If you just started your small business or are in the process of setting up one, congratulations! You’ll likely soon want commercial auto insurance to cover your business vehicles. Contrary to popular belief, commercial auto insurance isn’t reserved for big-time car rental, ridesharing, or delivery companies only. It’s essential for businesses of all kinds, including small businesses.
If you have any questions or worries about where to start, you’ve come to the right place. Let’s take a look at everything commercial auto insurance covers and how it differs from personal auto insurance.
What Is Commercial Auto Insurance?
Commercial auto insurance is an insurance policy that covers damage to a business’s motorcycles, cars, vans, trailers or trucks. It can also cover injuries to the drivers or passengers of those business vehicles. A business auto policy also protects your company by providing protection if your vehicle does damage to another person’s property.
A commercial auto insurance policy is necessary because any damage to your business vehicle or injury to your drivers may not be compensated by your personal auto insurance. You need a separate insurance policy.
Commercial Auto Insurance vs. Personal Auto Insurance: What’s the Difference?
Commercial and personal auto insurance serve a similar purpose—both offer coverage in case of an accident. The two policies provide you with financial protection and the necessary resources to recover after suffering damage, loss, or injury.
However, the two differ in various areas. Commercial auto insurance covers your business vehicle and the driver for commercial use. Essentially, this policy covers liability for you or any employees within your company with a valid driving license.
On the other hand, personal auto insurance only covers personal vehicles driven for personal uses only. This includes driving yourself to and from work and covers you alone.
Benefits of Commercial Auto Insurance
Commercial auto insurance comes with numerous benefits to your business. These include:
- Liability coverage: The policy includes liability coverage to help you pay for damages resulting from an accident you caused. This includes repair costs for the other party’s vehicle or property. The policy also protects you if someone you are involved in an accident with sues your company because of an auto accident.
- Damage protection: It offers protection in case of physical damage and theft.
- Coverage for medical payments: If an employee is injured in an accident, your workers compensation policy will provide medical coverage for them, however if anyone else is in the vehicle with them, they may not have access to medical insurance and your business auto policy could help protect them.
- Physical damage coverage: The policy offers comprehensive coverage. Note that approximately one in eight drivers in the U.S is uninsured. If you have one such driver, commercial auto insurance helps pay for the damages caused by such drivers. It also covers vandalism, theft, and fallen trees, meaning that even if you leave the car out at night, the policy still applies.
Common Vehicles that Require a Commercial Policy
There are many types of businesses, each requiring a different kind of vehicle. Some common vehicles that require a commercial auto insurance policy include:
Business Autos
These include cars, SUVs, light trucks, vans, and so on that you use to move from place to place for business activities.
Trucks
These include pickup trucks, box trucks, food trucks, and service utility trucks that you use to move business goods and services from one place to another.
Trailers
Commercial auto insurance also covers a wide range of commercial trailers. These include pickup truck utility trailers, large dump truck trailers, and tractor-trailers. Even special trailers designed to have equipment mounted on them.
What Is Covered Under a Commercial Auto Policy?
Below are some of the items this policy covers, which you’re entitled to a claim:
- Vehicle damage: The policy helps pay for all vehicle damages if an accident happens.
- Driver injury: Commercial auto insurance can pay for the driver’s medical expenses if they suffer injuries during an accident.
- Injury of other parties: If you caused the accident, the policy covers damage to other parties’ vehicles, driver injuries, and passenger injuries.
- Property damage: If the vehicle hits a property and damages it, the policy will help pay for these damages.
Do I Need Business Auto Insurance?
When determining whether you need commercial auto insurance, some of the factors to consider are:
- Who owns or leases the vehicle: Is it the business entity or you as the business owner?
- Who drives the vehicle: Are you the only driver of the vehicle, or do any of your employees drive it?
- The vehicle’s principal use: What are you using the vehicle for? Does it primarily transport goods, or does it transport people?
- Where it resides: Do your employees take the vehicle home?
An insurance broker can help you determine if you need commercial auto insurance to adequately protect your business. They can advise you to go for commercial auto insurance if you use your vehicles for any of the following:
- For employees to commute
- For work purposes, like construction and farming
- To transport people or goods
- To haul special equipment
- If you use an uncommon or unusual vehicle for business purposes
Determine How Much Commercial Auto Insurance You Need
Several factors come into play when an insurance company determines the amount of insurance you need to cover your business automobiles. These include:
Who Owns the Vehicle
If your business owns the vehicle, you must pay for commercial insurance. Keep in mind that the liability insurance limit you need for personal auto insurance is significantly lower than for commercial auto insurance because there are fewer risks. You can also cover leased vehicles to the company.
Who Drives the Vehicle
If you’ve got a driver who operates your commercial vehicle, the policy will cover both the driver and the vehicle. You’ll need more commercial auto insurance if you have several vehicles and drivers.
How the Vehicle Is Used
Undoubtedly, you require commercial auto insurance if you use the vehicle to transport goods or equipment, drive people around, or make sales visits and calls. Construction, contracting, and employee use also all require commercial auto insurance. Also if you have any advertising decals on your vehicles, that is a red flag to a personal insurance policy that the vehicle should be insured on a commercial policy.
The Type of Vehicle
The type of vehicle your business owns and how much it weighs also determine the cost of commercial insurance. Trailers and trucks weigh more and cost more than regular personal cars.
Frequently Asked Questions (FAQs)
Is Commercial Auto Insurance More Expensive?
Yes, commercial insurance is more expensive than regular auto insurance because the risk involved is higher. The plan has larger plan limits, greater potential issues, and various expansive options.
Does Commercial Auto Cover Personal Use?
Unlike personal auto insurance that doesn’t cover a personal vehicle for business use, commercial auto insurance extends its coverage to business and personal use.
Are the Tools in My Vehicle Covered?
Although commercial auto insurance covers the vehicle and any permanently attached items, such as rack, it does not extend to any items in the vehicle, including tools.
Find the Best Auto Insurance for Your Business
If you find out you require commercial auto insurance, the next step is to find the best commercial auto insurance company. One such top-rated and reputable U.S. insurance company is Doyle & Ogden. Our company offers both large and small business auto insurance coverage. Contact Doyle & Ogden today and get a commercial auto insurance quote.