Private Passenger Car

Published: | Updated: September 2, 2020;

Definition - What does Private Passenger Car mean?

In the insurance context, a private passenger car is one that is used for private needs, as opposed to business uses. Private passenger vehicles are generally defined as one that has the following characteristics:

  • A vehicle with 4 wheels.

  • A vehicle that, if it were used on public roadways, would require automobile insurance.

  • Is used for private purposes such as going to get groceries or commuting to and from work.

  • Not used to carry passengers for money.

Every type of vehicle can be categorized in different ways to reflect different risks. Insurers use these risk classifications for insurance purposes to determine the coverage(s) they are willing to offer and how much they charge for each type of usage.

Private passenger vehicles that are driven for pleasure use are typically charged a lower rate than vehicles that are used for business purposes because private passenger vehicles spend less time on the road, do not carry passengers for compensation, and are typically smaller.

These types of vehicles represent a lower risk of loss for an insurer than vehicles used commercially.

Insuranceopedia explains Private Passenger Car

The classification of a person’s vehicle can be highly relevant for coverage purposes. Vehicle classifications can be used by the insurance company to set rates and to accept or deny claims on the basis of the usage declared when the insurance policy was first put in place.

Insurance companies generally charge much less for vehicles that are declared to be private passenger cars because they tend to be smaller in size, spend less time on the road, and have fewer liability risks because they do not carry passengers for compensation. All of these factors contribute to a lower risk profile from the perspective of the insurance company who passes these savings along to the consumer in the form of lower rates.

For example, if a policyholder only insures their car for private passenger use but gets into an accident while using their car for business purposes, their claim may be rejected. That being said, carpooling or rides where passengers share gas and other costs, or even a realtor driving a client around does not count as “carrying passengers for compensation”. But in the latter case, the vehicle will be considered as being used for business and would require different insurance.

Many people such as realtors, landscapers, or Uber drivers use their vehicles for business needs alongside personal ones. For these types of people, it can be highly important to get a good commercial auto insurance policy that covers business use to prevent coverage gaps that can lead to significant expenses for the business or the driver.

Those concerned about paying higher than normal rates would be happy to learn that there are now many innovative insurance products out there that shift from commercial to personal use on the fly. In the case of ride-sharing drivers, there are insurance products that act like commercial products when your Uber app is on but reverts back to a private passenger car product when it is not. These new and innovative products help consumers save on their auto insurance rates

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