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Everything You Need to Know About Commercial Auto Insurance



Commercial auto insurance is an essential policy that businesses operating a fleet of vehicles should have. According to data, there's increased uptake of this coverage, with the industry reporting growth at a CAGR of 4.1% over the past five years.


Commercial auto insurance helps cover your trucks, cars, and vans used in conducting business from physical damage and liability. It offers extended coverage you cannot get for your work vehicles if you use personal auto insurance.


Here's what you need to know about commercial auto insurance and the coverage you should expect from the policy.


What is Commercial Auto Insurance?

Commercial auto insurance is a form of auto insurance designed for vehicles used specifically for business purposes. It acts as a contract between you and the insurance company that outlines how the insurer will compensate you for financial losses incurred by the business vehicle getting involved in an accident or any other issue covered by the policy.


Business vehicles covered by commercial auto insurance include commercial trucks, company cars, and vans. Food and box trucks are other examples of vehicles covered by this policy.


How Does Commercial Auto Insurance Work?

Commercial auto insurance covers business vehicles and the people who drive them. If you or your business vehicle's driver causes an accident that leads to property damage or physical injury of a third party, the party can bring a lawsuit against the driver or you and file a claim on your commercial auto insurance policy.


Your policy will cover the cost of paying for the damages up to the policy's limit. Any costs above the limit will be deferred to your business. For accident-related lawsuits, your policy will cover the cost of defending you or the driver of your business vehicle, separate from the policy limit.


What Does Commercial Auto Insurance Cover?

Typically, you'll need commercial auto insurance if you have a vehicle that fits the following:

  • It's used solely for work or as a company car

  • The company owns it

  • It hauls tools and equipment for the company

  • It's used to conduct business services

  • It transports goods or people

  • Employees drive it

Business auto insurance offers coverage for various incidences. Typically, it has higher limits than personal auto insurance, with broader eligibility and coverage.

Here's what commercial auto insurance will cover.


Collision Insurance

Collision insurance pays for damages to your vehicle if you hit another car, another vehicle hits you, or your vehicle rolls over. You get coverage regardless of who is at fault.


Collision coverage may be necessary for operating a leased or financed vehicle.


Comprehensive Insurance

Comprehensive coverage pays for damages caused to your vehicle by anything other than an accident. These include flood, theft, earthquakes, vandalism, fire, or damage from an animal or bird.


Uninsured Motorist Coverage

If an uninsured driver hits you, this cover pays for injury or property damage. This coverage may also apply in some states if the driver that hit you is unidentified.


Liability Insurance

Liability insurance covers property damage to another vehicle and bodily injury to others where you're at fault. The cover helps pay for lost wages, medical expenses, and legal expenses for the accident if the other party decides to file a lawsuit.


Underinsured Motorist Coverage

This coverage protects you if the driver at fault in the accident has inadequate liability insurance to cover the damages and bills. This cover doesn't apply in a no-fault state where each driver's auto insurance is responsible for their losses.


Options and Add-Ons

Most business auto insurance policies come with the following optional add-ons.


New Vehicle Replacement Cost Coverage

In case of a total loss, this option replaces your new vehicle involved in the accident with a comparable or new one. It also provides gap coverage for any amount you owe above the car's actual cash value.


Roadside Assistance

This option provides coverage for issues outside your policy's coverage. These include being locked out of the car, flat tires, and dead batteries.


Auto Loan or Lease Coverage

This option covers the difference between the vehicle's actual cash value and the unpaid lease or loan amount if your car becomes a total loss after an accident.


Medical Payments or Personal Injury Protection Coverage

This option pays for medical expenses if your or your passenger's health insurance cannot cover the costs.


Is Commercial Auto Insurance Necessary?

If you own, hire, lease, or use vehicles for business purposes, you should at least carry liability coverage. In most states, your business must own liability coverage for its owned autos. Also, if your business moves goods and people across state lines, federal law mandates that you have at least liability coverage.


You may also need to purchase a commercial truck insurance policy if you operate larger commercial vehicles. Otherwise, you'll need commercial auto insurance if you run a vehicle that:

  • You use for business

  • Is registered as commercial

  • Carries a commercial tag or license plate

Depending on state or federal law, you may be required to purchase additional coverage if your vehicle is used to do unique business tasks such as:

  • Delivering food, publications, or products

  • Transporting hazardous or flammable material

  • Providing taxi, chauffeur, or limo services

  • Towing vehicles

  • Carrying equipment

  • Trucking and moving freight

Exclusions of Commercial Auto Insurance

While commercial auto insurance can offer your business vehicles broad coverage, some specific activities and scenarios are not covered. Here're a few exclusions from the policy.


Racing

Commercial auto insurance doesn't cover costs related to vehicle racing.


Worker Injuries Covered by Worker's Compensation Insurance

Commercial auto insurance doesn't cover worker injuries that worker's compensation insurance should cover. This applies even if the business doesn't have an active worker's compensation insurance policy.


Intended or Expected Injuries or Property Damage

Commercial auto insurance will not cover any related costs if you or an authorized driver causes intentional bodily injury or property damage. This also applies if you or the authorized driver expected your actions to cause the damage or bodily injury experienced.


Hired and Non-Owned Vehicles

Business auto insurance only covers vehicles you add or "schedule" to the policy. Therefore, cars you hire, rent, or borrow are not covered since they're not listed on the policy. You can add coverage for this class of business vehicles in a general liability policy or business owner's policy (BOP).


Business auto insurance can provide coverage for temporary rental vehicles if your listed vehicle is under service or repair or has suffered a total loss.


Have an Expert Help You Determine Your Insurance Needs

Commercial auto insurance is essential to protect your business from the high financial costs of paying for lawsuits, property damage, and injury after an accident. Contact an expert and learn the coverage your business needs.

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