Business Auto Insurance: How Much Coverage Do You Need?

Commercial auto insurance is a type of insurance policy that covers vehicles used for business purposes. The cost of commercial auto insurance varies depending on several factors, including the number of vehicles, their value and usage, the level of coverage, and the driving records of the employees operating the vehicles. Small businesses pay an average premium of $147 per month or $1,762 annually for commercial auto insurance. The national median monthly cost for commercial auto insurance ranges from $207 to $270. It is important to note that commercial auto insurance is separate from personal auto insurance and offers higher coverage limits due to the increased risks associated with business vehicles.

How much you'll pay based on your profession

The cost of business auto insurance varies depending on your profession. For instance, NEXT insurance offers policies that cost as little as $12.50 per month or $150 annually for professions like yoga instructors and accountants. On the other hand, contractors and landscapers, who drive to work on other people's property and face more daily risks, will likely pay more for their insurance. Similarly, businesses with more vehicles, such as a cleaning company with multiple cars, will pay more than a single cleaner with just one car.

The industry you work in also affects your insurance rates. For example, construction vehicles that frequent dangerous job sites will likely have higher rates than other industries. Additionally, businesses in certain states might pay more due to the increased threat of natural disasters, higher property prices, and higher crime rates.

Your profession also influences the type of coverage you need. For instance, businesses that own or lease vehicles specifically for transporting goods, equipment, or people, such as contractors, landscapers, delivery companies, and transportation services, typically require commercial auto insurance. On the other hand, businesses that use vehicles for errands or transporting clients, such as shops and restaurants, might only need a basic business auto policy.

The national median monthly cost for commercial auto insurance through Progressive, a leading insurance provider, ranged from $207 for contractors to $211 for business auto customers, with an average of $257 and $270, respectively.

It's important to note that the number of vehicles and their value generally have a more significant impact on your premium than your profession. However, your profession can still influence the cost of your business auto insurance, and it's crucial to choose the right coverage for your specific needs.

How the number of vehicles impacts the cost

The number of vehicles a business owns is a significant factor in determining the cost of its commercial auto insurance. The premium increases with the number of vehicles, with larger fleets costing more to insure than smaller ones. This is because insurers perceive a higher number of vehicles as an indication of increased risk and exposure to potential claims.

The type of vehicles owned by the business also influences the insurance cost. Vehicles with higher values, such as those with advanced technology, safety features, or expensive equipment, generally lead to higher premiums. This is because the cost of repairs or replacements is higher for these vehicles, resulting in a greater financial burden on the insurance company in the event of an accident or theft.

The usage of the vehicles is another critical factor. Businesses that rely heavily on their vehicles, such as those in transportation services or delivery companies, tend to have higher premiums. This is because the more a vehicle is on the road, the greater the chance of an accident or breakdown, leading to increased claims. Additionally, the nature of the business and the type of cargo being transported can impact the premium. For example, a food truck carrying valuable equipment or a construction company with vehicles frequently visiting dangerous job sites may face higher rates.

The driving records of the business's employees also play a role in determining the cost of commercial auto insurance. A history of accidents, traffic violations, or claims can significantly increase the premium. Conversely, a clean driving record can result in lower rates, as insurers perceive these businesses as lower-risk.

The location of the business can also impact the cost of insurance. Urban areas, with higher rates of vandalism, theft, and accidents, typically lead to higher premiums compared to small towns or rural areas. The state in which the business operates can also influence the cost, with states prone to natural disasters or those with higher population densities often having higher insurance rates.

The impact of your driving history

Traffic violations, such as speeding, reckless driving, or running red lights, are also red flags for insurers. These infractions indicate a disregard for traffic laws and responsible driving behaviour, which translates to increased risk. Multiple violations can have a cumulative effect, amplifying the impact on your insurance rates.

Driving under the influence (DUI) or driving while intoxicated (DWI) is a serious offence that will significantly impact your insurance premiums. Such convictions signal a high level of risk and demonstrate irresponsible behaviour behind the wheel. Insurance companies may increase your premiums substantially or even refuse coverage due to the elevated risk associated with DUI/DWI offences.

In some jurisdictions, insurance companies use a point-based system to assess risk. Points are assigned for accidents, violations, and other driving-related offences, and accumulating points can result in premium surcharges. The severity and frequency of offences determine the number of points assigned.

The number of years you have driven without an incident impacts your insurance rates. For example, a property manager who has driven to work sites for nine years with no claims can expect to pay less than someone who has been in business for two years with a clean driving record.

To mitigate the impact of your driving history on your insurance premiums, you can consider the following:

• Completing a defensive driving course to demonstrate your commitment to safe driving and potentially qualify for insurance discounts.
• Maintaining a clean driving record for an extended period can gradually improve your insurance rates as insurers consider recent history as a positive indicator.
• Shopping around for quotes from multiple insurance providers, as different companies may have varying policies and rates for drivers with infractions.
• Improving your credit score, as this is used by some insurance companies to determine premiums.

The cost of commercial vs. personal auto insurance

Commercial auto insurance is generally more expensive than personal auto insurance. This is because commercial policies tend to have higher limits, which means more coverage in the event of an accident. Commercial policies also cover an entire business, which could include multiple drivers, vehicles, and employees with poor driving records. Commercial insurance is also affected by higher risk and liability, as businesses are at a higher risk of property damage claims and tend to drive during peak traffic hours.

However, commercial insurance does not always cost more than personal insurance. For example, a small business with only one or two drivers would have a much lower premium than a large business with a fleet of vehicles and numerous drivers. The type of business also matters; businesses whose primary operations involve driving, such as a moving company or a food truck, will likely have higher rates.

The cost of commercial auto insurance is determined by various factors, including the type of vehicle, the number of vehicles, the industry of the business, the driving records of employees, and the type of coverage chosen. Commercial auto insurance covers property damage and bodily injury liability, as well as medical payments coverage, uninsured and underinsured motorist coverage, comprehensive coverage, and collision coverage.

Personal auto insurance, on the other hand, covers accidents that occur while driving for personal use, including commuting to and from work. Personal policies usually only cover a household's drivers and one or two immediate family members. Personal auto insurance is typically cheaper than commercial insurance, with an average annual cost of around $1,592 for a driver with good credit and a clean driving record.

It is important to note that using a personal vehicle for business purposes may not be covered by personal auto insurance. If a vehicle is used for business purposes, commercial auto insurance is typically required.

How to get a commercial auto insurance quote

The cost of commercial auto insurance varies depending on several factors. These include the type of work you do, the number of vehicles you have, how often you drive, the make and model of your car, and your driving history. Small businesses pay an average premium of $147 per month, or $1,762 annually, for commercial auto insurance.

To get a commercial auto insurance quote, you can follow these steps:

• Determine your business needs: Identify the type of work you do, the number of vehicles you have, how often they are driven, and the level of coverage you require.
• Contact insurance providers: Reach out to reputable insurance companies such as Insureon, Progressive Commercial, NEXT, GEICO, and Nationwide. You can visit their websites or give them a call to get a quote.
• Provide necessary information: Be prepared to provide details about your business, including the number and type of vehicles, their usage, and your driving history.
• Compare quotes: It is recommended to get quotes from multiple insurance providers to compare coverage options and prices.
• Customize your policy: Work with the insurance company to tailor the policy to your specific needs. You can adjust coverage limits, add endorsements, or bundle policies to optimize your protection and cost.
• Finalize the quote: Once you have found the right coverage and price, finalize the quote by providing any additional information and agreeing to the terms.

By following these steps, you can obtain a commercial auto insurance quote that suits your business needs and ensures adequate protection for your vehicles and employees.

Frequently asked questions