Are you making money with your car? Insurance implications

If you use your car to make an income, you’re probably best off getting some kind of commercial auto insurance policy or at least a commercial endorsement on your personal policy. You may think it will cost a lot more, but not necessarily. Depending on exactly what you use the vehicle for, commercial coverage could be as little as 5-10% more expensive than personal insurance for the same driver, and in a few rare cases, it can actually be a little cheaper. Plus you’ll have the peace of mind of knowing that you’re covered in case you get into an accident while driving for business.

More and more these days, the line between personal and business vehicles is becoming blurred. With Uber, Lyft, Skip the Dishes, and Turo, your personal vehicle can be used for everything from transporting paying passengers, to delivering food, to being rented out to strangers. This is to say nothing about the millions of Canadian contractors and delivery drivers who use their own personal vehicles to transport people, food, supplies and building materials to and fro on a daily basis.

All of the above situations are considered business uses for the purposes of auto insurance, and would not be covered by your personal auto insurance policy. Whenever you apply for auto insurance, your broker will ask if you are planning to use the vehicle for business, and most Canadians assume that if they say yes, this will double or triple the premium.

The fact is that some business uses are riskier than others from an insurance perspective, and these can affect your premium quite dramatically, while others may not impact your premium by a whole lot. Often it comes down to whether you can find an insurance company that is willing to take you. If not, then you’ll need to get insurance from Facility Association, the insurer of last resort, and in those cases your rates could certainly double, triple, or more.

1. Ride sharing (Uber, Lyft)

Only a couple of insurers are willing to insure you if you drive for ride sharing services like Uber or Lyft. Those insurers don’t actually charge much more to insure you as an Uber driver than they would if you were just using the car for personal use, but the fact is that if you weren’t driving for Uber, it’s very possible that you could get lower quotes from other companies. So the difference in premium can range from $50, if those companies would have been your lowest quote anyway, to hundreds of dollars a year.

2. Car rental (Turo)

If you rent out your car to other people using an app like Turo, your options become even more limited. There is only one insurer right now that will insure you for this purpose, so again, you need to hope that this company’s rates for your driver profile are competitive with other insurers in the market. In the case of Turo, there is also a surcharge that can be a couple hundred dollars a year for each car you put on the service.

3. Deliveries (Food or other merchandise)

Because Uber has a huge commercial (business) insurance policy, the insurance companies that insure Uber are also willing to insure its drivers, including Uber Eats drivers. Again, you’re limited to just a few insurance companies, so you could be paying hundreds more per year than you pay now. On the other hand, if you use your car to deliver directly for a restaurant, or drive for other delivery services like Skip the Dishes or Amazon Flex, you’ll likely be paying $6,000 or more per year to get insurance through Facility Association.

4. Contractors

Before Uber, the most common business uses for personal vehicles were food delivery (directly for restaurants) and contractors who used their own personal vans or pickup trucks to get to and from work sites and transport tools and materials. We’ve already mentioned that insurance can get very expensive for delivery drivers, but the same is not necessarily the case for contractors. Many contractors try to avoid letting their insurance provider know that they use their vehicle for business, but the reality is that you should 100% let your insurer know, and in most cases, the cost will not be prohibitive.

Insurance companies have been insuring contractors for a long time, and have a lot of data that help them predict the kind of losses to expect, and hence what premiums to charge. For some contractors, the cost of getting a commercial policy for their personal truck can actually be cheaper than what they were paying for their personal insurance. That’s the exception, but we’ve seen it here at M&W a few times.

The moral of the story is that in a lot of cases, commercial auto insurance isn’t that much more expensive than personal auto insurance. Ultimately, you pay premiums based on what you’ll be doing with the vehicle, and how likely those activities are to lead to claims. And the fact is that the few hundred dollars you might save by lying about it won’t seem worth it when you have a claim, as that claim could be denied, and you could even be cancelled for misrepresentation.

Given the consequences if you lie about it and get caught, it’s always a good idea to be truthful with your insurance broker. And by all means, use a broker to get you multiple quotes, because that’s always the best way to make sure you’re getting the best price. One of our experienced brokers would be happy to run the numbers for you, and possibly offer other money-saving tips to make sure you get the right coverage for the lowest price.

Thanks to our Director of Personal Lines Scott Logan for his knowledge and contributions to this article