Business Use of Your Car (Independent Contractor Insurance)

If you need car insurance coverage for business use of your car, you have a variety of options, including Allstate, State Farm, and Erie. Find the best car insurance for your needs as an independent contractor.

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A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Written by Laura Berry
Former Insurance Agent Laura Berry

Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP® Joel Ohman

UPDATED: Jun 14, 2022

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Here's what you need to know...

  • If you drive your personal car for business purposes, you may need to carry business car insurance
  • The average commercial car insurance rates are $100-$200 a month
  • Independent contractors can lower their car insurance rates by reducing their mileage

If you’re an independent contractor or freelancer who uses a personal vehicle for work, you need to carry business car insurance. Your personal auto insurance doesn’t cover any accidents or damages while working.

The average rates for commercial car insurance are between $100 and $200 a month. Many insurance companies offer discounts and add-ons for independent contractors looking to save money on car insurance.

Keep reading to learn the difference between personal and business car insurance. This guide breaks down car insurance for independent contractors to help you find the most affordable auto insurance company for your business.

Do independent contractors need business car insurance?

There isn’t a specific independent contractor insurance policy, but business auto insurance will cover you if you use your personal vehicle for work.

The IRS defines an independent contractor as a non-employee hired by a company to work on a contract basis with clients of their choice. They may often use their own vehicles to chauffeur clients or passengers and deliver products. 

Some common independent contractors who need business car insurance are:

  • Rideshare and delivery drivers
  • Administrative and personal assistants
  • Physical and massage therapists

Don’t assume your personal policy automatically covers you if you’re an independent contractor. Most insurance companies will deny car insurance claims on accidents while performing your job if you don’t carry business coverage. 

For example, if you’re a rideshare driver, you’re on the road more often than when driving for personal errands, increasing the likelihood of an accident. Consequently, independent contracts must carry additional commercial coverage on top of a personal policy.

What is the difference between business vs. personal car insurance?

Your personal auto insurance doesn’t cover business use of your car, and your policy will specifically exclude coverages for accidents or damages sustained while working.

The table below lists different insurance scenarios and whether business or personal car insurance covers you for it.

Personal Car Insurance
Covers You When:
Commercial Car Insurance
Covers You When:
Commuting to your job site.Driving around to meet clients.
Running out to grab pizza for your fellow workers.Delivering your baked goods to customers.
Throwing a box of office supplies in the back of your car.Regularly using your vehicle to transport tools and equipment to job sites.
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Not sure what constitutes “business use of your car?” Answer the following questions to determine if you need business vs. personal auto insurance:

  • Do you travel to remote work locations?
  • Do you make deliveries?
  • Do you transport products or people?
  • Do you visit clients?
  • Do you haul work equipment?

If you answered yes to any questions above, buy business car insurance to ensure you’re adequately covered. Your rates will likely increase when you add coverage, but you can save money by maintaining a good driving record and asking for discounts.

What does a business auto policy cover?

Business car insurance provides the same coverages as a personal policy, including liability, collision, and comprehensive coverage. You can also purchase the following additional coverages with your commercial policy:

  • Rental reimbursement
  • Uninsured motorist insurance
  • Medical payments coverage
  • Roadside assistance

Your state may require some of these additional coverages depending on where you live. Research your state laws before comparing business car insurance quotes so you know you’re getting the proper coverage.

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How much does business car insurance cost?

Average business car insurance rates range between $100 and $200 per month, higher than average personal rates.

The main factors affecting your commercial car insurance rates are vehicle type, personal driving record, where you live, and how far you drive. For example, insurance rates on a large commercial truck or regular minivan will be higher than rates for a sedan.

You’ll also incur higher rates if you have multiple speeding tickets or reckless driving charges. 

However, contractors who occasionally use their vehicles for work can reduce their rates based on mileage. The table below shows how standard car insurance rates can vary based on how far you drive per year.

Car Insurance Company Car Insurance Rates with 6,000 Annual MileageCar Insurance Rates with 12,000 Annual Mileage
USAA$2,482.69$2,591.91
GEICO$3,162.64$3,267.37
State Farm $3,175.98$3,344.01
American Family $3,401.30$3,484.88
Nationwide$3,437.33$3,462.67
Progressive $4,030.02$4,041.01
Farmers$4,179.32$4,209.22
Travelers $4,399.85$4,469.96
Allstate $4,841.71$4,934.20
Liberty Mutual $5,995.27$6,151.63
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Some factors influencing commercial car insurance rates are out of your control. However, shopping around with multiple companies can help you find the most affordable business car insurance companies in your neighborhood.

What are the best car insurance companies for independent contractors?

The best commercial auto insurance company for you depends on where you live and how often you use your personal vehicle for business use. For example, you may be able to save money with limited car insurance for delivery drivers.

When comparing companies online, examine each company’s policy offerings and read customer reviews. You want to find an insurer offering the right business policies at affordable rates and a fast and friendly claims process.

J.D. Power ranks commercial car insurance companies based on product selection, price, and customer service. The top seven business car insurance companies are:

  • Allstate
  • State Farm
  • Erie
  • Farmers
  • Chubb
  • Travelers
  • Nationwide

All top insurers are available in all 50 states, except for Nationwide and Erie. However, you may find a local company specializing in business auto at competitive rates. Compare quotes from at least three companies in your area to find the best price for your policy.

What You Need to Know About Business Car Insurance for Independent Contractors

A personal policy doesn’t cover business use of your car. Consequently, you need to carry business coverage if you’re an independent contractor and use your personal vehicle for work.

Independent contractors who haul equipment, travel to worksites, or deliver products/passengers need a business auto policy. With this increased risk level, insurance companies require additional coverage to protect themselves and you against damages.

Business car insurance costs between $100 and $200 per month, but you can lower your rates by maintaining a good driving record and reducing your annual mileage. Independent contractors who occasionally use their vehicles for work will have the lowest commercial car insurance rates.

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