Who needs commercial auto insurance?
You may need commercial auto insurance if:
- Your business transports goods or provides services.
- You have a vehicle registered under a limited liability company (LLC), corporation or other business entity.
- You allow employees to operate company-owned vehicles.
- You use box trucks, food trucks, service vans or similar vehicles to operate your business.
- You use your vehicle for job-related purposes other than commuting to and from work.
You may also benefit from business auto insurance if you use a towing trailer or transport equipment and tools to job sites, as there’s increased liability due to the nature of your work. This can include risks like third-party property damage or injuries that occur during loading and unloading.
Coverage options in commercial auto insurance policies
Commercial car insurance policies include liability insurance, physical damage insurance and other coverages. When combined, these coverages apply to vehicles owned, leased, hired or borrowed for business use.
Hired and non-owned auto (HNOA) insurance provides coverage for hired, rented or borrowed vehicles driven by employees or personal vehicles used for business purposes. It doesn’t cover damage to rented or leased vehicles. Additionally, hired and non-owned insurance don’t cover any expenses arising from the personal use of a covered vehicle.
You may want to consider adding other coverages for even more protection. Contents coverage applies to the damaged contents of a vehicle involved in an accident. For example, if an accident damages a company laptop, contents coverage would pay to repair or replace the laptop.
Drive Other Car (DOC) coverage extends commercial car insurance to personal and non-owned vehicles driven by company executives or other employees. This type of insurance covers claims arising from the personal use of a vehicle that isn’t owned by the business. For example, your chief executive officer (CEO) might use a rental car while traveling for business purposes. If you are considering DOC coverage, remember that it only applies to individuals named in the policy, not every employee in your business.
Liability coverage
Liability insurance covers the cost of property damage and bodily injuries when the insured individual is at fault. For example, if a covered individual runs a red light and causes an accident, your liability insurance would cover the damages incurred by the other party.
Commercial auto insurance with liability coverage is mandated by law in nearly every state. This type of insurance pays for car repairs, medical expenses and other costs arising from an accident.
Collision coverage
Collision insurance pays for vehicle damage caused by an auto accident. With this type of coverage, it doesn’t matter who was at fault. If the other party caused the accident, your collision coverage should pay to repair or replace the damaged vehicle. Following this coverage, the insurance company generally recoups fees through subrogation, which occurs when the insurer seeks reimbursement from the at-fault party.
Comprehensive coverage
A collision isn’t the only way for a vehicle to sustain significant damage. Comprehensive coverage pays to repair or replace non-collision damage, such as damage caused by fires, vandalism and natural disasters. Your policy should also cover theft-related damage. For example, if your car is stolen and recovered with dents, scratches or broken windows, comprehensive coverage generally covers those costs.
However, it typically doesn’t cover regular break-ins, resulting in stolen property from inside the vehicle.
Additional coverage options for business vehicles
When you purchase business car insurance, you have the opportunity to customize your policy with additional coverages. To further protect your employees, you could also add medical payments coverage (MedPay), which covers any injury-related expenses regardless of who’s at fault.
Depending on your carrier, Drive Other Car (DOC) coverage might also be available, as well as roadside assistance. This coverage pays for certain services you might need if a vehicle breaks down while being used for business purposes. For example, your policy may cover the cost of a tow truck driver’s services, winching or fuel delivery.
Medical payments coverage
Medical payments coverage is designed to cover medical expenses for employees and passengers who are injured in a covered accident. This typically applies to hospital bills, dental care, rehabilitation and other healthcare services needed to recover from accident-related injuries.
Medical payments coverage can also help pay for funeral director expenses if someone dies from injuries sustained in a covered accident.
Uninsured/underinsured motorist coverage
Although most states require liability insurance, not everyone carries it. Even if a driver has liability insurance, their coverage limits might not be enough to cover all the costs resulting from an accident they caused.
Uninsured/underinsured motorist (UI/UM) insurance gives you extra protection for damages caused by a driver who doesn’t have liability insurance or enough liability coverage. This type of insurance covers medical expenses for employees who are involved in an accident caused by an uninsured or underinsured driver.
Rental reimbursement
Rental reimbursement coverage helps ensure your business can continue operating if one of its vehicles needs to be repaired. This type of insurance reimburses a portion of the cost of renting a similar vehicle.
For example, your policy may include up to $30 per day in rental reimbursement coverage. If your rental costs $60 per day, your company would have to cover the difference.
Rental reimbursement coverage also includes liability coverage, which applies if you or an employee has to drive the rental vehicle for business purposes.
Factors influencing commercial auto insurance cost
Several factors affect the cost of commercial auto insurance. If you operate a contractor-based business, such as one that provides landscaping, carpentry, construction or electrical services, your commercial auto policy may cost more than it would for other industries.
Like other types of auto insurance, the cost of commercial coverage depends heavily on market trends, industry regulations and individual driving records. Accidents, traffic violations and previous driving-related charges may increase the cost of business auto insurance.
Additionally, consider the cost of newer vehicles with more advanced technology, as they typically cost more to insure.
You may want to compare quotes from multiple insurers to ensure you’re getting the best rates.
Benefits of customized commercial auto insurance
Customizing your commercial auto insurance gives you a chance to tailor your coverage to your company’s needs. For example, if you have limited cash flow, consider adding rental reimbursement coverage to avoid paying for a rental vehicle out of your business funds.
Many insurance companies offer online policy management, making it easy to update your coverage as your business needs change.
How to get a quote for commercial auto insurance
To get a quote for a commercial auto policy, you have two primary options. The first is to consult an independent insurance agent. An independent agent doesn’t work for a specific insurance company, so they can show you quotes from multiple insurers.
The second option is to visit your preferred insurance provider’s website. You may be able to submit a quote request online. Be prepared to answer questions about your business, how many vehicles you need to insure and other related topics. You can also gather details such as the vehicle VIN, driving history or estimated annual mileage to help streamline the quoting process.
Frequently asked questions about commercial auto insurance
Do I need both commercial and personal auto insurance?
Yes, you should consider getting both commercial and personal auto insurance. You need personal auto insurance in case you get into an accident while driving to a restaurant, picking up your kids from school or driving for other personal reasons. Your business policy won’t cover you in these circumstances.
While both policy types cover similar scenarios and fees, they need to accurately represent the vehicle’s use for claims to be approved. For example, if an employee driving a vehicle for work purposes gets into an accident and files it under their personal policy, the claim will likely be denied, resulting in ownership of the damage costs and legal fees.
Does commercial auto insurance cost more than personal auto insurance?
It depends on your policy details, but commercial auto insurance generally costs more than personal auto insurance. A commercial policy may cover several business vehicles, increasing the total cost of your coverage. Commercial policies may also have higher limits or cover multiple drivers.
Additionally, there’s more risk involved in using a vehicle for business purposes. For example, your employees may use business vehicles to transport heavy equipment or hazardous materials. Insurance companies account for the increased risk by charging more for coverage.
To counteract these higher costs, consider choosing a higher deductible or bundling with general liability insurance, since many carriers offer discounts for package deals.
