If your business involves using vehicles in any way, from a fleet of delivery trucks to service vans or company cars, you need commercial auto insurance. Personal auto only covers your car on private roads; it does not cover vehicles used for business. In this article, we’ll walk you through everything you should know about commercial auto insurance, including what it covers and why it’s important for your business.
What Does Commercial Auto Insurance Cover?
Commercial auto insurance is a coverage type specifically for insuring vehicles used for business purposes. Commercial auto insurance is meant to cover vehicles that business is conducted from, unlike personal cars that are covered by personal auto insurance.
This coverage safeguards your business from losing money due to accidents, damages, injuries, and theft involving vehicles owned, leased, or rented by your company. Regardless of where you use vehicles to deliver goods, customers, or tenants, making sure that you are covered is essential to protecting your business and keeping your doors open.
The Importance of Commercial Auto Insurance
If you’re running a business, it usually involves vehicles that can, just like personal vehicles, fall prey to accidents, theft or damage. Why commercial auto insurance is important:
Protects Your Business Assets
Accidents can cost a fortune—vehicle damages, damages to third parties, and hospitalization bills. Commercial auto insurance protects your business’s assets by covering these costs.
Ensures Legal Compliance
In many areas, businesses are legally mandated to carry commercial auto insurance for vehicles used for business use. Failure to have it can lead to penalties, fines, and possible lawsuits.
Minimizes Financial Risk
If an accident occurs and the business does not have commercial auto insurance, the business owner is individually liable for accidents and damages. The financial implications of accidents (medical costs & property damage) can be significant. Insurance is a means of risk management used to hedge against the risk of a contingent or uncertain loss.
A Safe Distance for Employees and Clients
In cases of accidents, commercial auto insurance also covers damages and other related costs if your vehicles are used to transport employees or clients, ensuring both people and the business reputation are protected.
What Does Commercial Auto Insurance Protect You Against?
There are various forms of coverage that commercial auto insurance offers, each designed to protect your business in a different way. Here’s a glance at the main parts:
Liability Coverage
One of the most important types of commercial auto insurance is liability coverage. It takes care of the expenses of damages or injury to other people resulting from an accident that you caused. This includes:
Bodily Injury Liability: This covers medical bills, lost income, and legal fees for injured people from an accident caused by your vehicle.
Property damage liability: This covers the costs of repairing or replacing properties (like vehicles, properties, fences) damaged by an accident you caused.
Collision Coverage
Collision coverage pays for damage to your business vehicle from a crash, no matter who is at fault. That means you on the same level as an accident involving a vehicle or object, or even hitting a pothole.
Comprehensive Coverage
Comprehensive coverage protects your vehicles against non-collision incidents, including theft, vandalism, natural disasters, fire, or damage caused by animals. It helps pay for repairs or replacement if something other than a collision happens.
Medical Payments (Med Pay) Coverage
Med pay can also cover medical bills for injuries experienced by the driver or passengers inside your company vehicle during the accident, even if your driver had nothing to do with the crash. This may also be hospital bills, surgery, or other types of medical treatments.
Uninsured/underinsured Motorist Coverage
If another driver causes the accident but has insufficient insurance or no insurance, uninsured/underinsured motorist coverage will help pay for damages and medical expenses.
Coverage for Hired and Non-Owned Vehicles
This coverage is vital for businesses renting vehicles as well as businesses using personal vehicles for business use (non-owned vehicles). This coverage is also provided if these vehicles get involved in accidents while being used for business purposes.
Cargo Coverage
If your business is involved in transporting goods, then cargo coverage protects the goods being transported if involved in an accident, theft or damage.
Personal Injury Protection (PIP)
PIP pays for your employees, passengers and the driver’s medical expenses after an accident, regardless of fault. This can include hospital bills, lost wages and even funeral bills in the case of a fatal accident.
Who Requires Commercial Auto Insurance?
Commercial auto insurance is essential if your business engages in any of the following:
Delivery Services Be its food or packages or products, your vehicles are on the road quite a lot and are vulnerable to getting damaged or into an accident.
Construction Companies: Construction companies typically have heavy-duty trucks or equipment transporters that require specialized coverage.
Transportation and Logistics Companies: Commercial auto insurance is a must have for any business that operates a fleet of vehicles transporting goods or people.
Contractors and Tradespeople: Plumbers, electricians, landscapers, and other tradespeople commonly used their vehicles for work-related activities. Commercial auto insurance will cover them when they’re on the job.
If your business is transporting passengers (think taxi, Uber, etc.): Rideshare and Chauffeur Services
How Much Does a Commercial Auto Policy Cost?
Commercial auto insurance is one of the most complicated types of commercial insurance because the cost is determined by many different factors:
Type of vehicle: The make, model and age of your vehicles can affect your premium. Although larger or more expensive vehicles, or those that transport heavy loads, may culminate in a higher insurance rate.
Driving History: If your drivers have a record of accidents or violations, rates will likely be higher for your policy. A clean driving record can help lower those costs.
Business type: The type of your business and the number of the vehicles you have also affect the cost. The larger your fleet, the more you’ll pay, as will a business that has multiple operations in high-risk locations.
Scope of Coverage: More coverage means higher premium. For example, comprehensive or collision coverage will cost you more.
The region your business operates in can play a factor in determining what your insurance rates cost. You may pay more if you live in a location with high accident rates or a greater theft risk.
Deductible: The higher the deductible, the lower the premiums, but the more you’ll pay out of pocket if there’s an accident.
The annual cost of business insurance can range from a few hundred to several thousands of dollars on the average, depending on the above factors.
Perils of Commercial Auto Insurance
Commercial auto insurance: How to choose the right commercial auto insurance for your business Here are some tips on how to do just that:
Evaluate the Risks of Your Business: Consider how much risk your business is exposed to. As an example, if your employees tend to drive long distances, you might require higher coverage limits.
Knowing Your Size of Fleet: The amount of cars you run will definitely affect your premiums. Make sure that your coverage is across all vehicles, including those that are infrequently used or used by contractors.
Check Your State Requirements: Variations exist between state insurance requirements for businesses. Monitor the minimum legal requirements per your location.
Compare Quotes: Always comparison shop and look for the right coverage at the cheapest price.
Get in Touch With an Expert: When it comes to commercial auto insurance, working with an insurance broker or agent can help you through all the intricacies of the process. The right insurance agent also will guide you in selecting coverage that meets your specific business needs.
Final Thoughts
Commercial auto insurance is an essential component of a business with vehicles. It safeguards your business against considerable financial losses from accidents, theft, and other accidents. Whether you run a small business with a single vehicle or oversee a robust fleet, the appropriate insurance coverage is vital to your success and sense of security. Choose the right rider who will keep you in check, cover you and your business should anything happen and more importantly, keep you out of legal trouble.
