Commercial Auto Insurance

Commercial Auto Insurance

Commercial Auto Insurance

If you own a car, it’s likely you carry an auto insurance policy to cover your liability should you have an accident and experience, or cause, property damage or physical injury. If your small business uses automobiles, trucks, or vans in the course of day-to-day business, commercial auto insurance provides businesses the same protection, regardless of whether you or one of your employees is behind the wheel.

What is Commercial Auto Insurance?

Commercial auto insurance works much like personal insurance coverage, but is designed for vehicles that are used for business purposes. Even if you are a sole proprietor, like an electrician or a contractor, if you use your vehicle for business purposes, you’ll need a commercial policy because your personal auto coverage won’t protect you while your vehicle is on the job.

Your business’ auto insurance will cover your business cars, trucks, vans, trailers, and other vehicles used by the business and typically covers:

  • Liability: bodily injury, property damage, uninsured motorist, and underinsured motorist coverage
  • Physical damage: collision and comprehensive coverage
  • Miscellaneous: things like medical payments, towing, rental reimbursement, and auto loan GAP coverage

What Does Commercial Auto Insurance Cover?

Commercial Auto Insurance covers many of the same things your personal auto policy will cover:

  • Liability Coverage: Should you or an employee cause bodily injury or property damage to another vehicle if you or an employee were at fault in an accident
  • Collision Coverage: Will pay to repair your damaged vehicle if you hit another vehicle or another vehicle hits you, regardless of who is at fault. If your vehicle is financed or leased it will likely be required coverage
  • Comprehensive Coverage: This covers damage to your vehicle that could include theft, flood, vandalism, earthquake, fire, or other damage
  • Uninsured or Underinsured motorist coverage: This type of coverage will protect you even if the driver at fault doesn’t have insurance or doesn’t carry enough liability coverage to cover your loss (medical bills, for example)

In addition to the above, it is possible to add things like new vehicle replacement cost coverage, roadside assistance, coverage for leased vehicles, rental reimbursement, and personal injury protection coverage.

Who Needs Commercial Auto Insurance

Sole proprietors who use their vehicles for work need commercial auto insurance. So does any business that owns vehicles that are used for business whether they personally drive the vehicle or their employees do.

If your business owns vehicles, if they are used in the course of doing business, or your vehicle has a gross weight of 10,000 pounds or more or has a payload capacity over 2,000 pounds. Any work-related modifications like a ladder rack will also need commercial coverage.

What Does Commercial Auto Insurance Cost

You should expect commercial auto insurance to be more expensive than personal insurance. The cost is influenced by your business location, the driving records of the people who drive your vehicles, and the types of vehicles you are insuring (a delivery truck could cost more than a passenger vehicle, for example), and the number of vehicles you are insuring.

Insuring multiple vehicles with the same policy, your time in business, or a willingness to pay your annual premium in full could make you eligible for discounts. And, your cost could vary depending on the insurance company you decide to work with.

What’s the Difference Between Commercial Auto Insurance and Personal Auto Insurance

The main difference between personal auto and commercial auto insurance is that personal insurance only covers your driving during your personal life—commercial insurance covers you when driving for business.

If you were an electrician driving to a job with your work vehicle and were in an accident, you personal policy wouldn’t cover any property damage or liability claims. 

  • Commercial policies usually have higher liability limits than personal policies
  • Commercial policies are tax-deductible
  • Commercial policies can cover named employees or can offer blanket coverage for all employees
  • Commercial policies can include extra coverage that personal policies don’t, like coverage for equipment, trailers, or forklifts

Choosing the Right Commercial Auto Insurance

Choosing the right auto insurance policy is a lot like choosing any other type of commercial insurance policy. Here are 7 tips to help you make the right choice for your business.

  1. Do you know how much insurance you are legally obligated to have? Depending on the nature of your business, there may be liability limits or other industry-related coverage required by the state you do business in. Your insurance agent can help you identify the requirements in your state.
  2. What are the risks you need to consider? Your auto insurance needs might be different if you are the sole driver or if you have employees? If you are delivering products, you may also want to ensure that your insurance will cover damage to anything you are carrying should you have an accident.
  3. Work with someone who understands your industry. Although there are many things every small business has in common, there are some industry-related differences and nuances that could apply to your business. Working with someone who understands your business is a good idea.
  4. Being over-insured is better than being under-insured. Don’t underestimate the cost of a lawsuit if you, or someone in one of your business vehicles, causes an accident and your business is sued. Additionally, should someone be injured or property is destroyed, it can get pretty expensive really fast if your policy has limits and won’t cover everything. Don’t be tempted to buy the cheapest insurance you can find unless it’s going to give you the auto coverage you need.
  5. A Business Owner’s Policy might be a good idea. Sometimes if you bundle different insurance products you can lower the total cost. For example, it might make sense to bundle your general liability coverage with your auto coverage. They may even complement each other. Your agent can help you bundle where it makes the most sense.
  6. Read the policy before you sign on the dotted line. Before you purchase a policy it’s a good idea to read the entire policy document—including the disclosures. Sometimes the disclosures are written in very small type (sometimes called mouse type because only a mouse can read it). This could be the most important part of the document because it will tell you all the things that aren’t covered.
  7. Find a plan that can grow with your business. Your insurance needs will be very different as a small business with one delivery truck, but as you grow and you amass a fleet of vehicles, you will need coverage that will grow as your fleet and needs grow.

There is no one-size-fits-all commercial vehicle insurance policy, but it is possible to find a policy that will be right for your business.

This article was originally written on February 17, 2021.

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Ty Kiisel

Ty Kiisel is a Main Street business advocate, author, and marketing veteran with over 30 years in the trenches writing about small business and small business financing. His mission at Nav is to make the maze of small business financing accessible by weaving personal experiences and other relevant anecdotes into a regular discussion of one of the biggest challenges facing small business owners today.

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