Would corporate auto insurance be less expensive/cost effective than personal/consumer auto insurance?

Question

As per my other question, I'm looking to start a brokerage. Therefore, I would be in control of my own small business. I would assume that it would be a sole-proprietorship (and then later LLC or full out corporation).

Now, I am also fairly young (let's say 20) and male. I live in NJ, but I might be able to get residency in NC because of school. I'm not looking for a specific quote but a generalization. With that being said, if I purchased a car would it be cheaper to:

---Buy the car under my name and insure it myself?
OR
---Purchase the car through the company I start and have it insured through corporate insurance and register me as a driver?

Thanks in advance.

Let's just say that personal auto insurance for me would range from $3000 to $15000 depending on the car. I'm unsure of the cost of corporate insurance with one car and one registered driver.

I'd have my own policy in my own name either way.

The business would not be a sham. Also, as I was looking at some cars, I saw that you could right off practically the entire cost of the car as a tax write-off if used as a business vehicle. I believe it was a Range Rover, and it was on Land Rover's website where I saw this.

But, yes, I guess I had better look into getting other types of insurance as well. I have another question concerning starting the brokerage and wanted to separate this question from that. I figured I had better start young.

Answer 1

OK, here's the scoop. I've done this from both points of view. For a while, about 10 years ago, "youthful operators" and bad drivers were trying to avoid surcharges by putting personal use vehicles on a commercial policy (because commercial policies don't use "points" to surcharge drivers).

Nowadays, a company isn't going to offer a commercial auto policy to you, a primary youthful operator, unless 1. you have a minimum of five vehicles, and four of them have primary, over 25 operators 2. you've got a spotless record and 3. all the vehicles are owned in the name of a corporation. You flat out are NOT going to be able to get a private passenger type vehicle, owned by an individual (aka, sole proprietor) insured on a commercial policy.

Residency doesn't matter - vehicle garaging location is what matters, AND your driver's license, AND the state that the company is domiciled in.

Now, you're going to have to call an agent for sure, but in my experience, the ONLY companies willing to write a commercial policy on a 20 year old operator (assuming non- fleet policy) with NO commercial prior policy, are Progressive and Tico. Oh, you can find nonstandard carriers, they will NOT be cheaper. But BOTH these companies surcharge HEAVILY for operators under 25, exclude ALL coverage for ALL nonlisted operators, and ALSO will use your personal credit score for rating purposes.

So the bottom line is, companies arrange things so it's NOT cheaper for a youthful operator to get a commercial policy, and second of all, I seriously doubt you're going to get anyone to offer you the policy in the first place. But you should go to whatever agent writes your general liability policy, and ask them to get you a quote.

Answer 2

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Answer 3

Commercial auto policies, in my experience, is more expensive than personal auto insurance because the level of coverage is 1) so much HIGHER than what is available on a personal auto and 2) the risks are higher.

Your best bet would be to purchase personal auto insurance and advise your agent the vehicle is also used for business purposes. There is generally a business use exclusion unless you've informed the insurance company otherwise at the time you purchase the policy.

Once you have established your business and employ a fleet of cars and employees using the company vehicle(s), than consider commercial auto.

Answer 4

I disagree with the writers above. I think commercial auto insurance is generally cheaper than personal, for the same level of insurance.

However, this needs to be a real company, not some sham just for the insurance. You are looking to start a brokerage company at age 20? You had better have or be willing to find a lot of capital, experience, accounting expertise, legal expertise, etc. before anyone is going to do business with you.

You might want to inquire what the cost of errors and omissions liability insurance , general liability insurance, surety bond, etc.; not just auto insurance.

Answer 5

In all likelihood, because your business has no "history", it would be much more expensive to insure under the business -- if you could at all. Also, the tax advantages for the car to be owned by the business are minimal if at all. I have my own small company, and in my case, it made MUCH more sense for me to own the car, insure the car, and charge mileage (at standard rates -- your acountant or tax professional can help you with this) back to the company.

However, you will have to make sure that you inform your insurance company that the car will be used for business. If you get in an accident while doing business driving, and your insurer is not aware that you use the car for business, you can be deemed "uninsured" for the accident!