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Difference between private and commercial car insurance

The primary function of a car is to get you from one place to another quickly and efficiently. However, there are varied reasons behind why you buy your car. It could be for your daily commute, or as a luxury item that you can showcase as a status symbol. It could even be for commercial reasons, to aid your business activities. Based on the purpose for buying your car - personal or commercial, you should take the corresponding car insurance. The plans vary as the end use of the vehicle is different and hence the risks the car is subject to are different.

What is private car insurance?

A private car insurance policy offers coverage for the car you own for personal or private reasons. Cars under this policy cannot legally be used for commercial purposes, such as transporting goods from one place to another.

What is commercial car insurance?

A commercial insurance policy covers cars used for commercial purposes, such as your taxis or cabs. Damages to these kinds of vehicles not only creates expenses but can also affect your business and income, so this type of insurance protects you from the loss these damages may cost your business.

Difference between private and commercial insurance for cars:

Categories

Private Car Insurance

Commercial Car Insurance

Risk factor

A private car generally has a lower exposure to risk as they are used less frequently than a commercial car.

Commercial cars travel for longer distances and are used repeatedly, increasing their risk of accidents or third-party liabilities.

Premium

The premium for private car insurance will be lower than that of commercial insurance due to the reduced risk factor.

Since commercial vehicles are used more often and are at higher risk, they have a higher premium.

Coverage

A private car insurance policy covers:

  • Third-party liabilities
  • Damages or losses from an accident
  • Any damages due to theft, strikes, riots, fire, accidents, floods, or earthquakes
  • Personal accident insurance for the owner/driver of the vehicle.

A commercial insurance policy covers:

  • Third-party liabilities
  • Damages from theft, fire, and natural calamities (floods and earthquakes)
  • Personal accident cover for the driver
  • Offers financial security to the policyholder’s business in the event of loss or damages to the commercial car
  • Option to take a passenger cover

Mandatory covers

Under a private car insurance policy, the car owner must have a Third-Party Liability Cover.

Under a commercial car insurance policy, the owner must have Third-Party Liability and Personal Accident covers for the driver and passenger.

Claim process

Spot Surveys and FIR are not mandatory for private car insurance unless required.

Spot Surveys and filing an FIR are compulsory to make a claim.

Claim documents required

To make a private car insurance claim, you will need your vehicle’s

  • Registration Certificate (RC)
  • Driving License
  • Taxation Book.

To make a commercial insurance claim, you will need your

  • Registration Certificate (RC)
  • Fitness Certificate
  • Vehicle Permit
  • Load Challan
  • FIR Copy
  • Taxation Book
  • Trip Sheet (if required)

If you’re trying to decide which insurance policy to take, first consider the purpose for which you are using your car. Taking a private car insurance policy because of its lower premiums for a commercial vehicle can land you in trouble, so carefully consider the reason for buying your vehicle before taking the appropriate insurance policy. 

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