What is the Difference Between Private and Commercial Car Insurance?

Indian laws mandate that every car owner should have a valid car insurance policy to use the vehicle. However, not all car policies are the same. Insurance policy for cars differs based on many factors. One such factor is the purpose or the use of the car. Private car insurance is valid for vehicles purchased for personal use only. While, for commercially used cars, the nature of the policy is different. Commercial car insurance is extremely important for businesses that use cars for different purposes.

Difference Between Private and Commercial Car Insurance

The basic difference between private and commercial car insurance stems from the usage of the vehicle and the risks associated with the nature of the use. Some factors that set the two types of policies apart are:

  1. Risk of Damage

For a private car, the risk of damage is relatively low as compared to a commercial vehicle. A private car is used for personal use only; it runs less on the road, specifically on rough and damaged surface areas. Therefore, the insurers perceive that the risks of damages to private cars are low as compared to commercial cars. The deductible and insurance premium costs are very low for private vehicles.

In the case of a commercial vehicle, the risk of damage to the car, the driver, or a third-party individual is relatively high. This is because most commercial cars are mainly used for long-distance travels. Therefore, the deductible and insurance premium cost is high for commercial cars.

  • Compulsory Insurance Coverage

In the case of private car insurance, compulsory insurance coverage, as mandated by the Motor Vehicle Act, 1988, comprises third-party coverage only. In addition to compulsory coverage, private owners can opt for a wider coverage that includes own damage cover or a comprehensive cover.

Commercial car insurance includes compulsory coverage such as the paid driver Workmen’s Compensation (WC) coverage, passenger coverage and third-party liability coverage. A commercial car owner must ensure all the above-mentioned aspects are covered under the insurance policy.

  • Range of Covers

If you have comprehensive private car insurance, the policy cover includes damages caused due to accidents, natural calamities, manmade disasters, fire, theft, personal damage and third-party liability. Remember, this type of insurance is not mandatory and you have to pay an extra cost to avail it.

Commercial car insurance has a wider range of cover including damages caused due to towing of your commercial vehicle and more, in addition to mandatory third-party legal liabilities.

Calculating Insurance Premiums

For both private cars and commercial vehicles, the rate of insurance premium is calculated based on the risks involved. The rate of insurance premium for a private car is calculated according to the cubic capacity of the car. The age of the car is not so important when it comes to factors that decide the premium rates.

For a commercial vehicle, the age of the vehicle is an important factor in determining the premium rate. Other factors include the size of the engine or the cubic capacity. A consolidation of all these factors is taken into consideration by the insurers to assess the risks involved in driving a particular commercial car.

  • Claim Settlement Process

The claim settlement procedure is rather simple in the case of a private car. If your car is damaged, you can go back to the location where you stay and then file a claim and arrange for a spot survey. You do not need to file an FIR if your car gets damaged due to an accident and a third party is not involved.

In the case of a commercial vehicle, the claim settlement procedure is a bit complicated. If a commercial car gets damaged in an accident, the driver of the commercial car needs to arrange a spot survey after filing an FIR at the nearest police station.

  • Documents required during claim settlement

The documents required for a private car insurance claim include the driving licence of the driver, taxation book and registration certificate.

For a commercial vehicle, there are many documents needed, such as the car fitness certificate, driving licence of the driver, registration certificate, load challan, taxation book, permit, copy of FIR, and trip sheet.

In both private car and commercial vehicle insurance policies, the process to renew car insurance is almost the same.


For both private and commercial car insurance, you always have an option to go for comprehensive coverage which includes the mandatory third–party cover as well as extra covers for the damages caused to your own car or the loss due to fire, theft, or other factors. It is best if you purchase a comprehensive coverage plan as it has more benefits than the other insurance plans.