Vehicle Use and Why It Affects Auto Insurance Rating

Why Having Your Vehicle Rated For The Correct Use Is A Necessity 

If you have a personal vehicle, you need personal auto insurance. If you have a commercial vehicle, you need commercial vehicle insurance. Simple. But personal versus commercial vehicle rating for insurance purposes can be more complicated than that. It's often not so black and white—you may drop your kids off at school in your pickup truck and then head to a job site where you'll need to use your truck throughout the workday. How do you know if you have the proper vehicle rating and the right insurance coverage if your vehicle happens to have multiple purposes?

You need to ensure your vehicle rating accurately reflects how you use your vehicle regularly so you know which type of insurance is necessary to be covered adequately in the event of an accident that causes damage or injury. The information below from Morison Insurance covers some common questions and misconceptions about vehicle ratings regarding the correct type of auto insurance for a particular vehicle's usage.

What is Vehicle Rating for Auto Insurance?

The term "vehicle rating" can be taken in multiple ways, even within the context of insurance. It sometimes refers to vehicle rate groups that are based on the year, make and model of the vehicle, but in this case, it relates to the distinction between personal and commercial vehicles, which naturally affects the type of insurance coverage they need to be covered against insurance losses related to an automobile accident.

Commercial vehicles in Ontario are often purpose-built for their work, and it's clear that they exist for commercial purposes. For example, if you have an ice cream truck or a cement mixer, it's evident that its vehicle rating is for commercial use, and you're likely well aware that you need commercial auto insurance.

But it's not always crystal clear when a vehicle rating for commercial versus personal use is necessary. If you use your car or pickup truck for personal purposes, like going to the grocery store or heading out to the cottage for a long weekend, and you also use it for commercial purposes, such as making deliveries or transporting materials and tools between job sites, which vehicle rating will get you the right insurance coverage for damage?

The answer is a combination of both. If you regularly use your vehicle for both personal and commercial purposes, you need both commercial and personal auto insurance. The extent of the coverage that is necessary for each type will vary based on factors such as the type of work you do, where you live and work, your driving experience and past claims history, the value of your vehicle, how much physical damage coverage you want or need, how often you use your vehicle and the exact purposes you typically use it for. Make sure to speak with your Morison Insurance broker to make sure your vehicle is rated correctly.

Does Vehicle Rating Depend On the Vehicle Type?

The make or model of the automobile does matter for the type of vehicle rating, but it is not the most important factor. The most critical factor to remember for the question of commercial versus personal vehicle rating is how the vehicle is used and what it is used for. You may have a big pickup truck that you use at your construction job and also use to get out of the city on weekends, or you may have a little sedan that you drive all over the place—including to deliver the artisan products you create to various stores that stock them. Regardless of the size, category or type of the vehicle, it has the potential to be used for both personal and commercial reasons.

Specialized commercial vehicles are typically more expensive than regular cars and trucks, and they may have costly after-market modifications designed to make them more suitable for specific types of commercial use. That means a specialized commercial vehicle will cost a lot more to replace than a standard personal vehicle. Higher coverage limits may be required to allow the vehicle owner to avoid paying out of pocket for replacement costs. In contrast, commercial auto insurance considers those distinctions. Insurance companies may also refuse to insure a specialized commercial vehicle with personal vehicle insurance, as it seems unlikely that anyone would drive something like a cement mixer truck around for anything other than commercial reasons.

Why is It Important to Have the Correct Vehicle Rating for Your Usage?

You may wonder why vehicle rating matters so much and whether you need to worry about it. All Canadians need car insurance to be out on the road legally, but if your vehicle is covered and you can produce a certificate of insurance, why does it really matter if it's commercial or personal coverage?

The word "coverage" is the clue to why it's so important to have the correct vehicle rating for your insurance. No one wants to think about the possibility that they could get into an automobile accident and suffer financial setbacks as a result, but of course, it does happen. The problem is if you only have personal auto insurance and are involved in an accident while using your vehicle for commercial purposes. That's especially true if the insurance company discovers that you've regularly used the vehicle for commercial reasons.

What If You Need to Use Your Vehicle for a Commercial Reason One Time?

If you need to use your vehicle for a commercial reason one time, or a few odd times here and there, it's not necessary to worry about vehicle rating. One-off situations are acceptable and don't require commercial vehicle insurance for proper coverage.

For example, suppose you drive your car to your retail job each day and typically never use it for commercial reasons, but your boss is running behind one day and asks you to drive a few boxes of product over to another store location just this one time. In that case, there's no reason to be concerned about insurance coverage. Even if you did happen to get into an accident while driving those boxes over, your insurance company would not penalize you for a one-off situation, and you would still be able to access the insurance compensation you would generally expect from your personal car insurance.

While a one-time use may not be an issue, every insurance company is different, so make sure to speak with your Morison Insurance broker and let them know if a one-time commercial use could be an issue.

What's the Difference Between Commercial and Personal Auto Insurance?

When it comes right down to it, personal and commercial insurance coverage in Ontario for vehicles is very similar. We all know it can be dangerous on the road—it's not just a matter of being a good driver and staying in your own lane, literally and figuratively. You also have to contend with all the other drivers, who may not be as invested in safe driving as you are. Both types of vehicle insurance exist to get you insurance compensation if you're involved in an accident so you're able to repair or replace your vehicle promptly and get back to your daily routines.

The key difference is that commercial auto insurance applies to commercial-use vehicles, and personal vehicle insurance applies to personal-use vehicles. As a result, the two varieties differ in areas such as coverage limits, available coverage types, and, to some extent, the risk exposures they address. They also have something in common—neither type will give you the insurance protection you need against financial losses if you use the vehicle for the other purpose when an accident occurs. The exception to this is one-off situations, as we mentioned above.

Both personal and commercial car insurance covers more or less the same perils by providing liability, accident benefits and loss or damage coverage. It's essential to understand whether your coverage is comprehensive or only covers named perils, meaning that only the perils that are specifically listed on your insurance policy—the "named perils"—are covered.

Is There a Way to Tell If a Car or Truck Has a Commercial or Personal Vehicle Rating?

In Ontario, there is a way to tell at a glance if any given vehicle rating is commercial or personal simply by looking at the license plate. If it's a commercial license plate, the letters and numbers will be black, while personal-use cars, trucks, motorcycles and trailers have blue letters and numbers. Other provinces indicate this information in various ways on license plates—for example, in Quebec, commercial license plate numbers start with an "F." In Alberta, commercial license plates are marked with Class 1, Class 2 or Class 3, depending on the type of commercial usage the vehicle is intended for.

How Do You Make Sure You Have the Correct Vehicle Rating?

If you're not entirely sure about your vehicle rating and whether you need commercial or personal car insurance—or both—the best course of action is to give your broker at Morison Insurance a call and give them the information they need to ensure you have the right vehicle insurance in place. That includes information about your vehicle, but also about your driving habits. You should tell your broker how often you typically drive, at what times of the day, where you usually go and why you go there (for commercial or personal purposes) so they can get to the bottom of your vehicle rating and the type of coverage you need.

You can also chat with the friendly brokers at Morison Insurance about other insurance questions about your vehicle rating you may have to get expert help to ensure you are secure and protected by the right coverage in all areas of your life. At Morison Insurance, we don't work for insurance companies—we work for customers like you. That means the best interests of our customers are always our top priority, and we'll work tirelessly to ensure you have the coverage you need. Give us a call today at 1-800-463-8074 to speak with an experienced broker and get the peace of mind that comes with knowing you are protected against financial losses for all the perils you are likely to be affected by throughout your daily life.