Drivers in most states must carry liability auto insurance or at least a certain amount. It’s always been a legal practice to be able to cover the costs of any injuries you cause to other drivers or damage to their cars in an accident. This practice is also standard and expected of owners of commercial vehicles used for their businesses.
But naturally, a business-owned vehicle has some different standards and more expenses to cover in the event of an accident. That also means various insurance prices and rates –enter commercial auto insurance.
Commercial Auto Insurance Basics
Commercial auto insurance is a car insurance policy for a vehicle used for work or while on the clock. Like regular car insurance, commercial car insurance is grouped into three coverage types -liability, collision, and comprehensive.
Liability coverage of any kind is a must-have in most states. It covers property and personal damage of another driver in the event of an at-fault accident. Drivers are usually only allowed on the road with it.
Often, liability coverage goes by the name “basic coverage.” When collision and comprehensive insurance are added, the policy is considered full coverage. The same applies to commercial car insurance.
What Coverage is Included in Commercial Auto Insurance?
Collision insurance coverage is best described as a companion piece for liability coverage. Whereas liability coverage covers the expenses of damage and injury to another driver, collision coverage covers the damage and injury of the policyholder or driver at fault.
Comprehensive insurance is for circumstantial damage while the car is parked or unused. This can be due to weather or crime-related reasons. At the same time, there are also personal injury protection (PIP) policies and uninsured motorist coverage.
For simplicity’s sake, the commercial car insurance costs we’ll discuss will only be for basic coverage.
Commercial Auto Insurance Costs And Rates
When it comes to standard auto insurance, a provider will use personal information or vehicle details to gauge how much they’ll pay in insurance premiums or rates.
These include the driver’s age, car make and model, employment history, and credit score. How these factors add up is also determined by the insurance company’s home state.
Factors That Can Affect Your Commercial Car Insurance
- How much the vehicle is driven - Naturally, the more often the business or employees use the company car, the higher the risk of an accident. For example, a truck with a local route would be less expensive to insure than a truck with a statewide route.
- Where the business operates - The area or location of the business will affect commercial insurance because of crime rates and population. Rural business vehicles are typically less expensive to insure than a metropolitan business one would be.
- How much coverage the business gets - Outside of the usual liability commercial auto insurance, a business owner may decide to add personal coverage for their company vehicles. This could be any of the coverages mentioned in the last section, like comprehensive and collision.
- Type of vehicle - Commercial insurance can also be different for specific types of company vehicles. For example, a truck would be more expensive to insure than a van or pickup. A car is typically measured by its features and attachments and how costly it would be to replace. Make and model also matter.
- Vehicle use - Work vehicles can be used for employee and equipment transportation, delivery runs, and farming purposes. People and cargo transportation vehicles are typically the most expensive to insure, with farming and construction vehicles being less expensive. It all depends on the business' liability risk.
- Drivers' records - This doesn’t refer to the business owner’s driving record, but the drivers' of the company vehicles' history. Insurance providers may have guidelines for drivers operating something as big as a truck. The better the driving record they have, the lower the insurance premium will be.
Commercial Auto Insurance Average Cost
Let’s answer the question right here and now. Assuming it’s just basic coverage, the average cost for commercial auto insurance is anywhere from $50 to $200 a month for each vehicle, or about $600 to $2,400 per year.
This is also the average when the vehicle(s) in question are standard-sized cars.
How Much is Commercial Car Insurance For Each Type of Vehicle?
- Semi-Annual cost of anywhere between $8,000 to $12,500 to insure.
- Van - Annual cost of between $3,300 to $6,200 to insure.
- Limo - Annual cost of between $4,000 to $6,000 to insure.
- Cab - Annual cost of anywhere between $5,000 to $10,000 to insure.
Is There Any Way to Lower Commercial Auto Insurance Costs?
Anyone spending a significant amount always asks how much they could save or if discounts are available for commercial auto insurance.
The good news is that there are ways to get reduced rates beyond choosing a low-cost insurance provider.
Commercial Auto Insurance Rates Can be Made More Affordable With:
- Higher deductibles - The higher a policyholder’s deductible is, the lower their insurance rates will be since the two are directly proportional.
- Vehicle kept in a secure location - Insurance companies give their policyholders discounts based on the safety measures of their vehicle. Where the vehicle is stored is one such measure. Parking areas with locks or other measures can lead to lower rates.
- Drivers and employees have good driving records - A good part of any hiring process is selecting the best candidates. Doing this with company drivers and employees can lower insurance premiums if they have a good driving record with little to no traffic violations.
- Company vehicle safety features - It’s a regular practice for insurance companies to base their rates on a vehicle’s safety features like airbags, rearview cameras, or automatic brakes. The safer the car is, the lower the insurance rates will be. The same applies to commercial vehicles.
- GPS tracking - If a business owner has their vehicles fitted with GPS tracking devices. They can earn a discount on their commercial insurance. These systems are seen as theft prevention and safe driving practices.
How much commercial auto insurance is required for businesses?
At the very beginning of this post, we briefly touched on the subject of liability auto insurance. All drivers must carry a certain amount of coverage based on how much their state mandates. This includes both standard and commercial drivers.
Liability insurance is “connected,” for lack of a better word, to the vehicle itself, not the driver or the individual. So, business owners have required a certain amount of coverage for each vehicle used for work.
Many states set their requirements differently, but the commercial requirements of Illinois are $25,000 in bodily injury per person, $50,000 in bodily injury per accident, and $20,000 in property damage.
Or, as many business owners remember it, “25/50/20” for each of their vehicles. These are the minimum amounts and may not be enough to cover expenses fully in a real accident, so it’s best to carry far beyond these amounts of commercial auto insurance.
How do You Find The Most Affordable Quotes For Commercial Auto Insurance?
Business owners can buy commercial auto insurance like a normal car insurance -by shopping around and receiving multiple quotes. From there, it’s all about comparing and contrasting.
By now, you’re already aware of some factors that insurers look for, like vehicle safety features, good employee driving records, and safe vehicle storage. Now is your chance to see how local and national auto insurance providers price them by gathering quotes.
A good shopping philosophy when dealing with insurance is to compare discounts and how much a given insurance provider will take off the total quote.
Another aspect to consider is the state you choose to operate your business out of. States price their commercial auto coverage differently. A notable example is California’s commercial auto insurance, cheaper than Minnesota’s.
Commercial auto insurance is often a requirement for those who use the road for work purposes. These can be delivery services, ridesharing services, regular drives to worksites or clients (not commutes to the office), or equipment transportation for a job.
After reading this, you’re now aware of commercial auto insurance costs and what exactly determines them. Once you’ve assembled your team of drivers and company vehicles, it’s time to start shopping for the commercial auto insurance policy you cannot afford. However, it can still earn a profit while maintaining them.
