What Does Commercial Auto Insurance Cover?
Commercial auto insurance is like a safety net for business vehicles. A standard policy typically includes liability and physical damage coverage. Liability coverage covers injuries and property damage caused by you or your employees in an accident. Physical damage coverage, on the other hand, helps repair or replace your vehicle up to its actual cash value (ACV).
For added protection, insurers offer optional extras like collision and comprehensive coverage. These can cover incidents such as accidents, theft, or storm damage. You can also enhance your policy with handy add-ons like rental reimbursement or roadside assistance, ensuring your business runs smoothly even if a vehicle is out of action.
How Does Commercial Auto Insurance Work?
Commercial auto insurance operates much like your personal car insurance, but it’s tailored for business-use vehicles such as trucks or vans. Here’s how it works:
- You purchase a policy tailored to your business needs.
- Pay your premiums.
- If a covered incident happens—like an accident, storm damage, or someone else causing harm—the insurance company steps in to cover the related costs, up to the limits of your policy.
Each state has its own minimum coverage requirements, but these often aren’t enough to fully safeguard a business. For example, many states require a minimum liability of 25/50/25, which means $25,000 per person for bodily injury, $50,000 per accident for bodily injury, and $25,000 for property damage. Depending on the nature of your business, you might want higher limits for better protection.
What Types of Vehicles Are Covered?
Commercial auto insurance can cover a wide variety of vehicles your business might use, such as:
- Cars
- SUVs
- Pickup trucks
- Vans
- Box trucks
- Food trucks
- Service vehicles
- Buses
- Trailers
- Semi-trucks
If the vehicle is titled in your business name, it’s a good idea to insure it under a commercial policy. Even personally owned vehicles regularly used for business purposes may need the extra protection of commercial insurance.
As Lisa Clickener, a commercial insurance expert, advises: Vehicles registered to a business or consistently used for work are best covered under a dedicated commercial policy to ensure proper protection.
Types of Commercial Auto Insurance Coverage
Commercial auto insurance is designed to keep business vehicles and operations protected. While it works similarly to personal auto insurance, it typically offers higher liability limits to better protect businesses. Here’s a breakdown of the common types of coverage you can expect in a standard policy:
- Liability Coverage: This includes two key parts. Bodily injury liability covers medical expenses, rehabilitation costs, and even legal fees if someone sues after an accident caused by your business vehicle. Property damage liability pays for repairs to another person’s property, whether it’s a vehicle, fence, or building.
- Medical Payments (MedPay): This covers medical expenses for injuries to the driver and passengers, regardless of who’s at fault. Some states require this coverage.
- Personal Injury Protection (PIP): Available in some states, PIP covers medical bills, lost wages, and even in-home care after an accident, regardless of fault.
- Collision Coverage: Optional but invaluable, this helps repair or replace your vehicle after an accident with another car, object, or even a rollover, up to the vehicle’s value minus your deductible.
- Comprehensive Coverage: Also optional, this protects your vehicles against non-collision events, such as theft, vandalism, fire, or natural disasters.
- Uninsured/Underinsured Motorist Coverage: This comes in handy when someone without adequate insurance damages your vehicle or injures the driver. Some states make this coverage mandatory.
If you finance or lease your vehicles, lenders often require collision and comprehensive coverage.
Additional Coverage Options
Many insurance providers offer extra coverages tailored to your business needs, such as:
- Rental Reimbursement: Covers the cost of a rental vehicle while your business vehicle is being repaired.
- Gap Insurance: Bridges the gap between your vehicle’s value and the amount left on your loan or lease if it’s totaled.
- Hired Auto Coverage: Extends liability coverage to vehicles you rent, borrow, or hire for work.
- Non-Owned Auto Coverage: Adds liability protection when employees use their personal vehicles for business purposes.
- Roadside Assistance: Covers towing, tire changes, battery jump-starts, and more for work-related vehicles.
What Isn’t Covered?
Commercial auto insurance typically excludes:
- Damage or theft of customer vehicles.
- Personal vehicles (unless used for business purposes).
- Tools or equipment not permanently attached to the vehicle.
- Rental or non-owned vehicles (unless additional coverage is purchased).
- Employee injuries unrelated to an auto accident.
Choosing the Right Coverage
Every business is unique, so it’s important to understand what’s covered and what isn’t to ensure your assets are protected. While states have minimum requirements, these may not be enough for comprehensive protection. Higher liability limits can safeguard your company’s finances in case of lawsuits or significant accidents.
Working with a knowledgeable agent can help you tailor a policy to meet your needs. Independent agents, who work with multiple carriers, often offer more flexibility than agents tied to a single company.
Filing a Claim
Filing a commercial auto insurance claim is straightforward and similar to personal auto claims. Report the incident to your insurer, and an adjuster will help finalize the settlement.
Keep in mind that claims can sometimes affect premiums. It’s worth discussing the pros and cons of filing a claim with your agent, especially for minor incidents.
The Takeaway
Commercial auto insurance is a vital tool for protecting vehicles and drivers used in business operations. With the right policy and coverage options, you can ensure your company stays protected while keeping things running smoothly.
How Much Does Commercial Auto Insurance Cost?
The average cost of commercial auto insurance runs about $147 a month, according to Insureon, a small business insurance broker. However, the actual cost can vary based on several factors specific to your business.
For starters, the number and type of vehicles you use play a big role. A delivery van might have different costs compared to a fleet of trucks or a single company car. How those vehicles are used also matters. For example, vehicles that cover longer distances or operate in high-traffic areas may cost more to insure.
Your business type and industry also come into play. A contractor transporting tools and equipment has different risks than a catering company delivering meals. Additionally, the driving records of anyone operating these vehicles and any history of claims will influence the final price.
In short, the cost of commercial auto insurance is tailored to your business’s unique needs, ensuring you get the right coverage for your operations.
Do You Need Commercial Auto Insurance?
If your business owns, leases, or regularly uses vehicles for work purposes, commercial auto insurance is something to seriously consider. This also applies if employees use their personal cars for business tasks, like making deliveries or running errands.
Why is it important? Commercial auto insurance steps in to protect your business finances. It offers physical damage coverage for your work vehicles and provides liability coverage in case you or your drivers accidentally cause harm or damage to others.
Think of it as a safeguard for your business’s vehicles and operations, keeping things running smoothly no matter what happens on the road.
Is Commercial Auto Insurance Legally Required?
Just like regular drivers with personal vehicles, small business owners need to follow the law when it comes to insuring their company-owned vehicles. Almost every state—except New Hampshire—requires drivers to carry at least a minimum amount of liability insurance.
However, the exact requirements can vary from one state to another. If your business involves transporting goods or hazardous materials, things are a little different. Under the Motor Carrier Act of 1980, motor carriers must meet specific financial responsibility rules to ensure proper coverage.
It’s always a good idea to check your state’s rules and regulations to ensure your business vehicles meet all the legal requirements.
Does Commercial Auto Insurance Cover Rentals?
Yes, commercial auto insurance can cover rental vehicles, but you’ll usually need to add extra coverage to your policy. Hired and non-owned auto coverage is a popular option. It extends liability protection to vehicles you rent, lease, hire, or borrow for business purposes. It’s a handy way to keep your business covered, even when using vehicles that aren’t owned outright.
Who’s Covered Under a Commercial Auto Policy?
A commercial auto policy usually covers you and your employees when driving company-owned vehicles for work-related tasks. However, it typically doesn’t extend to family members, friends, or others who aren’t part of the business. That said, coverage details can vary depending on the insurer and policy. In some cases, unlisted drivers might only be covered up to your state’s minimum liability limits, so it’s always good to check the specifics of your policy.
What’s Not Covered Under a Commercial Auto Policy?
Every insurance policy is a little different, but generally speaking, there are a few things that aren’t covered by commercial auto insurance. For starters, medical expenses for employees that aren’t tied to an accident covered by the policy aren’t included. Also, business property that isn’t permanently attached to your commercial vehicles, like tools or equipment, usually doesn’t have coverage.
And if you’re renting a car while one of your company vehicles is being repaired after an accident, the rental might not be covered under the policy. Always double-check with your provider to be sure!
The road to the right commercial auto insurance is a lot smoother with the Alexander Insurance Agency of St. Charles by your side. From ensuring your vehicles are covered in case of accidents to offering extras like rental reimbursement and roadside assistance, we’ve got all your insurance needs covered. Let us help you keep your business moving forward with confidence—contact us today to get started!