Everything You Need to Understand About Liability Car Insurance

Share via

When you are self-employed, tracking expenses and finding ways to save money become daily tasks. Whether you offer virtual web design services or work as an independent accountant from home, you probably still have a car for personal use. However, it is important to understand liability car insurance as a self-employed individual.

What Is Liability Car Insurance?

Liability car insurance is a type of coverage for your vehicle that provides property damage and bodily injury protection. Most states require you to have liability car insurance, but the amount varies. If someone is hurt in an accident that you caused, this type of coverage pays him or her.

Many self-employed people who are on a budget decide to purchase the minimum required amount of liability coverage for their state. If you work from home and rarely drive, it makes sense to stick with the lowest amount to save money. However, if you drive frequently and are prone to accidents, you may want to add extra liability coverage.

Liability car insurance does not provide collision, uninsured and underinsured motorist, comprehensive and personal injury protection coverage. In addition, if your policy is not enough to cover all the damage after an accident, you are responsible for paying the rest.

As a freelancer or independent contractor, you have to budget carefully because you often do not have a steady paycheck. However, you do not want to skimp on liability coverage and end up in a horrific accident that leaves you with a massive pile of bills. Make sure you research different companies that offer policies and find the best one for your needs.

How Self-Employment Affects Car Insurance

Being self-employed does not automatically mean your car insurance rate will be higher or lower. Insurance companies use many factors to calculate your risk score, such as prior accidents, total annual income and age. On its own, being a freelancer or independent contractor does not signal to an insurance company that your rates should be a certain amount.

Nevertheless, being self-employed can still have an impact on how much you pay for insurance. For instance, if you drive often, it increases the chances of you having an accident and may lead to higher rates. On the other hand, if your business is at home and does not require travel, then your rates may be lower.

One important thing to remember is that you may be able to deduct mileage for your business, but you cannot deduct the cost of car insurance for a personal vehicle. Consider using software like QuickBooks Self- Employed or MileIQ to track your mileage for tax-saving purposes.

Do You Need Commercial Car Insurance?

Although liability car insurance covers many things, it may not be enough for some self-employed individuals. For instance, if you are an independent contractor for Lyft or Uber, then you need rideshare insurance. Another example is if you are using a vehicle to transport and deliver food, then you need commercial insurance.

Commercial car insurance provides coverage for physical damage and liability in a vehicle that is used for business purposes. Even if you are using the same personal car that takes your kids to school every day to deliver food to customers, you still need commercial car insurance. As long as you use the car for any part of your business operations, then you need this type of coverage.

In general, commercial car insurance has more coverage to protect your business in an accident. Without this type of coverage, your claim may be denied. For example, if you are in an accident while transporting cakes to a wedding for your business, then your insurance company may not help you without a commercial car policy.

Commercial Car Insurance Liability Coverage

Liability coverage for commercial car insurance policies varies greatly based on your business, how you use the car and other factors. You have to make sure you carry enough coverage in case of an accident, but state minimums vary greatly. Keep in mind that if you are liable for an accident, your business assets and investments may be at risk.

You may need this type of coverage if use the car to transport goods that you sell, such as food. Other items that you transport for your business may include materials, supplies, papers and customer orders. You may also need this type of coverage if you use the car to transport people for a fee or allow employees to drive your car. Some self-employed people who use their vehicles to transport tools, like ladders or lawn equipment, also need commercial coverage.

Figuring out the type of car insurance you need as a self-employed person can be difficult. You have to make sure that you have enough liability coverage in case of a serious accident. Talk to a trusted car insurance agent or company to find the right coverage for your business.

Share via
Richard Parker is a freelance writer and author at TalentCulture.com and Readwrite. He covers industry-specific topics such as Seo, small business solutions, entrepreneurship, content marketing, word Press development & web design. You can connect with him at Linkedin , and Google +.