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Difference Between Private and Commercial Car Insurance

Team AckoApr 30, 2024

Insurance is an effective tool to cover your financial expenses in case of damages to your car. Whether it is a personal car or a commercial car, motor insurance is essential when it comes to safeguarding your car from possible losses or damages. Insurance for your car should be based on the risk factor. A commercial car may run more than a personal car and that will require different coverage for accidental damages or losses. It helps to be aware of the important factors of both commercial car insurance and private car insurance. Read on to learn about the difference between private and commercial car insurance and factors affecting both types of car insurance policies.




Private Car Insurance:

The vehicle insurance policy that covers a car you own for personal use is known as Private Car Insurance. The Comprehensive Insurance, which includes Own Damage Insurance and Third-party Liability plan, is considered a robust cover for your personal car. Here are the coverage details of personal car insurance through the comprehensive insurance plan.

Private Vehicle Insurance Coverage

  • Offers financial coverage against damages or losses due to an accident.

  • Financial cover against theft, natural calamities, fire and riots.

  • Personal Accident cover for the owner-driver.

  • Third-party Liabilities.

What is Not Covered

  • Excludes business/commercial use of the vehicle.

  • Excludes passenger cover. However, you can opt for the add-on to protect passengers as well.

  • Excludes personal drivers if you have not opted for additional coverage.

Commercial Car Insurance:

The motor insurance policy covers a car you own for commercial purposes, especially as a taxi or a cab. The type of insurance coverage under this category is slightly different since it involves other risks. These are passengers, the driver and the standard financial cover of damages to the vehicles. This can impact your business and buying an insurance policy for your passenger car or cab becomes all the more important.

Commercial Vehicle Insurance Coverage

  • Offers financial security to the policyholder’s business financially due to losses or damages to the commercial car in case of an accident.

  • Coverage against total loss due to theft, fire and natural disaster.

  • Offers personal accident cover of the driver.

  • Passenger cover option.

  • Includes Third-party Liabilities.

What is Not Covered

  • Excludes use of the car for personal use.

  • Regular wear and tear.

  • Electrical/mechanical breakdown.

  • Loss or damages due to radiation/nuclear attack/war.

  • Damages due to use of the car beyond its limitations.

  • Damages caused by someone driving the insured car other than the driver mentioned in the policy.

Difference Between Private Car Insurance and Commercial Car Insurance:

While both types of car insurance offer financial protection to the car, they vary in terms of coverage since the risks are different. The table below offers an insight into the difference between a commercial vehicle insurance and personal vehicle insurance:

ParticularsPrivate Car InsuranceCommercial Car Insurance
Risk Factor and Premium Lower due to lower kilometres run by the personal car.Lower premium compared to commercial car insurance. Higher due to higher kilometres run by the commercial car.Higher insurance premium.
Coverage Financial protection towards damages or losses due to theft, fire, natural calamities, riots, etc. Personal Accident cover for the owner-driver. Third-party Liabilities. Provides financial protection towards any business losses due to damages to the insured commercial vehicle. Covers drivers and optional cover for passengers. Covers losses due to theft, fire, natural calamities, accidents, etc. Third-party Liabilities
Mandatory Cover Third-party Liability Third-party Liability, Driver and Passenger Cover
Documents For Claims Registration Certificate Driving Licence First Information Report (FIR), if required Copy of insurance policy Original repair bill, cash receipts in case of reimbursement Registration Certificate Fitness Certificate Load Challan Driving Licence Permit FIR, if required Trip Sheet Taxation book Copy of insurance policy
Claim Process FIR is mandatory or on-spot survey/inspection by the insurance company and then the process will be initiated. FIR is not mandatory unless required. Get the car repaired at a network garage or get a reimbursement.

Which is the Best? Commercial Car Insurance Or Private Car Insurance?

When it comes to comparing commercial vs. private vehicle insurance, you need to understand your requirements. Are you looking to use the car for commercial purposes such as a taxi to ferry passengers, or use it as a cab to transport employees or students or are you going to use it for personal use such as visiting your friends or relatives? It depends upon the requirement. 

Also, it is not legal to use a private car for commercial activities to earn money or for business purposes. It will invite stipulated penalties by the transport authority. Hence, commercial car insurance should be bought if you are using the car for commercial purposes, while private car insurance should be bought in case you are using the vehicle for your own use.

There are several digital insurance companies which offer new features and benefits and that too with the comfort of doing business online. You can visit the insurer’s website or mobile app to know about commercial or personal car insurance.

Comparing Car Insurance Policies:

Before you go ahead and decide to buy car insurance, be it commercial or private, it is essential to compare different insurance policies. You can compare car insurance online, which is easy and hassle-free with the use of the car insurance premium calculator. You can compare different car insurance quotes and understand the coverage and premium for the same. The higher coverage at a lower premium should be your objective while choosing a car insurance policy. This will offer wider coverage at a competitive price.

By comparing insurance policies online, it allows you to find the right premium amount. Some of the important factors that you need to keep in mind while comparing car insurance policies are:

  • Price: Pick an insurance policy that takes care of your requirement and your pocket as well.

  • Coverage: Apart from the standard comprehensive car insurance policy, consider add-on covers such as Zero Depreciation, Engine Protection, Return to Invoice, etc. to make the insurance coverage more exhaustive.

  • Insured Declared Value (IDV): The IDV is the current market value of your car. Ensure you check the IDV offered by the insurer for the premium it quotes. Higher the IDV at a lower premium is an ideal approach to choose the right insurance for your car, be it commercial or private.

  • Exclusion: It is imperative to read the terms and conditions of the policy to understand what is not covered or excluded. This will help reduce the chances of rejection of claims.

Frequently Asked Questions About Commercial and Private Car Insurance:

Below are some common questions about private and commercial car insurance policy:

Why is the premium for commercial car insurance higher compared to private car insurance?


The risk associated with a commercial car, which runs more kilometres compared to a private car, makes the premium for the commercial car more compared to a personal car.

Are hired drivers covered under private car insurance?


No, hired drivers are not covered under the private car insurance compared to a commercial car insurance policy. Only the owner-driver (policyholder) is covered under the personal car insurance until it is included in the policy as an additional coverage.

Are passengers covered in a personal car insurance policy?


No, passengers are not covered under the private car insurance. However, the policyholder can opt for add-on covers which include accident cover for passengers. In the case of commercial car insurance, passengers are to be covered mandatorily.

Is Third-party Liability cover mandatory for a commercial car insurance policy?


Yes. Both personal and commercial vehicles in India need to be insured at least with third-party insurance as per the Motor Vehicles Act.

Is there a Personal Accident cover for the owner and the hired driver in the commercial car insurance policy?


Yes. Both the policyholder and the hired driver will be included in the Personal Accident cover in case of accidental death or permanent disability. However, in personal car insurance, passengers are covered only if opted as an add-on.

If someone else was driving the car at the time of the accident and not the hired driver, will the commercial car insurance cover damages to the insured car?


The commercial car insurance policy does not cover any damage or loss if the car was driven by someone else other than the hired driver listed under the ‘Driver’s Clause’. Ensure the hired driver is driving the car instead of someone to avoid rejection of claims.

What are the types of car insurance policies under commercial and private car insurance?


There are two types of car insurance policies. The Third-party Liability cover and the Comprehensive cover. While the former covers your financial liabilities towards damages or losses to the third-party, the latter covers ‘Own Damage’ apart from Third-party Liability plan.

Why do I need a commercial car insurance policy for my car?


You need the commercial car insurance policy for your car if it is being used as a taxi cab, especially if you are using it to ferry passengers and earn money for the services. Your commercial car insurance will protect you and your business from financial losses in case of damage or loss that you may incur. Hence, the commercial car insurance ensures your finances are protected in case of an unfortunate accident.

Can I convert my commercial car to a private car?


Yes, you can convert a commercial car to a private car by following the stipulated guidelines approved by the transport department. You will have to visit the respective Regional Transport Office (RTO) to pay the required fees, get the car inspected and then get it registered as a private car.

When should I select a commercial car insurance policy? Which is better, commercial or private car insurance policy?


If you are using the car for personal use such as travelling to and fro from your home and office, visiting friends and relatives or driving around the town, then you need to choose the private car insurance policy. However, if you are using the car regularly for the below tasks for earning money or for a profit, then you need to choose the commercial car insurance policy:

> Transport passengers.

> Use it as a taxi or ferrying employee.

> Drive clients.

> Charge passengers for a ride or transport goods.

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet; and is subject to changes. Please go through the applicable policy wordings for updated ACKO-centric content and before making any insurance-related decisions.

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