Commercial Auto Insurance
Provides Coverage for Company Vehicles
What Is Commercial Auto Insurance?
Your company may be in need of commercial auto insurance whenever employees drive cars, trucks, or vans on-the-clock. Commercial auto insurance can benefit small business drivers, as well as companies that employ large fleets of vehicles.
When it comes to commercial driving, going without insurance is never worth the risk.
Commercial vehicle insurance will provide coverage for individual drivers in areas that a personal auto insurance policy does not cover. It’s critical to understand the distinctions between personal and commercial auto insurance when driving for business purposes.
- Commercial vehicle insurance
- Commercial truck insurance
- Truck insurance
- Fleet insurance
When used for business driving outside of a daily commute (where personal car insurance applies), commercial auto insurance may cover:
Commercial car insurance may appear similar to a personal car insurance policy at face value. However, commercial car insurance can prove beneficial by providing higher coverage and liability limits than a personal policy can offer -tailored to a specific business industry.
In layman’s terms, attempting to use a personal car insurance policy when driving on-the-job could leave you shortchanged in an accident.
A protective commercial auto insurance policy will offer extra coverage for employees that drive company vehicles. Seasonal insurance and optional coverage add-ons forhauling equipment or livestock in trailers may also be available.
Depending on the agent, commercial auto insurance is fully customizable. It can provide coverage for:
Covers another party’s injuries or death in an at-fault accident.
Covers another party’s property damage in an at-fault accident.
Covers damage to your vehicle in an accident, no matter who is at fault.
Covers damage to your vehicle outside of an accident, no matter who is at fault.
Covers you and your passengers’ medical expenses in an accident, no matter who is at fault.
Uninsured /Underinsured Motorist
Covers your bodily injury, damages, or death in an accident caused by an uninsured/ underinsured driver.
Covers borrowed or rental cars in an accident.
Covers employees that use personal vehicles for business purposes.
A basic liability commercial auto insurance policy will cover bodily injury and property damage in order to meet state minimum requirements. Other policy add-ons are available to extend commercial coverage.
For example, adding on collision and comprehensive insurance will offer full coverage commercial auto insurance to provide complete protection in any type of accident, no matter who is at fault.
Most businesses can benefit from some type of non-ownership commercial coverage, often referred to as ENOL or Employers Non-Owned Car Liability Coverage. In a commercial non-owner policy, a business’s revenue will be protected against legal judgment when an employee drives a personal vehicle for business purposes.
ENOL coverage is recommended as an affordable add-on even if employees drive personal cars for work infrequently; going without protective commercial coverage is never worth the risk.
Who Can Benefit from Commercial Auto Insurance?
As outlined above, commercial auto insurance can be advantageous if you or your employees drive any type of vehicle for work purposes. In many cases, certain vehicle types or commercial driving may be excluded from a personal policy.
If you happen to be a small business owner, your personal titled vehicle may not be covered when used for business purposes. Although you may already have a valid personal car insurance policy, a commercial auto policy will be needed to provide coverage when driving for work.
If you are having trouble finding the distinction between personal and business car use, it’s always better to be safe than sorry. When in doubt, contact your insurance agent for more information about where a personal auto insurance policy ends and a commercial policy begins.
You may need commercial auto insurance if you:
- Regularly use your personal vehicle for pickup or delivery, i.e. pizza delivery, newspaper delivery, or work supply pickup.
- Allow employees to drive your personal vehicle for work regularly or occasionally.
- Use your vehicle for a service, i.e. taxi or limousine.
- Lease or own your vehicle through a business, partnership, or corporation.
- Own a vehicle registered through or titled to a business, partnership, or corporation.
- Lease or rent your vehicle to another party.
- Own a van, pickup, or utility vehicle that exceeds 10,000 pounds or with a rated load capacity of over 2000 pounds.
- Own a vehicle with specialty equipment, i.e. snowplowing tools, racing equipment, catering equipment, or restrooms.
- Own a vehicle with business-related installations, i.e. built-in ladder racks or toolboxes.
Work-related car accidents are not to be taken lightly
Consider the chart below depicting vehicles involved in fatal crashes in California in 2010:
Although passenger cars made up the vast majority of crashes, light trucks and large trucks contributed to 37% and 6% of accidents, respectively.
If your employees regularly drive commercial vehicles, you can’t afford not to have commercial auto insurance to protect both their safety and your financial responsibility in an accident.
The US Department of Transportation confirms that trucking accidents, classified as trucks at 10,000 pounds or more, add up to half a million crashes each year in the US. 5000 of these truck accidents are fatal. Roughly one out of every eight traffic fatalities is related to a trucking accident.
- Other Drivers
Pain and suffering
Earning capacity impairment
Even with the safest drivers in your fleet, there are a number of factors that can contribute to a truck crash.
In the analysis of the Large Truck Crash Causation Study conducted by the Federal Motor Carrier Safety Administration, 58.8% of truck crashes were caused by the action of another vehicle, including loss of control
Other contributing factors to an unexpected crash involved the action of the truck driver, the action of a pedestrian or cyclist, speeding, road conditions, and vehicle failure. To provide peace of mind, it pays to expect the unexpected. Having a protective commercial auto policy in place will guard you legally and financially if an employee gets into a car accident on-the-job.
Basic liability insurance will protect the other parties and alleviate legal responsibility in an at-fault accident.
Full coverage commercial auto insurance that includes comprehensive and collision coverage will provide compensation for your vehicle repair or replacement in an at-fault accident.
The Pros and Cons
of Commercial Auto Insurance
If you fit the criteria for commercial auto insurance, it’s unwise to drive for business purposes without it. If your personal car insurance policy doesn’t cover you when driving commercially, you are technically driving without insurance. This is an irresponsible driving practice that could pose risk to you as an uninsured driver, as well as any other driver that you encounter on the road.
Provides coverage in areas where personal car insurance lapses.
Meets state minimum commercial liability requirements to drive legally.
Provides protection for employees that drive on-the-job.
Extra liability insurance is available for an added cost.
Extra comprehensive/collision coverage is available for full protection at an added cost.
Meets insurance requirements for a fleet of company vehicles.
May have policy limitations/ exclusions for high-risk businesses.
May come with a per accident dollar amount cap or limit.
May only provide partial coverage for losses in a catastrophic disaster or major lawsuit.
Claim payout may be slow if you are working with the wrong insurance company, but this applies to all insurance coverage types.
Most importantly, commercial auto insurance is necessary to meet state minimum liability insurance requirements for employees that drive on-the-job.
Commercial auto insurance can safeguard your business against a worst-case scenario on theroad, while keeping employed drivers protected.
How Much Will Commercial Auto Insurance Cost You?
The amount that you pay in commercial car insurance will depend directly on the amount of liability coverage that you take out.
If you decide to stick with a bare-bones policy that meets state minimum liability requirements, you will be quoted cheaper rates compared to a full coverage policy with collision and comprehensive insurance lumped in.
Although it may seem like a better idea to buy a cheaper commercial policy, you could end up paying more in the long run if it doesn’t offer adequate coverage in an accident.
This leads us to the question you may be itching to ask:
How much commercial liability coverage do I need to take out?
Unfortunately, there is no one-size-fits-all solution when it comes to commercial auto coverage. Your best bet is to meet one-on-one with your insurance agent to crunch numbers and determine exactly how much liability insurance is necessary to cover your bases in a major accident.
As a bottom line, DMV.org recommends a minimum of $500,000 in commercial liability coverage per vehicle operated by your business.
The good news is that commercial auto insurance isn’t likely to increase exponentially as you raise your liability coverage amount. You may be quoted a slightly higher rate for a $1 million liability policy compared to a $500,000 policy – with twice the payout.
With that being said
it is difficult, if not impossible
to estimate an exact price for commercial auto insurance since business needs can vary greatly. The cost to insure an entire fleet of trucks will be dramatically different from the cost to insure a single company vehicle.
- Type of vehicle
- Driving distance
- Driving record
- Driver’s gender
- Driver’s age
- Driving location
if you are insuring an expensive car or SUV for an employee driver, commercial auto insurance will cost much more than coverage for an older company pickup truck. Commercial auto insurance for passenger vehicles will also typically cost less than coverage for commercial trucks.
This leads us to truck class. A lighter weight truck will cost less to insure than a truck in a heavier class.
An insurance provider may use truck class categories to quote more accurate commercial rates:
- Light Truck.
Up to 10,000 pounds, i.e. pickup, flatbed, and refrigerated trucks.
- medium Truck
10,001-20,000 pounds, i.e. box and stake bed trucks.
- heavy duty Truck
20,001-45,000 pounds, i.e. farm, grain, and beverage semi trucks.
A flatbed truck used for service and repairs will cost less to insure compared to a mid-weight retail delivery vehicle, like a dry cleaning truck. A heavy-duty commercial truck that delivers beverages cross-country will cost the most to insure compared to vehicles in a lower class. You will also want to explore getting bobtail insurance for when the trailer is not attached.
If your business has enough money in the bank to spare, you can automatically lower your monthly insurance rates by opting to pay a higher deductible amount. As a word of caution, it’s important that your business is able to afford this deductible out-of-pocket in an at-fault accident. A higher deductible will lower your annual premium but is only recommended if you have the funds to pay the deductible amount upfront.
Licensed Insurance AgentBrad Larsen
- “Vehicles Involved in Fatal Crashes by Vehicle Type California.” www.bergenerlaw.com.
- “California Truck Accident Lawyers | The Reeves Law Group.” California Personal Injury Lawyers | The Reeves Law Group.
- “Truck Accident Statistics – LegalInfo.com.” Find Attorneys, Lawyers, Law Firms, Legal Resources, & Legal Information today At LegalInfo.com.
- “Large Truck Crash Causation Study (LTCCS) Analysis Series: Using LTCCS Data for Statistical Analyses of Crash Risk – Federal Motor Carrier Safety Administration.” Federal Motor Carrier Safety Administration.
- “Liability Insurance For Commercial Vehicles – Auto Insurance Guide at DMV.org: The DMV Made Simple.” DMV.org: The DMV Made Simple.