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The Ultimate Guide to Commercial Auto Insurance​

In this complete guide to buying commercial auto insurance, we explain everything you need to know before you buy a company auto insurance policy. From covering the different types of commercial auto insurance to a quick review of the cost of a business auto insurance policy, we discuss everything in this guide and answer some of the most frequently asked questions about commercial auto insurance coverage.

Quick References

What is commercial auto insurance?

A business auto liability policy is designed to provide coverage for companies who own and operate vehicles in order to carry out work-related duties. Commercial auto insurance can help a business to cover the costs associated with replacing or repairing any company vehicles within the limitations of a policy.

Any business which uses vehicles for work-related purposes will need to buy a commercial auto insurance policy. If the individuals within a company use their personal vehicle for work-related reasons, they may find that their private auto insurance will not cover any business-related risks. Aside from this, a personal insurance policy that does not have enough coverage for the risks could leave a business financially responsible for any connected losses.

A business auto policy will typically give you a much higher level of coverage than a personal auto insurance policy. It also helps with risk mitigation in terms of being able to offer a company improved chances of continual operations.

You can buy a commercial auto insurance policy for cars, semi-trucks, vans, trucks, heavy-duty trucks, and in some cases, other specialist commercial vehicles. Depending on the type of business auto insurance policy you buy, the policy will provide coverage for the vehicles that are owned by, leased, or under contract to the company. It may also help to cover employees should an accident occur, and they become injured.

There are typically three elements of coverage that are available to buy with a commercial auto insurance policy.

  • Liability Insurance.
  • Physical Damage Insurance.
  • Other Coverage, such as towing and labor, lease gap coverage, medical payments, and rental reimbursement.

When does a business need to buy commercial auto insurance?

In almost every state, companies are required to buy business auto insurance for any vehicles they own, lease, or possess under contract. This type of policy can cover property damage that is connected to an accident, medical bills, theft, and some other types of damage to a vehicle. You need to buy a commercial auto insurance policy if:

  • You drive to and from any work sites
  • You transport hazardous materials
  • The vehicle is used for towing
  • You need to transport other employees or clients anywhere
  • You carry any equipment, tools, or products that are connected to your work
  • You have a vehicle that is titled to your company

Will commercial auto insurance cover vehicles that are not owned by the business?

A non-owned and hired auto insurance policy will provide coverage for any vehicles that a company uses but does not own. This may include any employee-owned vehicles or leased vehicles. If your staff have their own personal auto insurance, this is not often enough coverage for business use, and in most cases, it is excluded.

What factors can impact the cost of a company auto insurance policy?

There are a number of factors that an insurance provider will take into account when they give your business a quote for commercial auto insurance.

  • Claims history
  • Number of vehicles being insured
  • Type of vehicles needing coverage
  • The value of the vehicles that need to be covered
  • The level of risk associated with typical business activities
  • Driving records of employees
  • Policy limits and deductibles

What does a business auto insurance policy cover?

Commercial auto insurance provides coverage for the cost of an accident. It can also cover acts of vandalism, theft, medical expenses, and specific types of vehicle damage. Here is a summary of the things that could be covered under a business auto insurance policy.

  • Physical Damage and Theft
  • Auto Accident Liability
  • Medical Expenses and Payments
  • Accidents with an Uninsured Motorist

Here is a more detailed summary of what you can expect a commercial auto insurance policy to give you coverage for.

Physical Damage

Business auto insurance can give you protection against vehicle theft, along with any physical damage that may be caused. Depending on the level of coverage you buy, this may include acts of vandalism, impact with another vehicle or object, and specific weather events.

Auto Accident Liability

A commercial auto insurance policy may also include liability coverage, which can help your business to pay for any associated damages in any accident that you were held responsible for. Depending on your individual coverage, this may include any legal expenses if you face a lawsuit for any third-party injuries and the repair costs for any vehicles or property that was damaged as part of the accident.

Medical Expenses and Payments

When you buy business auto insurance, you will get coverage for any medical payments, such as your own medical expenses in the event you are injured in an accident, along with any medical expenses for any passengers who may have been traveling with you. This coverage will pay for the medical expenses whether you were at fault or not.

Accidents with Uninsured Motorists

Coverage for uninsured motorists will vary from one state to the next. If an  uninsured driver causes an accident, they might not be able to afford to pay for any damages. With this type of commercial auto insurance coverage, your business will not need to pay any vehicle repairs or medical expenses that the uninsured driver cannot cover.

Similar to a personal auto insurance policy, a commercial auto insurance policy will provide coverage for specific liabilities, collisions, medical payments, damage to a vehicle or property, and uninsured motorists. The key differences are within the policy exclusions, coverages, definitions, and eligibility.

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Are materials, equipment, and tools covered by a commercial vehicle insurance policy?

If you have any unattached materials or tools that are regularly transported in your vehicle, they will not typically be covered by a business auto insurance policy. Usually, it is a business owner's policy or general liability policy that provides the best type of coverage for such items. In some cases, you will be able to buy additional insurance for a standard business auto insurance policy that will give you the best level of coverage for any equipment, tools or materials you keep in your vehicle/s.

Who is covered to drive a commercial vehicle?

When you buy a business auto insurance policy, this can cover your employees, family members, and others. If someone drives a vehicle while carrying out work-related duties for your company, then you will need to add them as a driver to your insurance policy.

What if I need to cover specific liability limits for a business contract?

If you are requested to have a higher limit for your commercial auto insurance policy, then you have two options. The first is to contact your business auto insurance provider and get a quote for the increased coverage requirement. The second option is to buy a commercial umbrella insurance policy and increase your coverage limits this way.

Is a trailer automatically covered by commercial auto insurance?

This will depend on the size of the trailer that you are using. For instance, if your trailer weighs less than 2k pounds (gross vehicle weight), then it could be covered automatically for any liability. If you want coverage for theft and/or damage, then you will need to add this to your policy by calling up your commercial auto insurance company.

If your trailer weighs more than 2k pounds (gross vehicle weight), then it will not be covered unless you call your insurer and add it to your policy.

What optional extras can you buy with business auto insurance?

Beyond the basic commercial auto insurance coverage, almost all insurance companies will enable you to customize your policy with a range of add-ons/endorsements.

Auto Loan / Lease Coverage – In the event your vehicle is a total loss following an accident, this will usually cover any difference between the actual cash value of the insured vehicle and the outstanding amount on the lease/loan.

Roadside Assistance - This will protect you if an issue arises that is not usually covered under your commercial auto insurance. This may include a dead battery, being locked out of your vehicle, a flat tire, and more.

Expanded Towing – This provides coverage for towing outside of the limits of a standard commercial auto insurance policy. It typically includes minor roadside repairs, towing, and jump-starts.

Hired Vehicle Physical Damage (Inc. loss of use coverage) – This provides you with comprehensive and collision damage coverage for any vehicles that you either lease or contract. It will usually be required in order to fulfill contractual obligations on any leased or contracted vehicles.

Rental Reimbursement – This can pay towards the cost of the rental car, up to any of your policy limits, and ensures that you have transportation following an accident.

Pays for a rental car up to the limits of your policy, so you have transportation after an accident.

New Vehicle Replacement Cost – If your vehicle is a total loss, this type of coverage can replace your vehicle with either a new or comparable kind of vehicle. It may also provide gap insurance for any outstanding amounts owed on your finance agreement that is above the actual cash value of your vehicle.

Medical Payments/Personal Injury Protection – If your own health insurance coverage or that of your passengers will not cover the cost of treatment or expenses, this will pay for those.

Who needs to buy commercial auto insurance?

If you or your staff use a vehicle for any work-related duties, regardless of the frequency, then you need to buy a commercial auto insurance policy to make sure you have adequate coverage in place for your business should an accident or other event occur.

What is not covered by a standard business auto insurance policy?

Although commercial auto insurance offers the most essential of coverage when you or your staff drive for any work-related reasons, there are a few things that are not covered.

  • The contents of your vehicle*
  • Accidents that occur if you are driving a rental vehicle
  • Injuries to employees while they are driving
  • Ridesharing for a business, such as Lyft or Uber**
  • Accidents that occur in your employee’s personal vehicles***

*If you want to cover the content inside of your vehicle, you will typically require coverage from inland marine insurance or commercial property insurance.

**if you drive for Uber or Lyft, you will find that you can usually buy rideshare insurance at a lower cost than a full-blown commercial auto insurance policy. However, not every state offers this coverage.

***In some businesses, particularly those with remote sales teams, it is not uncommon for people to use their own vehicles for work purposes. A standard commercial auto policy will not apply in these instances. Instead, you will need to purchase a hired and non-owned auto policy. In most cases, this can be added to your standard business auto insurance.

How much does commercial auto insurance cost?

The cost of buying business auto insurance will depend on the number of vehicles you use for your business, the intended use of those vehicles, the people who will drive them, and of course, the nature of your business.

With a policy limit of $1 million, the median cost of commercial auto insurance in the U.S for 2018 was approximately $140 monthly.

What do you need for commercial auto insurance?

If you want to get a quote to buy commercial auto insurance, there are certain pieces of information that you will need to hand. While not essential, it might help you get a more accurate price for your business auto insurance.

  • Make, model and year of vehicles you need to insure
  • The value of the vehicle
  • For commercial vehicles, the weight of the vehicle along with the weights of any equipment that could be attached
  • Security features of the vehicle
  • The maximum distance you expect the vehicle to travel on an annual basis
  • The claims history of your company
  • Names, license numbers, and summary of driving history for any people who will be driving

Who is an ‘insured’ under a commercial auto policy?

When you purchase a business auto insurance policy, there are three main categories of ‘insured’ entities on the policy. Here is a breakdown of who is covered for what.

  1. You

This will often refer to the named insured, the company, or the person who is detailed in the declarations.

Of all the types of insureds on a commercial auto insurance policy, ‘You’ will have the broadest level of coverage. This means that you will have coverage for any of your covered vehicles.

  1. Omnibus Insureds

Another insured refers to anybody who is liable for the conduct of a permissive user or yourself. (as detailed in 3.). This is often referred to in the industry as an omnibus clause, which covers any individual who may be held legally accountable for an incident that is caused by a permissive user or a named insured. 

An Omnibus Clause is a specific clause that is outlined within an automobile liability insurance policy, and which extends coverage to individuals who are not named on the policy. This clause can only apply to those individuals who are permitted to use the insured vehicle.

  1. Permissive Users 

A Permissive User is anybody else who is driving a covered vehicle that you either own, lease or borrow and who gains your permission as an insured. This essentially means that if you give consent for another individual to drive one of your vehicles, then they are also insured.

Your employees are covered as permissive users providing you have bought liability coverage for the vehicles you either hire or own. If your business liability insurance is limited to owned vehicles only, then they might not be covered under your standard commercial auto insurance policy.

If your employees use their own personal vehicles for work-related purposes, these vehicles are known as non-owned autos, and your commercial auto coverage will not extend to these vehicles.

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Is commercial auto insurance required by law?

With the exception of Virginia and New Hampshire, Commercial Auto Insurance is required in every state. Even in those states where it is not a legal requirement, the business and/or drivers will still be held liable for any eventual damages.

Is commercial auto insurance cheaper than personal?

Personal auto insurance will not usually pay out to repair any damage or to treat any injuries you sustain if you are transporting goods or people as a work-related duty. Although a personal auto insurance policy is often cheaper than a commercial insurance policy, if you are involved in an accident and your insurance won’t cover the costs, this could place you under severe financial stress.

How much commercial auto insurance do I need?

There are different requirements for each state, so it’s essential to check with a local commercial insurance expert as to what amount of business auto insurance you need to buy as a minimum.

Does a delivery driver need commercial auto insurance?

There are a number of unique risks that a delivery driver faces, and this can sometimes make it challenging for them to find insurance. The right insurance policy for a delivery driver is business auto insurance for company-owned vehicles, and if they use their own personally owned auto, they should buy hired and non-owned auto insurance. 

Do I need commercial auto insurance for my personal vehicle?

A business auto insurance policy will only cover those vehicles that are owned, leased, or borrowed by the business. If you use your personal vehicle for work-related reasons, then a personal auto insurance policy might not give you the coverage you need. Instead, get a quote for a hired and non-owned auto insurance policy.

Commercial auto insurance Vs. Personal Auto

If you have a personal auto insurance policy, this will typically once give you coverage when you are driving your vehicle for personal reasons. This will usually include commuting to a single place of work, and any other travel for leisure that is unrelated to your work. On the other hand, a commercial auto insurance policy will give you coverage for almost all of your business-related travel.

If you use a company vehicle, this will be covered as part of the business auto insurance policy; if you use your own vehicle for work-related reasons, then you will need to buy a hired and non-owned auto insurance policy or make sure the business has an endorsement for this type of coverage on their core commercial auto insurance policy. 

Commercial auto vs. hired and non-owned auto insurance

Hired and non-owned insurance coverage can protect any vehicles that your company uses but they do not own. So, if your employees get an allowance for using a personal vehicle for work-related reasons, this will cover these vehicles, along with any vehicles that your business may lease. Although you need to buy commercial auto insurance to comply with legal requirements, a hired and non-owned insurance policy is not yet written into law. So at present, this is simply recommended and not legally required.

What type of vehicles can be covered by a business auto insurance policy?

As you would expect, the majority of commercial vehicle insurance policies are customizable to a point. In most cases, work vans, box trucks, regular cars, service utility trucks, food trucks, and many other large commercial vehicles can be covered on a commercial auto insurance policy. This type of policy is frequently called truck insurance and fleet insurance, but for most insurance providers, it is merely a commercial auto insurance policy.

How can you save money buying auto insurance for a new business?

If you want to try and save money on your business insurance this year, there are a number of ways you can do this. If this is your first year in business, make sure you speak with a commercial insurance expert. They are often best placed to know about the best prices for business insurance, and they can also offer their expert guidance on matters such as coverage limits, endorsements and more.

How can you save money by renewing your commercial auto insurance?

If you are approaching your renewal date and you want to get competitive quotes for your auto insurance, speaking directly to a commercial insurance expert can help you save time, and in most cases, it will be the quickest way to get a quote for a like-for-like auto insurance policy.

If you haven’t already purchased a business owner's policy, this combines two-three different types of insurance into a single policy and it is a great way to save money on your business insurance.

Disclaimer: This information has been written for the public as informational only. Since coverage varies from state to state, it is important to speak to a licensed insurance agent in your state.

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