Commercial Auto Insurance Basics

Auto Insurance Core Details

Commercial auto, also commonly referred to as business vehicle insurance, shares many similarities with personal auto insurance. However, there are some essential distinctions you’ll need to keep in mind if you’re in the market, which I’ll briefly cover below.

Which Coverages Do Commercial Auto Policies Offer?

According to the Insurance Information Institute (III), most personal auto policies provide some level of coverage for business-related use. However, cars, trucks, vans, and other vehicles primarily owned, hired, leased, or mainly used for business-related purposes, won’t qualify for personal coverage.

Along these same lines, commercial auto policies provide nearly all of the same coverages as a personal lines policy, including those related to physical damage, liability, and miscellaneous options like towing and rental reimbursement.

Liability & Property Damage Insurance

This portion of a commercial auto policy provides coverage for others’ injuries or property damage as a result of you or an employees’ negligence, including medical costs and lost wages. Liability also kicks in if legal action is taken against your business as a result of the accident.

Medical Payments/Personal Injury Protection (PIP)

If your or your passenger’s health insurance doesn’t cover costs related to a covered accident, this endorsement could provide some reimbursement.

Uninsured/Underinsured Motorist Coverage

If a driver damages your business’s vehicle or property with insufficient insurance—or none at all, underinsured and uninsured motorist (UM/UIM) coverage is available to help.

IHS Pro Tip: In no-fault states like Florida, Michigan, New Jersey, New York, Pennsylvania, Hawaii, Kentucky, Massachusetts, Minnesota, North Dakota, and Utah, each driver’s auto insurance pays for their insured’s respective damages.

Collision Insurance

Collision is typically one of the most expensive coverages under a commercial auto policy, which pays for damages if your vehicle strikes another car, a fixed object, or if it rolls. While collision is technically optional, if your business vehicle is leased or carries a loan, the lender will require that you have the coverage.

Comprehensive Insurance

Collision is another optional coverage that most lenders require, which pays for damages caused by accidents other than crashes. Examples include an animal strike, theft, fire, flood, vandalism, and earthquake.

Common Commercial Auto Endorsements

Following suit, you’ll encounter most of the same personal lines auto insurance endorsements under a commercial policy:

Guaranteed Asset Protection (GAP) – Whether loaned or leased, this endorsement covers the difference between the value of your vehicle and what you owe on its own at the time of loss. So, if you owed $30K, but the vehicle’s value was only $20K, this optional coverage could pick up the difference.
Replacement Cost Coverage – Instead of accounting for depreciation (i.e., actual cash value), this coverage helps pay for a new or comparable vehicle if your existing one is deemed a total loss.
Roadside Assistance – Provides emergency roadside services like changing flat tires, bringing gasoline, jumpstarting a battery, unlocking your car, etc. Keep in mind that most of these services are provided by third-party contractors and not by the insurance company itself.
Towing – Reimburses you for towing costs to the nearest repair facility if your vehicle is damaged in an accident.
Hired Auto – Covers comprehensive, collision, and other obligations for a rented or leased vehicle. Some companies also offer expanded services like minor repairs.
Rental Reimbursement – Pays for renting a replacement vehicle while yours is repaired in the shop.

There are a couple of business-specific auto endorsements you might want to consider as well, depending on your exposures, including:

Employees as Additional Insureds – Changes the definition of employees to ‘named insureds,’ thereby extending to them the policy’s liability coverage.
Fellow Employee Coverage – If one of your employees causes or contributes to another employee’s injuries, this endorsement could kick in and provide coverage.

How Much Does a Commercial Auto Policy Cost?

Every business is different, and rates can vary widely, although you might expect to pay somewhere between $1,200 and $1,700.

With this said, your premium can vary widely on either side of these numbers, depending on exposures like:

Your business’s industry
Number of employees
Number of vehicles, including each vehicle’s make, model, year, and cost new
How vehicles are used (e.g., delivering goods versus commuting to and from work)
Annual miles driven
Level of coverage, including limits, deductibles, and endorsements
Driving record and claims history for you and your employees
Insurance score

As a result, if your goal is to keep your commercial auto insurance premiums as low as possible, they recommend “avoiding accidents. Driving safety should be emphasized.”

Furthermore, they emphasize that “Drivers should not be so pressured to produce that they feel compelled to drive unsafely,” and “All vehicles should be well-maintained.”

Who Can Help You Learn More About Commercial Auto Insurance Coverage?

When you allow someone to drive one of your business’s vehicles, you’re ultimately the one who’s responsible for their actions behind the wheel. This is just one of the many reasons why it’s so important to have sufficient commercial coverage in place to prevent unintended financial consequences.

The commercial auto professionals have decades of combined experience, and we’re here to help you when you’re ready!

Need a FREE Quote or have questions regarding commercial insurance? Please fill out our quick GET A FREE QUOTE form, and an agent will get back to you at your convenience!

We look forward to speaking with you today!

Michael Steele