What you need to know about insurance for business use of your car

In Canada, you are required to carry car insurance. You know you need to cover your personal car use, but are you properly covered if you are using your car for business purposes? Depending on your car insurance company and policy requirements, you might not be.

Commercial car insurance

When you use your vehicle for business, many auto insurance companies expect you to purchase commercial coverage. Commercial car insurance in Canada comes with higher premiums, but it also comes with higher coverage limits, which can be helpful in many situations. You can also purchase insurance for business that allows your employees to drive your car.

There are situations in which your insurance company won’t pay a claim made on your personal insurance policy if you were using your vehicle for business purposes, or if the person borrowing your car at the time of an accident was an employee and not a friend or family members. Using your car for business purposes without the right coverage can be a costly risk.

Do you need to get insurance for business use of your car?

Occasionally bringing stuff to work in your car probably won’t trigger a problem with your insurance coverage (but make sure to double-check). Here are some indications that you might need commercial car insurance:

• You use your car to pickup or deliver goods, supplies, or food, or you use your car as part of a messenger service.

• You use your car to take passengers for pay. This includes participating in ride-share programs like Uber and Lyft.

• Your car or truck is outfitted equipment designed to support your business, including permanent toolboxes or insulated boxes for food.

• Your car is registered to a business or owned by your business.

• You allow employees to drive your car, especially for business purposes.

If you are in an accident and you are engaged in a business activity, there is a very real chance that your claim on your personal insurance will be denied.

This has been an issue for ride-share drivers in Canada for a while. However, in recent months, there have been some insurers willing to offer ride-share insurance that has it’s own coverage policies. This is one way that some enterprising business owners have been able to take advantage of a ride share business without breaking the bank with “traditional” commercial car insurance.

The good news is that if you do buy insurance for business use of your car, it might be tax-deductible. Double-check your own coverage, and consider what you need for your business.

Then see if it can lead to a tax break. You might be pleasantly surprised.