Commercial car insurance is a type of business insurance that offers coverage for vehicles that are owned and used by your business. That means that if a covered kind of damage is incurred, the insurance company will help you cover the expenses.
The basic protections offered by commercial car insurance are similar to those associated with personal auto insurance. However, there is a strong need for commercial car insurance even in cases where it isn’t legally required. It safeguards your business from liabilities, costly expenses, and lawsuits.
Let’s explore why you need commercial car insurance.
Legal requirements are a huge part of why it’s critical for businesses to purchase a commercial car insurance policy.
In most states, businesses that use vehicles for commercial purposes need to be adequately insured with the right commercial auto insurance policy. The minimum is usually to carry enough liability insurance.
Vehicular repairs and replacement costs can add up to quite a large amount. Financial loss when a car crashes or gets damaged is a concern for organizations, especially companies on the smaller end.
If anyone has been injured, resulting in medical fees, the expenses can be even more significant.
Having a good commercial car insurance policy can help provide your business with valuable financial support in case of a vehicular accident.
When an auto accident occurs, there is typically an investigation to see who is at fault. If your business is found at fault for the accident, then you might be held liable for any damages and injuries. The way liability and fault work may depend on what state your business operates in.
The average auto accident liability claim for bodily injury was $20,235 in 2020. As you can see, liability claims can be very costly for your business. Having commercial car insurance helps prevent your business from needing to pay these expenses out of pocket.
If your business wants to carry out contract work or do business with another organization, you might be required to have a certain amount of commercial car insurance.
Liability is a serious concern for many businesses, and having adequate insurance can help you meet contract requirements and open up new business opportunities for you.
The chances of an auto accident involving a car your business owns or uses are not negligible. Other unexpected events that damage your vehicles can also occur, such as vandalism or extreme weather.
Having commercial car insurance gives your business protection against unexpected events and expenses.
In some businesses, employees need to drive the vehicles for work-related, relevant tasks. This may include situations such as:
If your business’ vehicle has been involved in an accident, you can file a commercial car insurance claim seeking financial compensation to cover the costs of the damages or injuries. This may include costs for repairing the vehicle or replacing it entirely if it’s a total loss. Medical fees and treatment expenses may be covered by the claim as well.
Auto theft is a serious problem, especially in urban areas that are densely populated. If your business vehicle gets stolen, you can file a claim to cover the cost of replacing the vehicle.
If a business vehicle is vandalized, the business may file a commercial car insurance claim to cover the costs of repairing the damage.
Fire is a type of covered peril in some commercial car insurance policies. If your business vehicle gets damaged or even destroyed by a fire, a commercial car insurance claim may be able to cover your car replacement costs.
If your business practically never uses vehicles for commercial purposes, doesn’t own any vehicles, and doesn’t plan on having employees driving around, you probably don’t need commercial car insurance.
Another situation in which you might not need a commercial auto insurance policy is if your organization is considered a corporation or a limited liability company (LLC). If your employees are all shareholders or owners, you might find commercial car insurance coverage unnecessary. If personal vehicles are used in this case, each individual will be personally responsible for having their own insurance for these vehicles.
If your business is considered a sole proprietorship or partnership, you might be fine without commercial auto insurance. If the business owner(s) do not use their personal vehicles for any business purposes, commercial auto insurance might not be necessary. It could be possible that an umbrella insurance policy could cover it.
Your commercial auto insurance policy’s covered perils (AKA what situations for which you can file a claim for losses and damages) will vary depending on what insurer you choose.
The usual commercial car insurance policy is fairly similar to the standard personal car insurance policy.
This means that the typical commercial car insurance policy will likely provide coverage for liability, collisions, comprehensive damages, certain medical expenses, and uninsured/underinsured motorist coverage.
The difference is that commercial car insurance applies to vehicles that your organization leases, owns, hires, or otherwise uses.
Let’s go over what the types of coverage commercial auto insurance may offer.
If you are found at fault or need to pay legal defense fees for a bodily injury liability claim, your commercial car insurance policy might be able to cover expenses. Bodily injury claims may involve injury or death.
Another kind of liability coverage is for property damage. If you accidentally damage someone else’s property, this kind of liability coverage can really help you out. If it's someone else's business, there commercial property insurance would cover their side.
For both kinds of liability coverage, legal counsel expenses tend to be covered, but there are some exceptions your policy may detail.
No fault, personal injury, and medical payments coverage will provide you with the financial support your business needs regardless of who was at fault for an auto accident.
This kind of coverage can award you with a payout so you can afford expenses for the driver and/or passengers even if you are found at fault for a collision.
Sometimes, the other party in a car accident doesn’t have adequate insurance, if any auto insurance policy at all.
Uninsured (or underinsured) motorist coverage helps pay for injuries or damages in case the other, at-fault driver committed a hit and run or doesn’t have an insurance policy.
Fairly straightforward, collision coverage provides financial protection in case your business’ vehicle gets damaged via collision with another vehicle or object.
A covered perils policy will list what kinds of perils are covered. If you purchase a commercial auto insurance policy that offers comprehensive coverage, it will usually cover perils such as:
Vehicles driven for commercial purposes often differ from ones driven for personal use.
When buying a commercial car insurance policy, it’s important to double check whether it meets your needs. The following vehicles are usually covered:
Regardless of whether your business vehicle is owned, rented, or leased, commercial car insurance should be able to offer useful coverage.
In most states, owning vehicles requires that you also carry liability coverage.
If your business moves goods and products across state lines, it is also a federal law for you to at least carry commercial car liability insurance.
If your organization has cars licensed for commercial use, you should have commercial car insurance.
Some trucks are built much larger than other commercial vehicles. If your business owns and operates large vehicles, you might want to consider procuring a commercial truck insurance policy so that you can get your vehicles adequately covered.
After a collision, fire, or another kind of covered peril, if you are found liable, the other party or parties involved can sue you. Your insurance company, after being notified, will cover your monetary losses up to a certain amount.
The upper limit of coverage in dollar amount depends on the policy you have bought. Generally, the cheaper the policy premium, the lower the coverage limits.
After the limit has been reached, your business will be responsible for the rest of the payment needs.
Like all insurance policies, a commercial car insurance policy will have its premium vary depending on your particular situation. In this case, the insurance company will be looking at several factors related to your business.
These factors are:
Sometimes, a business needs more specialized coverage for their vehicles.
Optional coverage you might want to consider securing for your business include physical damage to hired/borrowed vehicles and lease/loan gaps.
Endorsements may also be available, which are essentially ways to personalize your business’ insurance coverage. This may include changing up your coverage limits, policy details, and more.
Notable exclusions exist for commercial car insurance policies to protect the insurer from unreasonable claims.
If your circumstance involves any of the following, your insurance claim might get denied and you would have to pay out of pocket.
If the activities undertaken by your business workers are deemed too high risk, your insurance company is likely to reject the claim.
Many cases need to be accidental in order for the insurance company to accept a claim. If a worker was intentionally seeking to hurt themselves or a business owner ordered their subordinates to commit reckless behavior, you can expect coverage to not be given.
If your business’ driver spills something such as a chemical while driving and it causes pollution, business auto insurance usually will not cover the pollutant’s resulting damages.
If there was a contest or race of some sort, coverage will usually be excluded. Even if it isn’t bodily injury and is only some property damage, racing elements will disqualify you from receiving coverage for this claim.
If there is anything combative such as a rebellion, insurrection, or warfare going on, coverage will not be given for damages to the commercial vehicle.
The limits for commercial coverage are often much higher than for personal auto coverage. You might expect your commercial auto coverage limit to be around $1 million USD.
When shopping for commercial auto insurance, it’s essential to compare quotes. Companies may pay around $150 a month for commercial auto insurance.