary income source. However, if you’re using your vehicle the majority of the time for work that pays the core of your income, you might need to buy commercial car insurance.

A huge difference between the two types of insurance is that most Australian insurers allow you to purchase car insurance for business vehicles directly from them. However, commercial car insurance is often only available via a licensed broker. Another difference is that you can usually purchase business car insurance online, but are unlikely to be able to do this with commercial car insurance.

Some business car insurance providers may also offer cover if you’re using your car for ridesharing services such as Uber. But this only applies if it is a secondary or part-time occupation.

When comparing business car insurance quotes, it’s useful to check whether this option is covered, or if you need to buy a specific ridesharing insurance policy.

Another thing to check is if you can only drive the car owned by you, and insured under a policy issued to you, for a ridesharing service. You should  remember that a business car insurance policy will only cover business items kept inside the car, but not special modifications or tools fitted to the vehicle.

How much does business car insurance cost?

Business car insurance policies usually only differ from personal car insurance policies in terms of the coverage offered for business items.

The cost of these policies can depend on the type of insurance and coverage you choose and can exceed $1,500 annually. For instance, a third party fire and theft insurance policy usually covers your liability for any damage to other cars in an accident where you are at fault, and protects your car for damage from fires and theft. You may also be able to add coverage for business items stored in the car to this policy when buying business car insurance. Your age, gender,  location, and choice of insuring the car for an agreed value or market value can affect the cost of the policy.

When you buy a car insurance policy for business purposes, you’ll likely need to provide documents which establish that you’re using the car only for a part-time business. You’ll also need to confirm the value of  items you keep in the car that are used as part of this business. If your business exposes you to a greater risk of your car suffering damage, your insurer may increase the premium or excess.

The business car insurance premium you pay may be higher if you let someone else drive the car or if you drive it for a purpose that is seen as dangerous, like car racing. If you use the car for a business purpose that is not part of your policy and the car is damaged, you’ll have to pay for any treatment or repairs yourself. You may want to read the insurance provider’s Product Disclosure Statement (PDS) to get a sense of what all is included and excluded.

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This article was reviewed by Personal Finance Editor Georgia Brown before it was published as part of RateCity's Fact Check process.

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