It has both liability and property components. The liability component protects your business if it is at fault for causing a crash, and causes bodily injury or damages someone else’s vehicle or property. The property component of commercial auto insurance protects the value of your vehicle against crashes, theft, and other perils.
Who needs Commercial Auto Insurance?
Your business needs commercial auto insurance if it owns or leases vehicles titled in the name of the business. Most states require every vehicle registered in the state to have minimum levels of liability insurance. In addition, some states also require coverage for uninsured and underinsured motorists. Collision and comprehensive coverages are optional.
If you are a business owner, 1099 contract worker, or even an employee, you may need commercial auto insurance for vehicles owned, leased, or titled in your personal name if the vehicle is:
- Used for business purposes such as visiting job sites, transporting clients, or carrying work tools, and the vehicle is not covered under an existing commercial auto policy.
- Driven by employees, co-workers, clients or volunteers.
- Used to transport goods or passengers for a fee (including ridesharing services).
- A dump truck, box truck, food truck or other large truck, or a cargo or work van.
Commercial Auto Insurance does not cover employees who drive their personal cars for business purposes. Businesses who have employees driving personal cars for business errands, or who hire or rent vehicles for business use should purchase Hired & Non-Owned Auto Insurance in addition to their commercial auto coverage. Hired & Non-Owned Auto Insurance is also available for companies that do not own vehicles or do not need commercial auto coverage.
Types of Vehicles Covered
Commercial Auto Insurance can cover cars, SUVs, light trucks, and vans used for business purposes. It can also cover large trucks which are normally excluded from personal auto policies including box trucks, food trucks, service utility trucks, and trailers.
Commercial Auto Insurance is available for small businesses with single vehicles up to businesses with large fleets of vehicles.
What does Commercial Auto Insurance Cover?
Commercial Auto Insurance provides coverage for both liability and property. For vehicles that your business owns or leases, liability coverage is required for minimum amounts by most states. Property coverage protects the value of the vehicle your business owns or leases. If you have a lease or loan on your vehicle, the leasing company or bank may require you to have property coverage.
Commercial Auto Liability
The liability component of commercial auto insurance consists of bodily injury liability and property damage liability. This coverage protects your business if you or one of your employees causes injury or damage to another party while driving and are deemed to be at fault for the crash. The insurer will also help pay for the legal fees to defend your business in court.
Some insurance policies, rather than covering bodily injury and property damage separately, combine the two coverages together into a combined single limit liability coverage. Your coverage will either have both bodily injury liability and property damage liability, or only combined single limit liability.
Most states require all registered vehicles to have minimum bodily injury and property damage liability coverage.
Bodily Injury Liability provides coverage for your business if you or your employee is at fault for causing a crash that physically injures pedestrians, drivers or passengers in other vehicles, or passengers in your vehicle. Expenses covered include medical expenses, legal fees, loss of income, pain and suffering, and funeral costs.
Usually, there are separate limits “per person” and “per accident”, and the limits are usually expressed per person/per accident, such as: $100,000/$300,000. With these limits, the most the insurance company will pay to each injured person in a crash is $100,000, and the most they will pay for all the people injured in the crash is $300,000.
For example, your employee is driving a delivery truck owned by your business and crashes into another car. Your employee is deemed to be at fault for the accident. The 4 occupants of the other vehicle are seriously injured and sue your business. The insurer will pay up to $100,000 in damages to each of the occupants, with a maximum of $300,000 total paid out.
You can choose your limits of liability, with higher limits requiring higher premiums.
Property Damage Liability provides coverage if you are at fault for a crash while driving, and damage others’ property. The property can be another vehicle or any other property, such as a building or fence.
For example, if a driver for your company hits another vehicle and is at fault for the crash, property damage would cover the costs to repair the other vehicle’s damage, up to the limit of property damage liability.
Combined Single Limit (CSL) Liability is offered by some insurance companies instead of separate bodily injury and property damage liability. For example, if a policy has a combined single limit of $500,000, that is the maximum the insurer will pay for all bodily injury and physical damage claims combined.
Medical Payments is a no-fault coverage, which provides payments for any medical and funeral expenses for the driver of your vehicle as well as any passengers in your vehicle. It pays out regardless of who is at fault for the crash. Medical payments coverage usually has a lower limit of liability, which is around $10,000-$30,000.
Commercial Auto Property
The property component of commercial auto insurance protects the value of your vehicle. There are two coverages: collision and comprehensive.
Collision coverage pays for physical and mechanical damage to your vehicle when it hits or is hit by an object or another vehicle.
For example, if you crash into another vehicle, or hit an object like a wall, collision coverage would pay you for the cost to repair your vehicle. If the cost of repairing your vehicle exceeds the value of the vehicle before the crash, collision coverage would pay you the pre-crash value of your vehicle.
Comprehensive physical damage coverage pays for the loss of your vehicle if it is stolen, or damage to your vehicle from perils such as theft, vandalism, falling objects, fire, glass breakage, and flooding.
For example, if your car is stolen and cannot be located, comprehensive coverage would pay you the value of your vehicle before it was stolen. If a tree falls on your car, comprehensive would pay you the cost to repair your vehicle, or if it is not repairable, it would pay you the value of your car before the tree fell on it.
Commercial Auto Property coverages including Collision and Comprehensive consider depreciation when calculating their payouts. Since vehicles depreciate over time, the older your vehicle, the lower any insurance payments will be if you make a claim.
Uninsured and Underinsured Motorist Coverage
Uninsured and Underinsured Motorist Coverage is required in some states.
Uninsured Motorist Coverage
Although it is against the law in most states, some people drive vehicles without obtaining the required insurance. Another vehicle without insurance may crash into your company owned vehicle, causing injuries to your driver and other passengers. Even though the other vehicle is at fault, since they don’t have insurance, there may not be money to pay for the injuries to the occupants of your vehicle.
Uninsured motorist coverage exists to cover this risk. In the event the other vehicle doesn’t have insurance, your uninsured motorist coverage will pay for the injuries to your driver and passengers.
Underinsured Motorist Coverage
Most states require low minimum required amounts of liability insurance, such as $50,000 per accident. In serious crashes where your driver is not at fault, this amount may not be sufficient to pay for all the medical expenses for your driver and passengers, which may exceed hundreds of thousands of dollars.
Underinsured motorist coverage will cover the expenses for bodily injury that exceed the limits of the other driver’s insurance.
A deductible is the amount of a loss that you are responsible for before the insurance company’s coverage begins. Deductibles are a form a risk-sharing that gives your business a financial incentive to avoid actions that may lead to a claim.
The liability and uninsured motorist coverages of commercial auto insurance generally do not have deductibles. The property coverages collision and comprehensive normally do have deductibles.
For example, your collision coverage has a deductible of $500. You are driving a vehicle owned by your business and you crash into a wall, causing damage of $5,000 to your vehicle. The insurer would subtract the deductible of $500 from your claim and pay out $4,500 for your loss.
Does your Employee’s Personal Auto Insurance cover Business Errands?
It is common for a business to send its employees out on business errands, such as depositing a check or visiting a client. Most states require minimum liability coverage for all vehicles so your employee may already have liability insurance that covers their vehicle. However, as an employer, you have no control over the level of liability insurance that your employee carries, which in some states could be as low as $30,000-$50,000.
If your employee causes a crash while driving from the office to a work site and causes serious injury to another driver, the other driver may sue your company. Since your employee was on the job at the time of the crash, your company may be responsible for the injured driver’s medical bills and lost pay due to the crash that exceeds your employee’s personal auto insurance limits.
For example, if your employee has the minimum liability coverage of $50,000, and causes a crash resulting in $300,000 in damages, your company could be responsible for the $250,000 of damages that exceed your employee’s insurance limits if you don’t have proper coverage.
If you commonly have employees driving on behalf of your business, you should purchase Hired & Non-Owned Auto Coverage.
Hired & Non-Owned Auto
Hired & Non-Owned Auto is important for businesses that:
- Have employees who drive their personal vehicles for business purposes, such as driving to the post office.
- Hire livery cars to pick up or drive around clients.
- Send employees on business trips where they rent vehicles.
This coverage supplements the existing liability insurance on these vehicles your business does not own. In cases of serious crashes, Hired & Non-Owned Auto can cover medical expenses and damage to other vehicles or property caused by the drivers that work for your company or who you have hired.
Hired & Non-Owned Auto does not cover commuting from home to work or any personal errands in vehicles your company does not own.
How much Commercial Auto Insurance should you buy?
For many businesses, a minimum of $500,000-$1 million in commercial auto liability is appropriate. To supplement this liability, a Commercial Umbrella policy may also be appropriate to provide strong protection for your business.