Business owners often overlook a critical gap in their coverage until they need it most. Commercial auto insurance protects business vehicles differently than personal auto policies. If a company vehicle gets into an auto accident or causes property damage while doing business, a personal auto policy won’t cover the claim.
In this article, we cover the essentials of commercial auto insurance. You can show this to clients who have a fleet of commercial vehicles or even a few that they use in their daily operations. Make sure they understand the intricacies of commercial auto insurance to help them manage risk and loss.
Commercial auto insurance is a type of business insurance that covers different kinds of commercial vehicles, from company cars to trucks and vans. While the policy can work like personal auto insurance, it mainly covers vehicles used for business activities. This provides physical damage and liability coverage for amounts, situations, and usage that personal auto policies don’t cover. This is why this type of coverage can also be more expensive than personal auto insurance.
Since personal auto insurance excludes certain business uses of a vehicle, this creates a potentially serious lack of coverage if a driver causes an accident while working. Commercial auto insurance typically provides higher coverage limits than personal auto policies. Under most commercial auto policies, employees who drive insured vehicles receive coverage as well.
Check out our list of some of the best commercial auto insurers in the US to find the right provider for your clients.
There are different types of businesses and at least one situation where your clients would need this type of insurance:
Any business that owns vehicles used for work needs commercial auto insurance. Every state except New Hampshire requires commercial auto insurance for business-owned vehicles. This applies whether a company uses a single vehicle or an entire fleet. Some businesses that need commercial auto insurance the most include:
Delivery drivers, couriers, trucking companies, landscapers, motor carriers, and food trucks need commercial auto coverage. These operations depend on vehicles to earn revenue, so auto liability and liability coverage are non-negotiable for operations.
Contractors, construction companies, and tradespeople must use trucks or vans to transport their tools and equipment. Apart from requiring commercial vehicle insurance, they may also need insurance for heavy equipment
Businesses in this category can include field technicians like HVAC professionals, who use vehicles to carry their equipment and visit customer locations regularly. Caterers that use vehicles for deliveries or mobile operations also need commercial auto insurance.
Personal auto insurance won’t cover business vehicle use, so commercial coverage is essential for work vehicles. If an employee causes an auto accident while driving a business vehicle, a personal policy will deny the claim entirely.
Commercial auto insurance covers various claims involving business vehicles, including:
This pays for bodily injury to others, including medical costs and lost wages. It also pays for property damage to other vehicles when the business is at fault in an accident.
This covers the driver and any passengers injured in an accident. It pays for medical treatments, rehabilitations, dental care, and funeral expenses related to accident injuries.
Collision coverage pays to repair or replace the vehicle if it collides with another object, overturns, or rolls, including single-vehicle accidents like hitting a telephone pole.
Comprehensive coverage protects vehicles from non-collision events, including fire, theft, vandalism, glass damage, and hitting an animal.
Uninsured motorist coverage pays to repair or replace the vehicle if a driver with no insurance damages it. Underinsured motorist policies cover damage to the vehicle caused by drivers without sufficient coverage. More on uninsured motorist coverage in this guide.
These include roadside assistance with towing, jump starts, minor repairs, and rental car reimbursement for transportation after an accident. There is also hired and non-owned auto insurance, which provides liability coverage for employees who use personal, rented, or leased vehicles for business purposes.
There are several important exclusions for this type of insurance that your clients should bear in mind:
If an employee is injured in a company vehicle while at work, workers’ compensation obligations, including medical expenses and lost wages are not covered by commercial auto insurance. Most states require businesses with employees to carry separate workers’ compensation insurance to handle these claims.
Pollution damage is excluded. This includes when cargo spills during an accident and contaminates property. Coverage for pollution-related liability typically requires a separate endorsement or specialized policy.
Claims from the operation of mobile equipment are not covered; these are provided by general liability policies instead.
Commercial auto insurance doesn’t cover damage to property the business owns, transports, or has in its custody or control. Transit insurance can be purchased separately to cover transported property.
Coverage excludes injury or damage from war, warlike action, insurrection, or rebellion.
While commercial auto covers bodily injury and property damage, these situations are not covered if it's found that the damage was done on purpose.
Claims alleging injury or damage from work already completed are not covered; these are typically covered under a general liability policy’s products-completed operations coverage.
Claims caused by drivers not listed on the policy may be denied, even with permission to use the vehicle.
Contractual liability is not covered unless special arrangements are made for additional coverage.
As of this writing, the average cost of this type of insurance is around $147 per month or $1,764 per year for typical small business policies. Commercial auto insurance rates typically range between $150 and $200 per month depending on business factors.
While the average cost of commercial auto insurance is typically manageable for most businesses, this can vary due to several factors, including:
When underwriting commercial auto insurance, insurance companies evaluate how vehicles will be used and what type of cargo or equipment they carry. Large trucks and trailers cost more to insure because they’re more likely to cause serious damage in accidents compared to smaller vehicles.
That's why business owners who cover vehicles used for deliveries pay higher rates than those with company sedans used for occasional client visits.
Claims history is one of the most critical factors influencing rates, although a company's driving history, coverage needs, and profession can all affect rates. Businesses with frequent or severe accidents, especially those with large claim payouts, pay higher premiums.
The insurance cost changes directly based on coverage choices. Choosing a higher deductible can lower premiums and coverage limits directly affect costs. Business owners who choose higher liability coverage limits and lower deductibles will pay more for insurance.
Where a business operates can significantly impact the cost. Population density, local crime rates, court settlements, and aggregate claims within a region all affect rates. Parking locations matter too, since vehicles in low-income, high-crime, or accident-prone areas pay more for premiums.
Newer commercial vehicles may cost less to insure than older ones because new vehicles depreciate rapidly in value.
Modern vehicles have become more expensive to insure. Vehicles made from advanced materials and use emerging technology cost more to insure and repair.
Different coverage combinations affect pricing. Policies with less coverage cost less, while comprehensive coverage, which includes liability insurance, medical expenses, and property damage protection costs more.
Insurance agents and brokers can help business owners understand how these factors specifically apply to their situation and find coverage that protects clients' businesses without unnecessary expense.
Finding the most suitable coverage for your clients' commercial vehicles is not simply a matter of choosing the cheapest commercial auto insurance on the market. Here is a step-by-step guide to finding the best coverage:
Start by gathering information about your client’s operations. Ask about vehicle types, their usage, employee driving patterns, and any existing coverage. This ensures you recommend the right coverage for their specific situation. You can also check out our guide on the different types of commercial insurance that your client may need apart from commercial auto policies.
Clients may be unaware that commercial auto insurance is more expensive than personal policies, and they may be surprised by the cost difference. Help them understand that commercial policies have higher liability limits and broader protection for business operations. Explain that the higher cost is better viewed as an investment designed to protect their business.
Get quotes from at least three insurance companies using the same coverage limits. This reveals which carrier offers the best rates.
You can speed up the car insurance comparison process with online tools. Platforms like CoverHound, NEXT, and others provide instant quotes from multiple carriers.
Offer these options to clients to reduce premiums:
Present two or three top options with side-by-side comparisons showing:
Keep records showing why you recommended each policy. This can protect both your clients and your brokerage from potential liability claims. Be sure to bookmark our Motor and Fleet news page to stay updated on commercial auto insurance.
