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Updated Jun 27, 2024

What Does Commercial Auto Insurance Cover?

If your business operates vehicles or has employees driving for business reasons, commercial auto insurance is a must.

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Written By: Nicole UrbanowiczSenior Writer & Expert on Business Operations
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If your business operates a vehicle or a fleet of cars or trucks, proper auto insurance is a critical consideration; it can save your company from devastating financial consequences. Commercial auto insurance can cover your losses, including bills and expenses, when a company-owned vehicle is involved in an accident. We’ll explain what this vital insurance policy entails; we’ll also share how to gauge suitable coverage to protect your organization from potentially severe legal and financial repercussions.

Who needs commercial auto insurance?

Any business that owns vehicles or has employees drive for work-related tasks needs commercial auto insurance. Additionally, if your business rents vehicles to conduct business or if employees use personal vehicles for work tasks, you need commercial auto insurance. These policies cover a wide range of autos, including cars, sports utility vehicles, pickup trucks — any vehicle used exclusively for business.

Commercial auto insurance can be critical to your business’s survival. An often-cited study by The Hartford found that vehicle accidents are the second-costliest insurance claims for small businesses, with an average claim of $45,000. Those costs rise significantly when trucks and fatalities are involved. Plus, according to data from the Federal Motor Carrier Safety Administration, the average cost of a large truck crash is $3.6 million per crash with a fatality and $200,000 for those with injuries. Without adequate commercial auto insurance, such incidents can devastate a business.

Bottom LineBottom line
Many types of business insurance are advisable and even required. However, commercial auto insurance is among the most critical for any company that operates vehicles in any capacity.

Types of commercial auto policies

Auto insurance policies for small businesses generally fall within three categories:

Insurers typically offer coverage in the form of stand-alone policies or insurance endorsements to existing policies.

1. Commercial auto

Commercial auto insurance applies to vehicles, such as trucks and cars, that you or your employees use exclusively for your business. It also helps pay the costs (up to coverage limits) if you or an employee damage someone else’s property or injure a pedestrian while driving.

This policy covers three types of drivers:

  • The named insured (the person who takes out the policy; they’re covered even if they weren’t directly involved in the accident)
  • Permissive users (employees or anyone else you’ve given permission to drive the covered vehicle)
  • Omnibus users (people who can be held liable for any accident or negligence committed by you or your permissive users)

2. Hired auto

Hired auto applies to cars or trucks your business leases, rents or borrows. This policy covers medical bills and third-party damage. You can also add a physical damage endorsement to cover your company vehicle.

3. Non-owned auto

Non-owned auto covers damage to another person’s vehicle, bodily injury claims that your business caused to someone else in an accident and expenses if your business gets sued for negligence. This coverage is for vehicles that your business doesn’t own but are used by employees for business tasks.

Similar to a business owner’s policy, this insurance only provides coverage for the third party, not the policy owner. As such, this insurance doesn’t cover your company’s hired or non-owned vehicles. It also doesn’t cover medical bills if an employee was injured in an accident while driving their own car or a rented vehicle — nor liability coverage when you or an employee are driving for reasons unrelated to your business.

How is commercial auto insurance different from personal auto insurance?

There are two primary differences between commercial and personal auto insurance:

  • Personal auto insurance excludes business usage. A key difference between personal and commercial auto insurance is that a personal auto insurance policy often excludes coverage for business-related use. This type of policy won’t cover any accident or other issue that arises when you or your employees are driving for your business.
  • Commercial policies account for greater risks. Commercial auto insurance often has higher risk and limits than personal auto insurance because a business vehicle may carry anything from employees to hazardous equipment. There could also be a higher impact on your small business with a lawsuit due to an accident, which is why there are often higher legal cost limits on commercial policies. Total commercial auto coverage limits can range from $500,000 to millions. Policy endorsements, or insurance riders, are also available specifically for commercial auto policies.
TipBottom line
Some of the best GPS fleet management services provide tools to monitor driver safety and various safety-related integrations that can help you keep your insurance rates down. Check out our Motive review to learn how this platform shares driver data with insurers to help lower your rates.

How much commercial auto coverage does my business need?

Commercial car insurance laws vary by state. That’s why it’s crucial to consult your state’s requirements for how much commercial liability auto insurance is required; this information includes specific bodily injury and property coverage parameters. While your exact needs may vary, Nationwide recommends at least $500,000 in liability coverage per vehicle.

If you’re leasing a company car or truck, your lending institution may require you to carry collision and comprehensive coverage; this is to pay for damages to your vehicle if you’re at fault in an accident or the victim of noncollision events (like weather events or vandalism).

Unlike general liability insurance, collision and comprehensive coverage policies typically entail commercial car insurance deductibles.

How much does commercial auto insurance cost?

Commercial car insurance costs depend on several factors, including deductibles and out-of-pocket expenses. Generally, all other factors being equal, the higher the deductible, the lower the premium.

For example, insurer Progressive says its national average monthly cost for commercial truck insurance ranges from $736 for specialty truckers to $1,125 for transport truckers. Amistad Insurance Services estimates that its commercial car insurance ranges from $600 to $2,500 for each vehicle.

Some factors that can affect your business auto insurance include the following:

  • Type of driving and vehicle (e.g., truck transporting goods or cargo vs. cars for sales calls)
  • Where and how often you drive for business (frequent short trips vs. occasional longer trips for business)
  • Vehicle make, model, year and cost when new (more expensive vehicles generally have higher premiums)
  • Gross vehicle weight, especially if it’s a truck
  • Driving records and driver demographics for all company drivers
  • Claims history (the higher the number of claims, the higher the risk and premiums)
  • The number of commercial autos being insured (the more employees driving, the higher the risk and premiums)
  • Coverage options, such as limits, deductibles and added endorsements (the higher the limits and the more riders, generally the higher the premium)
TipBottom line
To save money on business insurance, including commercial auto insurance, pay your annual premium upfront instead of monthly; you should also get quotes from several carriers to compare rates.

How to buy commercial auto insurance

When choosing business insurance, including commercial auto insurance, you can shop online or contact insurers by phone. Independent insurance brokers and agents can also help match your needs to coverage limits and ensure you comply with all legal requirements.

Before settling on your coverage, compare several insurance providers’ offerings, coverage limits and prices. Check online reviews to gauge how happy their customers are with the company’s service, support and how promptly they pay claims. This data will provide valuable insights into your chosen insurer; it will also ensure you opt for comprehensive commercial auto insurance coverage that fits your company’s risk management plan.

Kimberlee Leonard contributed to this article.

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Written By: Nicole UrbanowiczSenior Writer & Expert on Business Operations
Nicole Urbanowicz is a small business owner who studied management and finance at Harvard, where she received her master's degree. Before becoming an entrepreneur herself, she started her career writing about business and investing for Dow Jones and The Wall Street Journal, after which she became a research analyst for Allured Business Media, using business intelligence data to develop strategic guidance. Today, in addition to running her e-commerce business, Urbanowicz continues to provide financial analysis and advice and uses her certification from the New York State Department of Financial Services to consult on insurance matters.
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