If you're a business owner with company vehicles, a typical car insurance policy isn't going to cut it. You need a commercial auto insurance policy to be fully protected. Here's an in-depth look at what these are, how they work, and how you can find the best companies for auto insurance.
What is commercial auto insurance?
Commercial car insurance is an auto insurance policy that covers vehicles operated by a business. It's like personal auto insurance in many ways. It helps protect other drivers from damages policyholders or their employees may cause. It can also help business owners pay for vehicle repairs, business equipment, and employees' medical care, if necessary.
How does commercial car insurance work?
Commercial car insurance works similarly to personal auto insurance. Here's how business owners can get a commercial auto insurance quote:
- Decide which insurance companies to compare quotes from.
- Call each company or use their online quote tools to answer questions about the company's vehicles and drivers.
- Choose the desired level of coverage and select a deductible.
- Purchase the policy or contact an insurance agent for next steps.
Once a business has purchased a policy, it pays monthly premiums. In the event of a claim, the company fills the insurer in on the details of the accident. The insurance company will investigate and then pay the company according to the policy terms.
Personal auto insurance vs. commercial auto insurance
The main difference between personal auto insurance and commercial vehicle insurance is how drivers use the cars. Personal insurance covers everyday vehicles drivers use for going to and from work and running errands. Commercial car insurance covers vehicles used specifically for work.
There's a gray area for rideshare and delivery drivers who use their personal vehicles to work in a freelance capacity. For a long time, insurers didn't know how to handle this. Now, several companies offer ridesharing add-ons to personal car insurance policies. Drivers who have one of these are fully covered without a commercial auto insurance policy.
What does a commercial auto policy cover?
Commercial car insurance policies cover all the same things as a personal auto insurance policy, plus some business-specific needs.
What coverage should a commercial auto policy include?
A commercial auto insurance policy should include the following coverage options:
- Bodily injury liability: State law requires this type of coverage. It pays for other drivers' injuries if a business owner or one of their employees is at fault in an accident.
- Property damage liability: Also required by law, this pays for damages to other people's property if the policyholder or an employee causes an accident.
- Uninsured and underinsured motorist coverage: Some states require drivers to have this coverage. It helps motorists pay for damages if they get hit by a driver who doesn't have adequate insurance.
- Collision coverage: Collision coverage pays to repair vehicles, even if the policyholder was at fault in an accident.
- Comprehensive coverage: This coverage pays for accidents other than crashes with another vehicle. This includes natural disasters, theft, vandalism, and animal-vehicle collisions.
There are many additional coverage options available. It's up to each business to decide what it needs and how much it can afford. A company that transports cargo will want extra coverage for that. Businesses worried about downtime after an accident may want to consider rental car reimbursement with downtime. This pays for businesses to rent a vehicle while its own car is being repaired. If it can't rent a suitable vehicle, the insurer will pay for lost income due to downtime.
Coverage options vary from one insurer to the next. Make a list of which coverage options are most important to you and look for a company that can check all your boxes.
Types of vehicles typically covered by commercial car insurance
Commercial auto insurance usually covers the following types of vehicles:
- Cars
- Pickup trucks
- Vans
- Box trucks
- Food trucks
- Service utility trucks
If you're not sure whether a policy covers your business's vehicles, reach out to the insurer to check before you buy a policy.
How much does commercial auto insurance cost?
The average car insurance cost for commercial policies is typically between $800 and $2,400 annually, often around 8% to 10% more than personal policies. But the cost varies depending on several factors including:
- The number and type of vehicles
- Desired coverage
- Company's location
- The business's claims history
Commercial auto insurance usually has higher policy limits than personal policies, which can make the cost higher. Insuring multiple drivers and vehicles also drives costs up, particularly if the drivers log a lot of hours on the road.
The only way for a business to know exactly how much a commercial auto insurance policy will cost it is to get quotes and compare them.
Do you need commercial auto insurance?
A business needs commercial auto insurance if a specialized vehicle (like a semi truck) is routinely driven as an essential part of that business. For example, companies that deliver office supplies or other items to stores need a commercial auto insurance policy because they have to drive often to operate their business. Making a quick trip to the store once every couple of months to buy office supplies probably doesn't warrant a commercial policy.
The line can get a little blurry for self-employed individuals, but the rules are the same. Small business owners using their vehicle to get to and from an office typically only need a personal auto insurance policy. If they're using their car to drive to several job sites throughout the day, that's considered business or commercial use.
Commercial auto insurance requirements by law
All states require some bodily injury and property damage liability coverage, though the minimum amounts vary from state to state. The requirements also depend on the type of vehicle and, for businesses transporting people, the seating capacity of the vehicle.
To find out how much coverage your business must have by law, check with your state's department of transportation.
How to find cheap commercial car insurance
The best way to find cheap commercial auto insurance is to shop around for quotes. All insurers weigh the components of car insurance applications a little differently. That results in different car insurance quotes. Shopping around is the only way to know which will offer your business the best rate.
Beyond that, look for discounts. Progressive commercial auto insurance, for example, gives business owners a discount for paying their premiums in full rather than paying monthly.
Choosing a higher deductible can also help business owners save. Geico commercial auto insurance gives policyholders a choice of several deductibles, so they can choose the one they're most comfortable with. Higher deductibles mean bigger out-of-pocket costs in the event of a claim, but they also reduce premium costs.
