Choosing Commercial Auto Insurance: What You Need To Know

Commercial auto insurance is a necessity for businesses that use vehicles to carry out their operations. It covers vehicles used for business purposes, whether or not they are owned by the company. This type of insurance is separate from rideshare and personal auto insurance. It is important to note that commercial auto insurance is typically required if you are a rideshare or delivery driver.

Commercial auto insurance policies often have higher liability limits than personal auto insurance policies as they are designed to cover business-related activities, which may involve higher risks and potential losses. The cost of commercial auto insurance depends on various factors, including the type of vehicle, usage, and driving records. It is recommended to consult an insurance agent to determine the specific needs and requirements for your business.

When is commercial auto insurance necessary?

Commercial auto insurance is necessary when a vehicle is used for business purposes. This includes vehicles that are:

• Owned by a business entity
• Driven by employees, co-workers, volunteers, or clients
• Used to transport goods, people, or equipment
• Used to conduct a service
• Used to travel to multiple job sites per day
• Used for contract requirements, hired car coverage, or as a motor carrier
• Larger vehicles, such as dump trucks, cargo vans, or vehicles weighing over 15,000 pounds
• Used for food service, such as food trucks, restaurants, or ice cream vendors
• Used to transport people for a fee, such as taxis, limousines, or non-emergency medical transportation (NEMT) vehicles
• Used for ridesharing or towing services
• Required to have higher liability limits

If a vehicle is used primarily for business purposes, a commercial auto insurance policy is typically required. This is because personal auto insurance policies often do not provide sufficient coverage for business-related activities and may not cover the vehicle at all if it is owned by a business.

Additionally, certain occupations and situations may require specific commercial coverages, such as transporting hazardous materials or using a vehicle to carry specialised equipment.

It is important to note that the requirements for commercial auto insurance may vary depending on the state or country, and it is always best to consult with an independent insurance agent or specialist to determine the specific needs and requirements for your business.

Commercial vs. personal auto insurance

Commercial and personal auto insurance policies differ in several key ways. Firstly, the ownership of the vehicle is an important factor. If a business owns the vehicle, it typically needs to be insured under a commercial auto insurance policy. Personal auto insurance is usually intended for private individuals and their immediate family members.

The type of vehicle is another consideration. Commercial auto insurance often covers vehicles that are heavier or larger than a standard SUV or pickup truck, such as semi-trucks, dump trucks, or commercial trailers. These vehicles may require specialised insurance due to the increased potential for damage in an accident.

The use of the vehicle is also important. Commercial auto insurance is generally needed if the vehicle is used for business purposes, such as transporting goods, equipment, or people. Personal auto insurance typically covers commuting and personal use, but may not cover business use. However, if a vehicle is used for both personal and business purposes, a hired and non-owned auto insurance (HNOA) policy can be purchased to cover the business use of a personal vehicle.

Additionally, commercial auto insurance policies usually offer higher liability limits than personal auto insurance policies. This is because commercial policies often cover multiple drivers, vehicles, and employees with varying driving records. As a result, commercial auto insurance premiums tend to be higher, ranging from $147 to $150 per month, depending on the industry and specific needs.

Finally, the weight and type of vehicle, the required liability limits, and the number of drivers and vehicles can all influence the type of insurance needed.

How much coverage is needed?

The amount of commercial auto insurance coverage you need depends on several factors, including the value of your assets, the age and value of your vehicles, and the requirements of your state.

State Requirements

Each state has its own minimum requirements for commercial auto insurance coverage, which usually include liability insurance for property damage and injury to other drivers. Some states also require additional types of insurance, such as uninsured motorist coverage, personal injury protection, or medical payments coverage. It is important to review the specific requirements of your state to ensure you are complying with the law.

Value of Your Assets

When determining the amount of coverage you need, consider the value of your assets, including your vehicles, savings, home, business, and retirement and investment funds. If you are underinsured and are responsible for damages that exceed your coverage, you may have to pay for the remaining amount out of pocket. Therefore, it is crucial to assess your financial situation and choose a coverage limit that adequately protects your assets.

Age and Value of Your Vehicles

The age and value of your vehicles also play a role in determining the necessary coverage. Older vehicles with low cash value may not require comprehensive or collision coverage, as the cost of repairs or replacement may not be significant. On the other hand, if you have expensive or newer vehicles, full coverage, including collision and comprehensive insurance, may be advisable to protect against potential financial losses.

Usage and Driving Record

The usage of the vehicle and the driving record of the insured individuals can also impact the amount of coverage needed. If the vehicle is used frequently or for long distances, the risk of accidents increases, and higher coverage may be warranted. Additionally, a history of accidents or traffic violations may result in higher coverage requirements and premiums.

Recommended Coverage Limits

While the specific coverage limits depend on the factors mentioned above, here are some general recommendations for common types of commercial auto insurance:

• Liability car insurance: $100,000 per person for bodily injury liability, $300,000 per accident for bodily injury liability, and $100,000 for property damage.
• Uninsured/underinsured motorist coverage: $100,000 per person for bodily injury liability, $300,000 per accident for bodily injury liability, and $250,000 for property damage.
• Personal injury protection (PIP): This varies by state but typically ranges from $10,000 to $50,000.
• Comprehensive coverage: This is usually required by lenders or lessors and helps cover the cost of repairs or replacement due to non-collision incidents.
• Collision coverage: Similar to comprehensive coverage, this is often required by lenders or lessors and covers the cost of repairs or replacement due to accidents.

It is important to note that these are general recommendations, and you should assess your specific situation to determine the appropriate coverage limits for your commercial auto insurance.

How much does it cost?

The cost of commercial auto insurance varies depending on several factors. The national average monthly cost in 2023 ranged from $257 for contractor autos to $1,041 for for-hire transport trucks. However, it's important to note that the cost will be unique to each business and its specific needs. Here are some of the factors that influence the cost of commercial auto insurance:

• Vehicle Type and Value: The type and value of the vehicle being insured will impact the cost of insurance. For example, a pickup truck with additional features may cost more to insure than a standard truck.
• Level of Risk: The level of risk associated with the business and the insured vehicles will affect the cost of insurance. For instance, jobs that involve driving to job sites or driving in general tend to have higher insurance costs.
• Employee Driving Records: The driving records of employees who will be operating the insured vehicles play a significant role in determining the policy cost. Businesses with drivers who have clean driving records may benefit from lower premiums.
• Policy Deductible and Limits: Higher coverage limits will typically result in higher insurance costs. Additionally, a lower deductible, which is the amount paid before the insurance policy takes effect, will increase the overall cost of the policy.
• Number of Vehicles: The number of vehicles that need to be insured will impact the cost. Insuring a fleet of vehicles may qualify the business for fleet insurance rates, resulting in a bulk discount.
• Business Location: The state or region where the business operates can influence the cost of insurance. For example, insurance rates may be higher in areas with a higher population density or a higher risk of natural disasters.
• Usage and Mileage: The frequency of vehicle usage, the number of miles driven, and the purpose for which the vehicles are used can impact the insurance cost. Businesses that rely heavily on their vehicles for work-related activities may face higher premiums.
• Business Size: The size of the business, in terms of revenue and employee count, can also influence the cost of commercial auto insurance.

It's worth noting that businesses can take steps to reduce their commercial auto insurance costs, such as maintaining a good driving record, bundling policies, increasing their deductibles, and comparing quotes from different insurance providers.

How to buy commercial auto insurance

Commercial auto insurance is a necessity for businesses that use vehicles for work purposes, whether that's employees commuting in their own cars, or a company-owned fleet of vehicles. It's also a legal requirement for larger commercial vehicles.

Here's how to buy commercial auto insurance:

• Decide which vehicles and drivers you need to insure: You'll need details like the vehicle identification number and driver's license information to get a quote.
• Determine how much coverage you need: Insurers typically recommend carrying $1 million in liability protection. The amount of collision and comprehensive coverage you need will depend on the specifics of your business, like the size of your fleet and the age of your vehicles.
• Get multiple quotes: Comparing business insurance quotes will help you find the right coverage for the best price. You can get quotes online from providers like Progressive, Allstate, and Geico, or from online business insurance companies.
• Buy a policy: Depending on the provider, you may be able to buy the policy online, or they may connect you with an agent to finalise the purchase.

Frequently asked questions