- What is commercial auto insurance?
- Who needs commercial auto insurance?
- What types of vehicles are eligible?
- What does commercial auto insurance cover?
- What doesn’t commercial auto insurance cover?
- How much does commercial auto insurance cost?
- How much commercial auto insurance do I need?
- How do I get commercial auto insurance?
What is commercial auto insurance?
Commercial auto insurance provides coverage for vehicles owned, leased, or rented by your contractor business. In the event of an auto accident, commercial auto insurance, much like personal auto insurance, provides financial coverage if your business is found to be at fault or if there is damage to property.
Commercial auto insurance 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, 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
- Driven by employees, co-workers, clients or volunteers
- Used to transport goods, such as building materials
- A dump truck, box truck, other large truck, or a cargo or work van
If your business owns mobile equipment such as a backhoe or crane that can be driven on public roads, auto liability insurance may be required by your state.
What types of vehicles are eligible?
Commercial auto insurance can cover cars, SUVs, light trucks, and vans used for business purposes. It can also cover large trucks that are normally excluded from personal auto policies, including box 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.
Some states require that mobile equipment that is driven on public roads carry minimum auto liability insurance. If you have mobile equipment that can be driven on public roads, such as a backhoe or forklift, it is important to check if you need auto liability coverage for that equipment.
What does commercial auto insurance cover?
Commercial auto insurance provides coverage for both liability and property. For vehicles that your business owns or leases, a minimum amount of liability coverage is required 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.
Example: The per person/per accident limit you’ve secured for your plumbing business is $100,000/$300,000. Your employee crashes into another car while driving a company-owned van and is found to be at fault for the accident. The four 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.
- 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.
- 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.
- Collision coverage pays for physical and mechanical damage to your vehicle when it hits or is hit by an object or another vehicle.
Example: On your way to a client, you crash your work van into 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.
Example: During a repair job at a client’s home, your work van gets is damaged by a fallen tree branch. Comprehensive coverage would pay you the cost to repair your vehicle, or if it is not repairable, comprehensive would pay you the value of your van before the branch fell on it.
Uninsured and Underinsured Motorist Coverage
Uninsured and Underinsured Motorist Coverage is required in some states, and it may cost more in states with a higher number of uninsured drivers.
- Uninsured Motorist Coverage protects you in the case that a driver with no insurance damages your company-owned vehicle or causes injuries to your driver or other passengers. Even though the other driver is at fault, with no insurance, they may be unable to pay for any injuries or damage sustained to your vehicle. This is where uninsured motorist coverage would step in.
- Underinsured Motorist Coverage protects you in the same case, where your driver is not at fault, but instead of the offending driver having no insurance, they do have insurance but don’t have a high enough liability limit to cover all the costs for damage or medical expenses. Underinsured motorist coverage would step in to fill the gap.
What doesn’t commercial auto insurance cover?
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.
Hired & Non-Owned auto is important for businesses that:
- Have employees who drive their personal vehicles for business purposes, such as driving from one worksite to another worksite. If your employees are only commuting from home to a worksite or office, you do not need Hired & Non-Owned auto coverage.
- Hire livery cars to pick up or drive around clients
- Send employees on business trips where they rent vehicles
Example: Your employee is transporting a few tools and materials to the job site. Instead of using a company truck, he takes his personal car. On the way to the site, he hits a pedestrian. In this scenario, Hired and Non-Owned auto insurance would cover any medical or legal costs associated with the accident.
How much does commercial auto insurance cost?
How much commercial auto insurance do I need?
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.
How do I get commercial auto insurance?
There are many factors to consider when purchasing commercial auto insurance—from the financial strength of an insurer to the pricing that you’re offered. AdvisorSmith has reviewed many of the insurance companies offering commercial auto insurance, and below are some of the top companies.
» Learn more about how to get commercial auto insurance