What is commercial auto insurance? Commercial auto insurance is a policy that covers physical damage and liability not covered by a personal insurance policy. As Investopedia notes, business owners can purchase a commercial auto insurance policy for a variety of different vehicles, including company cars and commercial trucks.
Commercial Auto Insurance: The Basics
Commercial auto insurance typically covers larger vehicles such as work vans, service utility trucks, food trucks, and box trucks. However, a commercial policy can include standard cars and pickup trucks if a company uses them for business purposes. Commercial auto insurance, which is sometimes referred to as fleet insurance, covers usage and vehicle types that a personal policy won’t cover, so they are written and rated differently. According to Investopedia, a typical commercial policy includes the following types of coverage:
- Bodily liability coverage – This coverage pays for medical care if the other driver is injured in an accident that you’re at fault for. It also usually covers the cost of legal defense, if necessary.
- Property damage liability coverage – If your vehicle accidentally damages someone else’s vehicle, this coverage will pay for repairs.
- Combined single limit – If your policy includes a combined single limit, that means your policy will cover the same amount of costs for bodily injury as it does for property damage.
- Medical payments, no-fault, or personal injury coverage – This coverage pays for medical care for you and any passengers in your vehicle, no matter who is at fault.
- Comprehensive physical damage coverage – If your vehicle is damaged due to theft, vandalism, fire, flood, or other peril, this coverage will pay for repairs.
- Collision coverage – This coverage covers damage if your vehicle hits another object or an object hits your vehicle.
As Policygenius notes, business owners can add additional types of coverage to their commercial auto insurance policy as well. These include:
- Roadside assistance – If you need help because you’re locked out of your vehicle, have a flat tire, or your truck’s battery is dead, this coverage will cover the costs.
- New vehicle replacement cost coverage – This coverage pays for replacing a new vehicle if an accident results in total loss and provides gap coverage if you owe more money than the vehicle’s actual cash value.
- Hired auto physical damage – If you lease or rent vehicles for commercial use, this coverage will pay for necessary repairs and cover any obligations to the leasing company.
- Auto loan or lease coverage – If you still owe money on your vehicle or the vehicle is under a lease, this coverage will pay the difference between the unpaid amount and actual cash value after a total loss.
- Expanded towing – This coverage pays for towing, jump-starting the battery, and minor roadside repairs.
- Rental reimbursement – If you have to rent a vehicle after yours is damaged in an accident, this coverage will pay for it.
Personal Auto Insurance vs. Commercial Auto Insurance
The most significant difference between a personal auto insurance policy and a commercial auto insurance policy is that the personal policy covers the car you own for personal use. A commercial auto insurance company covers the car or truck you use for business purposes. Policygenius points out that self-employed drivers often use the same vehicle for personal and business purposes. If you’re self-employed and have an accident while using your vehicle for work, your personal policy won’t cover the damage. You need a separate commercial policy to cover accidents that happen when you’re on the job.
While commercial auto insurance often includes the same type of coverage as a personal policy, such as bodily injury and property damage liability, there are a few critical differences. According to Policygenius, these include:
- Liability coverage limits – Commercial auto insurance usually has higher liability limits because commercial insurance protects an entire business from liability, not just an individual.
- Tax benefits – Commercial auto insurance is a tax-deductible business expense.
- Named insured – A commercial auto insurance policy can cover specific employees or provide blanket coverage for every employee.
- Extra coverage – Many commercial auto insurance policies cover equipment, such as trailers and forklifts.
Do You Need Commercial Auto Insurance?
If you’re trying to decide if you need a commercial auto insurance policy, Investopedia suggests that you consider the following factors:
- Ownership – Every vehicle owned by a company requires commercial auto insurance coverage. If an employee owns a vehicle that they also use for work, it’s a good idea for the company to include that vehicle in the commercial policy. Self-employed drivers should consider purchasing a commercial auto insurance policy on top of their personal policy if they use their personal vehicle to do their job.
- Use of vehicle – Insurance companies classify commuting to work as personal use, so if you’re in an accident while commuting, you’ll be covered by your personal policy. However, if you use your personal vehicle to transport people or equipment for commercial purposes, you should have a commercial auto insurance policy.
- Vehicle make and model – If your personal vehicle’s gross weight is more than 10,000 pounds, you’re required to get commercial auto insurance coverage regardless of how you intend to use it. Personal policies also don’t cover vehicles with a load capacity of more than 2,000 pounds. Your insurance company may also require you to get a commercial policy if you’ve made any modifications to your vehicle, such as adding a ladder rack.
The typical commercial auto insurance policy costs between $1000 and $2000 a year ($80 to $160 a month). Commercial policies cost more than personal policies because they carry higher liability limits, and they usually cover multiple employees and vehicles. Other factors that can impact the cost of a commercial auto insurance policy include location, employee driver records, and types of vehicles your company uses. If you’re insuring large cargo vehicles or a food truck, you can expect to pay more than someone insuring a fleet of small passenger vehicles.
Check this out if you need additional information, resources, or guidance on car insurance.
This content is created and maintained by a third party, and imported onto this page to help users provide their email addresses. You may be able to find more information about this and similar content at piano.io