Auto Insurance Costs: What Small Businesses Need To Know

Small businesses pay an average of $147 per month or $1,762 per year for commercial auto insurance. However, the cost varies depending on factors such as the number of vehicles, their value, their business use, industry, location, and driving records. Commercial auto insurance is necessary for small businesses that own or lease vehicles for business purposes, such as transporting goods, equipment, or people. It provides liability and physical damage protection for these vehicles, which are exposed to more risk than personal vehicles.

How much does commercial auto insurance cost?

The cost of commercial auto insurance varies depending on several factors, including the nature and size of the business, the number and type of vehicles, driving records, location, and coverage needs.

According to Insureon, small businesses pay an average of $147 per month or $1,762 per year for commercial auto insurance. Progressive Commercial, the #1 commercial auto insurer in America, reports that in 2023, the national average monthly cost for commercial auto insurance ranged from $257 for contractor autos to $1,041 for for-hire transport trucks. The average monthly rate across all business types was $270.

NEXT, another insurance provider, offers commercial auto insurance starting at $12.50 per month or $150 per year for certain low-risk professions.

The cost of commercial auto insurance is influenced by the level of risk and the specific needs of the business. Businesses with more vehicles, higher-risk industries, and a history of claims can expect to pay more for their insurance.

It is important to note that commercial auto insurance is mandatory for small businesses operating vehicles, as personal auto insurance policies typically do not cover vehicles used for business purposes.

What factors influence the cost of commercial auto insurance?

The cost of commercial auto insurance is influenced by a range of factors. Here are some of the key factors that can impact the price of a policy:

• Type of Business: The industry a business operates in can affect the cost of commercial auto insurance. For example, landscapers, electricians, and delivery companies may pay higher premiums due to the nature of their work. The cost also depends on how the business vehicle is used and the annual mileage.
• Number of Vehicles: The number of vehicles a company owns, rents, or leases can impact the cost of insurance. If employees use their personal vehicles for work, this can also be a factor.
• Driving Records: The driving history of the business owner and employees can affect commercial auto insurance rates. A clean driving record may result in lower premiums, while accidents or violations can increase costs.
• Amount of Coverage: The amount of coverage needed will impact the cost. For example, specialized vehicles or trucks may require additional coverage, increasing the premium.
• Policy Limits and Deductibles: The coverage limits and deductibles chosen will affect the overall cost of the policy. Higher coverage limits typically lead to higher premiums.
• Location: The state or region where the business is located can influence the cost of commercial auto insurance. Different states may have varying requirements for coverage levels.
• Driving Experience: Inexperienced or new drivers may result in higher premiums. Conversely, mature drivers with more experience tend to have fewer accidents, leading to lower insurance costs.
• Vehicle Type: The type of vehicle(s) used for work can impact the cost of insurance. Certain vehicles may be considered higher risk and lead to higher premiums.
• Miles Driven: The number of miles driven can affect the cost of insurance. More miles driven means a higher chance of accidents, which can increase the premium.
• Fuel Prices: Lower fuel prices can lead to more vehicles on the road and an increased likelihood of accidents, potentially impacting insurance costs.
• Distracted Driving: The increasing prevalence of in-vehicle technology and distracted driving can contribute to higher insurance costs.
• Medical Costs: Rising medical costs and an increase in soft tissue surgical procedures can drive up the cost of claims, leading to higher insurance premiums.
• Legal and Litigation Trends: Aggressive attorneys and an increase in smaller claims can impact insurance costs. The involvement of attorneys in smaller claims can lead to higher premiums.
• Credit History: A good credit history can help lower insurance costs, as it indicates financial responsibility to insurers.

How does commercial auto insurance differ from personal auto insurance?

Commercial auto insurance and personal auto insurance are two distinct types of vehicle insurance, designed for different purposes and offering varying levels of coverage. While both types of insurance provide protection in the event of an accident, there are several key differences to be aware of when deciding which type of policy is right for you and your business.

Ownership and Use

One of the most significant differences between commercial and personal auto insurance is who owns the vehicle and how it is used. Commercial auto insurance is typically required when a business owns the vehicle. This type of insurance covers not only the business owner but also their employees, even when running personal errands. In contrast, personal auto insurance usually only covers the owner of the vehicle and, in some cases, one or two immediate family members.

Personal auto insurance is generally intended for personal use, including commuting to and from work. However, it is important to note that personal auto insurance policies often exclude business use. This means that if you are using your personal vehicle for any business-related activities beyond your daily commute, you may not be covered in the event of an accident.

Type of Vehicle

The type and weight of the vehicle are also factors in determining the appropriate type of insurance. Commercial auto insurance is usually required for vehicles that are heavier or larger than a standard SUV or pickup truck, such as dump trucks, semi-trucks, or commercial trailers. These types of vehicles can cause more damage in an accident and may require special insurance coverages.

Liability Limits

Commercial auto insurance policies typically offer higher liability limits than personal auto insurance policies. This is because commercial policies are designed to provide more protection in the event of an accident, as the financial stakes are much higher for businesses. Commercial policies can also cover different types of vehicles and more complex legal issues.

Cost

Due to the higher liability limits and increased coverage provided by commercial auto insurance, it tends to be more expensive than personal auto insurance. The cost of commercial auto insurance can vary depending on several factors, including the type and number of vehicles, how often they are driven, the driving records of employees, and the chosen coverage limits and deductibles.

Additional Considerations

There are some grey areas when it comes to determining whether commercial or personal auto insurance is needed. For example, realtors who use their personal vehicles to drive clients between houses may be covered by a personal auto insurance policy as long as the vehicle is classified as "Business Use". On the other hand, pizza delivery drivers, who are considered high-risk, will almost never be covered under their personal auto insurance.

In summary, the main differences between commercial and personal auto insurance lie in the ownership and use of the vehicle, the type of vehicle, the liability limits, and the associated costs. It is important to carefully consider your specific circumstances and consult with an insurance professional to determine which type of insurance policy is right for you and your business.

What does commercial auto insurance cover?

Commercial auto insurance is a type of car insurance specifically designed for vehicles used for business purposes. It covers a range of vehicles, from company cars to commercial trucks and vans, and even food trucks. It is important to note that personal auto insurance policies typically do not cover vehicles used for business, so a separate policy is necessary.

Commercial auto insurance provides protection for liability and physical damage. It helps cover the costs of injuries to others and damage to their property if you or your employee causes an accident while driving for work. It also covers legal expenses if you are sued over the incident. Additionally, it can include collision and comprehensive coverage, which pays for repairs or replacement of your vehicle in various situations, such as theft, fire, vandalism, or collisions with animals.

Bodily Injury Liability Insurance

This covers the costs of injuries to others if you or your employee accidentally cause them harm while driving for work. It also includes legal expenses if a lawsuit arises from the incident.

Property Damage Liability Insurance

If your employee or you damage another person's property while driving for work, this coverage will pay for the repairs. It also provides legal protection if you are sued over the incident.

Combined Single Limit (CSL)

CSL offers a single overall limit for both bodily injury and property damage claims, rather than separate limits for each.

Personal Injury Protection (PIP)

PIP covers medical expenses and other costs, such as lost wages, for you and your passengers, regardless of who caused the accident.

Medical Payments (MedPay) Coverage

MedPay covers medical expenses and funeral fees for you and your passengers, regardless of who was at fault in the accident. It is usually sold in smaller amounts, ranging from $1,000 to $5,000.

Collision Coverage

This coverage pays for repairs or replacement of your work vehicle if it collides with another object or is hit by another object.

Comprehensive Insurance

Comprehensive insurance covers the cost of repairing or replacing your work vehicle for issues other than accidents. This includes theft, vandalism, fire, falling objects, and collisions with animals.

Uninsured Motorist (UM) Coverage

UM coverage takes care of injuries to you and your passengers if you are hit by an uninsured driver. In some states, you can also buy UM coverage for damage to your vehicle caused by an uninsured driver.

Underinsured Motorist (UIM) Coverage

If you are struck by a driver who does not have sufficient liability insurance to cover your medical bills, UIM coverage will help with those expenses.

In addition to these basic coverages, commercial auto insurance can be customized with various endorsements, such as new vehicle replacement, hired auto physical damage, auto loan or lease coverage, towing and labor, rental reimbursement, and medical payments or personal injury protection.

How can small businesses save on commercial auto insurance?

Small businesses pay an average of $147 per month or $1,762 per year for commercial auto insurance. However, there are ways to save on these costs.

Firstly, bundling insurance policies can save money. For example, a business owner's policy (BOP) combines general liability insurance, commercial property insurance, and business interruption insurance, usually at a lower rate than purchasing each policy separately. Commercial auto insurance can also be added to a BOP.

Another way to save is to pay premiums annually rather than monthly, with some insurers offering a discount for doing so.

Businesses can also save by raising their deductible, though this means paying more out of pocket if a claim is filed.

Additionally, taking proactive steps to lower risks can reduce costs. For instance, installing fire and burglar alarms may lower commercial property insurance costs, while developing a workplace safety program can result in lower workers' compensation insurance expenses.

Shopping around and comparing quotes from multiple providers can also help businesses find the best deal.

Frequently asked questions