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Whether your business fleet is big or small, you’ll need to insure the vehicles that you use for business purposes with a commercial auto insurance policy.
Failing to have commercial auto insurance for your work vehicles can leave your business vulnerable to financial losses if there’s an accident.
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What Is Commercial Auto Insurance?
Commercial auto insurance is a type of car insurance specifically designed for vehicles used for business purposes. It’s a contract between you and your insurance company that outlines how your insurance company compensates you for financial losses if a business vehicle is involved in an accident or other problem covered by your policy.
Business vehicles can include company cars and commercial trucks and vans. Box trucks and food trucks are other examples of vehicles that can be covered by commercial auto insurance.
Your personal car insurance won’t pay a claim if you’re driving a car for business and get into an accident.
Here are scenarios where you need a business auto insurance policy:
- The car is solely used for work and is a company car.
- The truck or van is owned by the company.
- You conduct a business service with your vehicle.
- You haul tools or equipment in a business vehicle.
- You need high liability insurance limits.
- You transport goods or people in your car, van or truck for work.
- Your employees drive a business vehicle.
How Does Commercial Vehicle Insurance Work?
A commercial auto insurance policy works like a personal car insurance policy, but it covers your work vehicles such as delivery vans, trucks and company cars. It pays for injuries and property damage to others if you or an employee cause an accident while driving your work vehicle.
Commercial auto insurance also pays to repair or replace your work vehicle if you buy additional coverage types such as collision and comprehensive insurance.
What Does Commercial Auto Insurance Cover?
Though commercial auto insurance is similar to personal auto insurance, it differs in who’s eligible, coverage, exclusions and limits. For example, commercial auto insurance policies usually offer higher liability limits than personal auto insurance policies.
| Type of coverage | What it covers |
|---|---|
| Bodily injury liability insurance | Pays for others’ injuries that you or an employee accidentally cause and your legal costs if you’re sued over the incident. |
| Property damage liability insurance | Pays for damage to another person’s property if you or an employee cause an accident. It also pays for your legal costs if you’re sued over the incident. |
| Combined single limit (CSL) | CSL provides one overall limit for bodily injury and property damage claims against you rather than two separate limits. |
| Personal injury protection (PIP) | Pays for medical expenses and other costs (such as lost wages) for you and your passengers, no matter who caused the car accident. |
| Medical payments (MedPay) coverage | Pays for medical expenses and other costs (such as funeral fees) for you and your passengers no matter who caused the accident. MedPay does not cover lost wages and is usually sold in small amounts between $1,000 and $5,000. |
| Collision insurance | Pays to repair or replace your work vehicle after a car accident. |
| Comprehensive insurance | Pays to repair or replace your work vehicle for problems such as theft, vandalism, fire, falling objects and collisions with animals. |
| Uninsured motorist (UM) coverage | Pays for injuries to you and your passengers if you’re hit by an uninsured driver. In some states, you can also buy UM coverage that pays for damage to your vehicle from an uninsured driver. |
| Underinsured motorist (UIM) coverage | Helps cover your medical bills if you’re struck by a driver who doesn’t have enough liability coverage to pay your medical bills. |
You can also buy additional commercial auto insurance coverage types, including:
- Gap insurance. If you owe more on your loan or lease than the value of your totaled work vehicle, gap insurance helps cover the difference.
- New vehicle replacement. If your work vehicle is totaled, new vehicle replacement can help pay for a new comparable vehicle.
- Rental car reimbursem*nt. If your insured business vehicle is in the shop due to a problem covered by your policy, rental car reimbursem*nt helps pay for a rental car.
- Roadside assistance insurance. If your insured car you use for business is disabled due to a problem like a flat tire or a dead battery, roadside assistance insurance can help pay for a tow, jump start and other services.
What Isn’t Covered by Commercial Vehicle Insurance?
Commercial auto insurance doesn’t cover:
- Personal vehicles used for work.
- Rental vehicles used for work.
- Unattached tools and equipment in a commercial truck or van, but they can be covered for theft and damage under a commercial property insurance policy.
- Customer vehicles, but theft or damage to your customer’s cars due to problems like severe weather, vandalism and fire would be covered under your garagekeepers insurance.
What Kind of Vehicles Are Covered by Commercial Car Insurance?
Business vehicles covered by commercial auto insurance include:
- Box trucks
- Company cars
- Commercial trucks and van
- Food trucks
- For-hire livery
- Tow trucks
Why Do You Need Commercial Vehicle Insurance?
Not having commercial auto insurance puts you at risk of having to pay for damage and injuries involving your company vehicles.
Without the coverage, you may wind up paying medical bills and legal fees if you or an employee are injured in an accident involving a business vehicle. You will also have to pay for damages, injuries and potential lawsuits for people in other vehicles and property owners.
Commercial vehicle insurance additionally offers collision and comprehensive coverage, which helps pay to repair or replace your work vehicle for problems such as car accidents, theft, vandalism, floods, fires, severe weather and collisions with animals.
Personal car insurance won’t cover you if you’re driving a car for business and get into an accident.
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Who Is Covered By Commercial Auto Insurance?
Commercial auto insurance covers you and your licensed employees who drive a company vehicle who are listed on the policy. You should add any employee who regularly drives commercial vehicles to a commercial vehicle insurance policy.
How Much Does Commercial Auto Insurance Cost?
Commercial auto insurance costs an average of $147 per month, according to Insureon. But Insureon estimates that more than two-thirds (37%) of its small business customers pay less than $100 a month for commercial auto insurance.
Your commercial auto insurance costs will depend on factors such as:
- Business size
- Business and driving risks
- Number of employees driving insured vehicles
- Number of vehicles
- Types of vehicles
- Value of vehicles
- Claims history
- Employee driving records
- Policy deductible
- Policy coverage limits
What is Hired and Non-Owned Auto Insurance?
A commercial auto insurance policy will not cover personal vehicles or rental vehicles that you use for work. But if you rent your work vehicle or employees sometimes use their personal cars for work errands, consider “hired and non-owned auto insurance.”
This coverage pays for liability claims against your business that involve a vehicle the business doesn’t own. For example, if an employee causes a crash on the way to visit a worksite, the victims could potentially sue your business. Hired and non-owned auto insurance covers these situations.
Tips for Buying Commercial Auto Insurance
Follow this checklist if you’re in the market for commercial auto insurance:
- Get enough coverage. Make sure you have enough commercial auto insurance coverage to protect what can be taken from you in a lawsuit if there’s an accident and you’re sued. For instance, you likely want to get liability coverage beyond your state’s minimum. Nationwide recommends at least $500,000 in liability coverage per vehicle.
- Talk to an agent. Don’t hesitate to enlist the aid of an insurance agent. An agent can help you identify the right policy for your business, including specific commercial auto coverage for the type of work you do.
- Add uninsured/underinsured motorists coverage. This coverage pays for you and your passengers’ medical bills if you’re hit by someone who doesn’t have liability insurance or doesn’t carry enough liability insurance.
- Do research on the insurance company. Take time to vet the insurance company you have in mind for your commercial auto insurance. Don’t rely solely on price. You want to compare the coverages offered and check reviews for multiple companies.
What Is Commercial Auto Insurance and How Does it Work? FAQ
Who is covered to drive my commercial vehicle?
Commercial auto insurance generally covers licensed employees who have permission to drive your company’s vehicles that are listed on the policy.
Is my trailer automatically covered by commercial auto insurance?
Your trailer may be automatically covered by your commercial liability auto insurance if it is under a certain size, such as 3,000 pounds of gross vehicle weight. If your trailer is more than 3,000 pounds of gross vehicle weight, you may need to list it on your policy. The weight maximum for automatic coverage can vary by company, so make sure you talk to your agent to determine if you need to list your trailer.
If you want your trailer covered for problems like car accidents and theft, you’ll likely need to list your trailer regardless of its weight.
Are there other types of business insurance I may need?
You will need other types of small business insurance if you want coverage for problems like accidental injuries and property damage caused to others, damage to your business property and lost income due to problems like theft, fire and severe weather.
A business owners policy (BOP) is a good place to start. It contains three core coverage types that address these types of problems and more. You can also add other coverage types to your BOP, such as workers compensation insurance, which is usually required even if you have just one employee.
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