Commercial auto insurance is a coverage that is required if your business owns a vehicle or if you use your personal vehicle for business purposes. It is there to help pay for damages or medical bills if you are involved in a vehicle accident on work time or while conducting business. Read our guide to learn about the benefits and the cost of commercial auto insurance.
What Does Commercial Auto Insurance Cover?
Commercial auto insurance is a lot like your personal auto insurance. If your company owns a car, then it is required by state law that you carry auto insurance to drive on public roads.
The protections offered to you from commercial auto insurance are:
- Liability Coverage - If you are in an at-fault accident (an accident where your actions are deemed to be the cause), the policy will cover the other party’s bodily injury or property damages.
- Medical Payments - Also known as “med pay,” this can be thought of as a pool of funds to cover immediate medical bills of any party involved in an accident, even before fault is established.
- Collision Coverage - A large percentage of auto accidents cause damage to your vehicle. Collision coverage will make sure that your car or truck is restored to the condition it was in prior to the wreck. Damage due to theft, vandalism, and some weather acts also fall under this coverage. This may be an optional coverage on some policies.
- Uninsured/Underinsured Coverage (U/UI) - Nearly 13% of drivers (one out of every eight) on the road do not have an active insurance policy on their vehicle. Many more could be considered underinsured if their coverage limits are not high enough to cover damages they have caused in an accident. U/UI coverage will step in to fill the gaps in the event that you are involved in a collision with one of these people.
Like personal auto insurance, there are state minimums that need to be fulfilled by your commercial auto insurance policy. Most states have a minimum liability coverage of $25,000/$50,000 (per person/per accident), but some states require as little as $10,000/$20,000.
While buying minimum coverage may seem like a way to cut expenses, we would highly recommend much higher limits, even going with the maximum if possible. On top of your liability limits, you can add a commercial umbrella policy to maximize your financial protection.
The average cost of damages from a commercial auto accident is more than $40,000, but it can easily be much higher depending on the amount of property damage, the severity of injuries, or if there is a death. Having to pay any of these expenses out of pocket could put your business at severe economic risk. Keep in mind that even if you and your employees are safe drivers, you are sharing the road with all the other drivers as well.
How Much Does Commercial Auto Insurance Cost?
A standard commercial auto policy for a normal passenger vehicle has an average cost of about $700 to $1,400 per year. Specialty vehicles like tractor-trailers, taxis, or buses can run anywhere from $2,500 to $35,000 per year. Obviously, this huge range stems from many factors like:
- Type of vehicle
- Value of vehicle
- Number of vehicles on the policy
- Driving history of everyone on the policy
- Location, distance, and states covered while driving
Commercial Auto Insurance Vs Personal Auto Insurance
One of the most common questions about auto insurance is, “I have personal coverage on my car. Will this cover me if I am driving somewhere for work?” The problematic answer to that question is...maybe.
If you drive your personal car minimally for business (ex. driving to a meeting or picking up office supplies), then your personal auto insurance may be enough coverage for you. Some personal auto policies have an optional election that allows for some business driving in the car. You should speak with your personal insurance agent to verify this before taking any chances.
If you drive your personal car a majority of the time for business purposes, then you will definitely need commercial auto insurance. Other reasons that will instantly require you to carry commercial auto are:
- Make Deliveries- If you are in an accident while delivering goods for your business, your personal auto insurance will probably deny your claim.
- Transporting- Using your vehicle to pick up or deliver a client of the business is considered business use. Commercial auto insurance would be needed to make sure your company is protected from any liability.
- Ridesharing- Driving for services like Uber or Lyft will often cause your personal insurance company to cancel your policy and deny any claim stemming from this business use. A commercial auto policy is absolutely needed to operate a ridesharing business with your personal vehicle.
Non-Owned Auto Insurance
It is possible that even if your personal auto insurance steps in to cover your personal liability in an accident, your company may still be exposed to its share of liability from an accident in your personal vehicle.
Non-owned auto insurance is an additional coverage that protects your business assets if you or an employee is in an accident while driving a personal vehicle for work purposes. It does not, however, cover any of the personal liability.
The most common example is sending an employee out to run a work errand and then they cause an accident. Their personal insurance policy should cover their injuries and damages. Your business’s non-owned auto insurance will cover any liability that the business has in the incident.
To make matters just a little more confusing, non-owned auto insurance is actually an optional extension of your general liability insurance policy, not your commercial auto policy.
The best way to be sure that you, your company, and your employees are covered when driving for the business is to clarify with your insurance agent any and all situations that could arise.
Frequently Asked Questions
Are part-time employees and subcontractors covered by my policy?
In most cases, yes, part-time employees and subcontractors fall under the coverage offered by your professional liability insurance policy. Be sure to clarify that this is in your policy when you get a quote.
Is malpractice insurance considered professional liability?
Yes, professional liability insurance goes by many names, but it is generally the same concept across industries. Other titles may be malpractice, E&O, and professional indemnity.
Are professional liability insurance and general liability insurance the same thing?
No. General liability insurance is a “broad insurance policy” that covers risks like bodily injury and property damage.
Most businesses have a need for general liability insurance, as it lays a great foundation of protection for the company.
Learn more general liability insurance.
Is professional liability included in a business owner’s policy (BOP)?
No. A typical business owner’s policy includes general liability insurance, property insurance, and business interruption insurance. Professional liability insurance would require its own policy.