The High Cost Of Commercial Auto Insurance: Understanding The Price Tag

Commercial auto insurance is an essential but often significant expense for businesses. The cost varies depending on several factors, including the type of vehicle, the level of coverage, the number of vehicles, and the driving records of employees. Small businesses pay an average of $147 per month or $1,762 annually for commercial auto insurance, but rates can range from $12.50 per month to over $500 per month. The cost of commercial auto insurance is typically higher than personal auto insurance due to the increased coverage and risks involved.

Commercial auto insurance costs vary by state

Commercial auto insurance costs vary depending on the state in which the business is located and the specific requirements of that state. For example, in Missouri, the state requires auto liability insurance coverage for all vehicles, whether they are for personal or commercial use. The minimum amounts of coverage for auto liability insurance in Missouri are $25,000 per person for bodily injury liability coverage, $50,000 per accident for bodily injury liability coverage, and $25,000 per accident for property damage liability coverage.

The cost of commercial auto insurance also depends on factors such as the number of vehicles a business owns, their value, and how often they are driven. Small businesses pay an average premium of $147 per month, or $1,762 annually, for commercial auto insurance. This amount can vary significantly depending on the specific circumstances of the business. For instance, commercial auto insurance for contractors with vehicles like pickup trucks and cargo vans typically costs around $257 per month. On the other hand, for-hire transport trucks can cost over four times as much to insure, with an average monthly premium of $1,041.

The type of vehicle being insured also plays a significant role in determining the cost of commercial auto insurance. Vehicles with a higher value will likely cost more to insure. Additionally, businesses that operate in certain industries may pay higher rates. For example, a food truck filled with valuable equipment or a tow truck that is always on the road will likely have higher insurance rates than a business that primarily uses cars for food delivery.

It is worth noting that commercial auto insurance is typically more expensive than personal auto insurance because commercial vehicles are generally considered to be at a higher risk of damage. Commercial vehicles are often driven more frequently, especially during peak traffic hours, increasing the likelihood of accidents. As a result, commercial auto insurance policies usually have higher coverage limits to provide adequate protection for businesses.

The type of vehicle affects the cost

The type of vehicle you own and its usage plays a significant role in determining the cost of commercial auto insurance. The more vehicles a business owns, the higher the insurance cost. For instance, a cleaning company that owns three cars will have a higher insurance cost than a cleaner with only one car.

The type of vehicle also influences the cost of insurance. Businesses that use specialized vehicles or trucks may need additional coverage to protect the vehicle's specialization. For example, a food truck or a tow truck will likely have higher insurance rates than a standard car.

The value of the vehicle is another factor. Many business owners consider premium rates when choosing vehicles for their fleet. The more features a vehicle has, the higher the insurance cost. For instance, a vehicle equipped with commercial add-ons such as cranes, lift-gates, winches, or snow plows will likely require a commercial auto policy.

The driving distance and location also impact insurance costs. The more miles a vehicle travels, the higher the insurance cost, as there is a higher risk of accidents. Businesses located in areas with higher property prices and more crime will also have higher insurance costs.

Additionally, the driving records of all drivers will affect insurance rates. Businesses should hire qualified and skilled drivers with clean driving records to lower insurance costs and reduce risks.

Driving history impacts the premium

Commercial auto insurance companies will always request and review your personal driving record as part of their underwriting process. This allows them to gauge your risk level and set appropriate premium rates. Insurers look at several factors when assessing your driving record, and these can have a significant impact on your insurance costs.

Traffic Violations

The types and frequency of violations on your record are a strong indicator of the types of claims you may make in the future. For example, speeding tickets, tailgating, and DUI convictions can all impact insurance costs, with more serious violations resulting in higher premium prices. These violations indicate a disregard for traffic laws and responsible driving behaviour, and insurance companies view them as indicators of increased risk. Multiple violations can have a cumulative effect, further amplifying the impact on your insurance rates.

Accident History

A history of accidents, particularly those deemed to be your fault, signals a higher risk to insurance providers. If you have been involved in multiple accidents, insurance companies may perceive you as a higher liability and adjust your premiums accordingly. Drivers with a track record of accidents are more likely to file insurance claims, resulting in increased costs for the insurer. The severity and frequency of accidents are also taken into account when determining the impact on your insurance rates.

Driving Experience

Insurers will consider the number of years you have been driving and the types of vehicles you have operated. Less experienced drivers may be seen as higher-risk, resulting in higher premium costs.

License Status

Any history of license suspensions or revocations will be taken into account by insurance companies. These incidents indicate an increased risk, and insurers may deem you a higher-risk driver, leading to increased premium costs.

Annual Mileage

The number of miles driven annually for commercial purposes can impact your insurance rates. The more miles driven, the higher the chances of a collision, regardless of your driving skills. Commercial insurance rates may be lower if you drive fewer miles.

Vehicle Type

The type and size of commercial vehicles operated can also affect insurance rates. Certain vehicles may be more susceptible to damage, occupant injury, or theft, resulting in higher premiums.

In summary, your driving history plays a pivotal role in determining the premiums you pay and the coverage you receive for commercial auto insurance. A clean driving record with no accidents or violations can result in lower premiums, while a history of accidents, traffic violations, or other infractions can lead to increased costs.

The amount of coverage needed

The amount of coverage you need for your commercial auto insurance depends on several factors.

Firstly, the type of work you do and the level of risk involved will affect the cost of your insurance. For example, a mortgage broker will likely pay less for commercial auto insurance than a roofing contractor as the nature of their work involves less driving. Similarly, jobs that include driving to get to job sites often have higher insurance costs.

Secondly, the number of vehicles your business owns will impact the cost of your insurance. The more vehicles you have, the more you will pay for insurance.

Thirdly, the state in which your business operates will also affect the cost of your insurance. For example, a small business in Miami will likely pay more for insurance than a small business in a small town in Minnesota due to the increased threat of natural disasters and higher property prices and crime rates.

Fourthly, your record of losses and claims will impact your insurance fees. For example, if your employees have a history of backing over mailboxes, your premium may increase.

Fifthly, the coverage limits you choose will affect the cost of your insurance. Higher coverage limits will almost always increase the cost of your policy.

Lastly, your driving history and the driving history of your employees will impact the cost of your insurance. The number of years you or your employees have driven without an incident will impact your insurance rates. For example, a property manager who has driven to work sites for nine years with no claims will likely pay less than someone who has been in business for two years.

It's important to note that commercial auto insurance is required for all commercial vehicles in certain states, such as Missouri, and penalties may be imposed for not carrying auto liability insurance.

Policy limits and deductibles

For example, a commercial auto policy with a $1 million limit will only cover up to that amount for a single-occurrence claim. If the claim amount is $1.2 million, the policyholder will have to pay the remaining $200,000 out of pocket. Most commercial auto customers choose a policy with at least $1 million in limits.

The right amount of coverage depends on the business's individual needs and its comfort level with financial risks. It is recommended to consult a licensed insurance broker-agent to determine the appropriate coverage limits and deductibles.

The deductible is the amount of money the policyholder pays out of pocket before the insurance company starts covering the claim. A higher deductible will result in a lower-priced policy. However, it is important to choose a deductible that is easily affordable, as failing to pay the deductible will render the insurance inactive.

Commercial auto insurance costs are influenced by various factors, including the type of vehicle, the level of risk, employee driving records, and policy deductible and limits. The average cost of commercial auto insurance is $147 per month, with 37% of small business customers paying less than $100 per month. The cost can vary depending on the business's location, the number of vehicles, and the driving history of the employees.

Frequently asked questions