Difference Between Private and Commercial Car Insurance

Difference Between Private and Commercial Car Insurance

A car is primarily an investment. Irrespective of the model and cost and whether it is second-hand or first-hand, a car is an asset. The most effective way to protect your car is to get car insurance from the first day. Depending on your usage, you can get car insurance accordingly. The car insurance for a commercial vehicle and a private vehicle is different.

A commercial vehicle is used primarily in a business to make a profit, whereas a private vehicle is used for personal use. Let us take a look at types of car insurance.

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Types of car insurances

There are 2 main types of car insurance available in India.

  1. Third Party car insurance – Mandatory according to the law, third-party car insurance protects the property and covers damage caused to the third party involved in the accident. This does not cover the costs of damage caused to your vehicle. The premium of third-party is lesser but the amount you end up paying for repairing your vehicle in case of an accident is much higher. There are no add-ons you can purchase to make this policy suited to your needs. 

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  1. Comprehensive car insurance – A robust type of insurance policy, comprehensive car insurance is when your vehicle, along with the vehicle of the third-party as well the driver and passengers can be covered under one policy. You can enhance the protection extended to your car by buying other add-ons like zero depreciation, roadside assistance, consumable cover, and so on. You can customize the IDV in this type of car insurance.

What is private car insurance?

When you are purchasing a car, you have to declare the intended use of the car. Cars that are registered for private use have a white number plate with black characters on it. Private car insurance is issued to cars that are meant for personal use and cannot be used to transport people or goods from one place to the next. This type of car insurance covers damage to the vehicle of the third party, theft, fire, riots, accidents, strikes, floods, and earthquakes depending on the type of car insurance purchased. In simple terms, the car insurance that can be bought by private cars is known as private car insurance.

What is commercial car insurance?

Cars used for commercial purposes may be used to transport people or goods. Commercial car insurance is generally issued to cabs or taxis that transport people for money. Commercial car insurance covers own damages along with third-party obligations due to property damage or injuries and death. Apart from the things that are seen in private car insurance as well, this also offers coverage to the paid employee or driver. You can buy taxi insurance online easily by looking for the best deal and scouting the net for the perfect match. A lot of insurance companies offer this service online making it easier for business owners to make decisions that impact their financial resources. Commercial car insurance is essential for business owners as a single mishap can cost them a fortune leading to the downfall of the company.

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Difference between private and Commercial car insurance in table format

Private car insurance

Commercial car insurance

The frequency of usage of a private car is much lesser. This also means the risk is lesser and the premium is much lower.

A commercial car can run for about 10 to 12 hours a day. This means the risk is greater and the premium of commercial car insurance is higher.

As per the law, private cars must have third-party car insurance at the least.

As per the law, a commercial vehicle is required to have legal liability cover towards employed drivers as well as accident cover for the passengers.

This car insurance provides Personal Accident Cover to the owner or driver of the car leading to death or disability.

Commercial car insurance provides Personal Accident Cover to passengers and employed drivers. It protects the owner of the car from any financial liabilities due to accidents.

Private car insurance does not cover any damages caused while the car is being towed.

Commercial car insurance covers any losses or damage caused while the car is being towed to a garage.

Documents required by a private car to be submitted at the time of placing a claim are RC, driving license, and tax records.

Documents required to register a claim in case of commercial car insurance are vehicle permit, load challan, trip sheet, fitness certificate, copy of FIR as well as car’s RC, driving license, and tax records.


Can I convert commercial car insurance to private car insurance?

If you are planning to use it for personal reasons only, then the car can be converted from a commercial vehicle to a private vehicle. This requires a process that involves re-registration of the car at the local RTO. Once the car has been converted to a private car, only then can you convert the commercial car insurance to private car insurance.

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Although there are a few stark differences between the private and commercial car insurance policies, the underlying purpose is to protect the car and the driver as well passengers from any grave injuries.