Do You Need Commercial Auto Insurance?

If you or an employee causes a car accident, commercial auto insurance protects you and your business assets. It also ensures continued operations while the vehicle undergoes repairs. A personal auto insurance policy doesn’t cover most business-related driving. As such, many business owners will need a commercial policy.

Keep reading to learn more about what commercial insurance covers, who needs it, and how it compares to a personal auto policy.

When do you need commercial auto insurance?

A personal auto policy may be enough if you occasionally use your vehicle for business purposes, such as running a quick errand. But if driving is a necessary part of your business, you may need commercial auto insurance.

If you use your personal vehicle for business

If you use your personal vehicle for business purposes, you may need more than a personal auto insurance policy. Some examples may include if you often use your car to drop off packages for your business, plow snow, or tow something used for a business. Commercial auto insurance offers higher limits and can cover more complex claims.

If you have a fleet of vehicles

Managing multiple vehicles carries a range of risks. Commercial insurance helps you prepare for that. In fact, you can customize your coverage for each vehicle based on the size, age, and theft and safety ratings.^[1] For example, if you run a landscaping company and have multiple types of vehicles, you can get customized coverage for each one.

If you transport goods or passengers

If you drive for a moving company, courier service, or rideshare service, you might need commercial auto insurance. It can cover your legal fees and the medical bills of others — such as your passenger or other drivers — if you cause an accident.^[2]

If you haul tools or equipment

Businesses that transport hardware or machinery usually require commercial insurance for vehicles. Your insurance policy covers liability and vehicle damages for accidents you get into. Standard business auto insurance doesn’t cover tools or equipment directly, so you may need additional coverage.

If your employees use your vehicle

Your employees may need to use a company vehicle to visit clients, travel between worksites, or pick up food for a company event. Luckily, commercial auto insurance extends liability and vehicle protection to your employees.

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What is commercial auto insurance?

Commercial auto insurance protects businesses that rely on vehicles. If you cause an accident, this insurance covers any liability expenses. It also pays for vehicle repairs or replacements so you can continue to run your business.

Auto insurance is necessary for companies of all sizes. Large corporations with a fleet of trucks and service vehicles may require higher limits and specialized coverages. Meanwhile, small-business owners who use their personal vehicles for deliveries or services may only need a basic commercial auto policy.

Drivers for rideshare or food delivery services such as Uber or Lyft can also protect themselves with a commercial policy. Many rideshare and delivery companies maintain insurance on your behalf. But you can buy separate coverage or add an endorsement to your personal policy, like rideshare coverage, for a boost.

If you need extra assistance, an insurance agent can help you customize your policy to fit your needs.

What does commercial auto insurance cover?

Commercial auto insurance covers cars, trucks (box and long-haul), trailers, and vans. Essentially, it can accommodate any type of commercial vehicle designed for public roads.

A standard commercial policy includes the following coverages:

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  Liability coverage

  If you or your employee is in an accident on the job, liability insurance covers the business’ legal fees and the affected party’s bodily injuries and property damages.

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  Collision coverage

  Collision insurance covers the repairs or replacement of company cars after colliding with another vehicle or object — such as a fence, tree, or pole — regardless of fault.

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  Comprehensive coverage

  Comprehensive insurance covers vehicle damages after a non-collision event, like theft, vandalism, or natural disaster.

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  Uninsured/underinsured motorist coverage

  Uninsured/underinsured motorist insurance covers the driver and any passengers’ medical expenses if another driver causes an accident and doesn’t have adequate insurance coverage. It may also cover property damages.

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  Personal injury protection (PIP) coverage

  PIP insurance covers the driver and any passengers’ medical bills, loss of wages, and funeral expenses from a car accident, regardless of fault.

Commercial auto combines your property damage and bodily injury liability limits. This means that a single amount applies to both types of claims. Typical limits are $500,000 or $1 million for small businesses. But the amount of coverage you should buy varies depending on your business, vehicle use, and risk.

What’s not covered by commercial auto insurance

Commercial vehicle insurance doesn’t cover everything. Here are standard exclusions and different types of optional coverages to fill the gap:^[3]

• Vehicle contents: Commercial auto insurance doesn’t cover the contents inside a vehicle, like equipment or food. Cargo or inland marine insurance can help you recoup the cost of damaged or stolen goods or company material.

• Roadside assistance: This insurance typically doesn’t cover towing, fuel delivery, and other emergency services. Roadside assistance is an optional coverage that can be a lifeline when your car breaks down.

• Rental cars: Your policy likely won’t cover a rental car if your company vehicle is out of commission. Rental car insurance reimburses you for the cost of a rental so you can continue business operations without disruption.

• New car replacement: The standard business auto insurance only provides coverage up to the depreciated value of your car. Adding a new car replacement endorsement pays for the cost of a brand-new car of similar make, model, and quality if you total yours in an accident.

• Third-party vehicles: A commercial policy excludes liability coverage for vehicles the company doesn’t own. This includes hired, rented, leased, or borrowed cars. A third-party auto policy can cover this situation.

• Employee vehicles: Commercial insurance doesn’t cover your employee’s personal vehicle. A non-owned vehicle policy provides liability when your employee uses their personal car for business purposes.

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Commercial vs. personal auto insurance

Commercial auto insurance covers vehicles you primarily use for business reasons. Personal auto covers vehicles you primarily use for personal use but can also offer some coverage for business-related driving. It’s a good idea to purchase a commercial policy if you regularly operate a vehicle for your company.

Most states require you to carry the minimum liability limits on a commercial car. Many also mandate uninsured and underinsured motorist coverage and personal injury protection coverage. A full-coverage policy includes liability, vehicle protection, comprehensive and collision, as well as other necessary coverages. But you may only need a liability policy if you can shoulder the cost of vehicle repairs and replacements after an accident.

The claims process is quite similar to personal auto insurance. After an accident, you notify your insurance company, submit proof of loss, and wait for your settlement. Commercial insurers will reimburse you up to your vehicle’s actual cash value. ACV equals the vehicle’s replacement value minus depreciation (based on age and physical condition) at the time of loss.

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