Do I Need Commercial Auto Insurance?
Operating a business can be a stressful but rewarding experience. You have a lot to be responsible for when leaving your mark on the marketplace. It is no simple feat, especially if you choose an industry that requires driving. Many companies out there rely on vehicles to conduct their business. This can be anything from construction to catering. Whatever industry you find yourself in, if you are using a vehicle at any point, you will want to consider commercial auto insurance.
Commercial auto insurance covers you in the event of a car accident while you are conducting business. While this all seems pretty self-explanatory, you may still be unsure if you and your business specifically need it. Maybe you do not use a vehicle regularly or believe your personal insurance is enough (hint: it’s not). This piece will serve as your guide in deciding if you need commercial auto insurance when you should purchase a policy, and how much it will cost.
What is Commercial Auto Insurance?
Commercial auto insurance offers coverage for you and your employees when either of you is driving a company-owned vehicle. Vehicles of these types may range. Perhaps you are a catering business and rely on your company van, or maybe you make housecalls using your business’s car. Whatever the reason, any vehicles purchased with the intention of being used for your company should have commercial auto insurance in order to offer you protection while on the road.
Who Needs Commercial Auto Insurance?
In most of the United States, you are required to carry a state-mandated minimum in standard auto insurance coverage. Without it, you can be facing some serious penalties like hefty fines and jail time. But what kind of policy you buy relates to what your vehicle is used for. If you are going to be conducting business with your vehicle(s), you will most likely want commercial auto insurance.
You should consider a commercial auto insurance policy if you do any of the following:
- Let your employees operate the vehicle for business purposes
- The car is leased, rented, or owned in the name of your company
- Your vehicle is used predominantly for work
There may be other instances not mentioned, so as a general rule of thumb, if this automobile should be used for more than just driving to and from work, you should consider a commercial auto insurance policy. Even if the vehicle title is not explicitly in the company’s name, but you use it for conducting business, you will want to look into policies. It never hurts to be prepared.
When Do You Need Commercial Auto Insurance?
You should purchase a commercial auto insurance policy the moment you begin using a vehicle to conduct business. You should also consider it when your employees begin to drive for the sake of their job.
If you own or rent a vehicle and use it for any of the following purposes, you should buy a commercial auto insurance plan:
- Transporting equipment
- Transporting materials, flammable and hazardous, for your business
- Construction jobs, including carrying cranes or plows
- Operating as a tow truck
- Catering (this includes pizza delivery)
- Delivering newspapers
- Operating a limousine or taxi service
If you are still unsure, ask yourself how often you use your vehicle for your business, excluding driving to and from work. If you find yourself saying yes, you need a commercial insurance policy for your vehicle. Even if you are on the fence or do not use a vehicle every day for work, it would still be in your best interest to have some level of insurance coverage. The road can be a dangerous, unpredictable place. The last thing you or your business wants is to shell out thousands of dollars after an accident. It’s never worth the risk.
How Does Commercial Auto Insurance Work?
Commercial auto insurance is offered by insurance companies in order to help you cover the cost of an accident should you end up in one while operating your business. The coverage it provides can vary, but a standard plan mainly includes liability insurance. This means any damage you cause to someone else or their property will be covered. Add-ons for specific incidents like mishaps while unloading may be tacted on. A typical commercial auto insurance policy consists of four main parts:
- Premiums - This is how much you will be paying monthly (or sometimes annually) for insurance. Costs can vary greatly depending on you, your employees, and your industry. This will be explored further.
- Deductibles - Deductibles refer to how much you promise to pay out of pocket in the event of an accident. If you have a deductible of $500 and make a claim for $1,000, your insurance company will pay $500. The higher your deductibles, the lower your premiums will be.
- Coverages - Coverages are the outlined circumstances your insurance company will cover you for after an accident. This can include things like medical payments and repair bills.
- Policy Limit - This is the highest amount your insurance company will pay in order to assist you. For example, if you have a policy limit of $100,000 and your damage is $150,000, you could be on the hook for that remaining $50,000.
What Does Commercial Vehicle Insurance Cover?
Commercial auto insurance covers a variety of situations and incidents you can encounter while operating a business-owned vehicle. Some of these are part of your standard plan, while others may be added on. The coverage limit for each can vary. Outlined below is what can be covered under your commercial auto insurance policy:
- Property Damage Liability - Any damage you cause to someone else’s property during an accident will be covered by your insurance up to a certain amount.
- Bodily Injury - If you are in an accident with another car, bodily injury liability will pay for injuries the other person sustains from the incident.
- Personal Injury - Personal injury will help cover expenses after you or an employee are injured within the car at the time of the accident. This can include covering lost wages if you or your employee cannot work.
- Non-Owner Auto Coverage - If your business is booming and you need to rent a vehicle to make deliveries, non-owner auto coverage will protect you while you are driving a car that is not under your business.
- Collision Coverage - Covers the cost of a collision regardless of who was at fault.
- Comprehensive Coverage - This part of your plan will pay for any damage to your vehicle that happens when it is not moving or in storage. This could include a tree branch scraping the side of it.
- Uninsured/Underinsured Coverage - If you happen to get into a collision with an uninsured or underinsured driver, this part of your policy will come in to assist you when the other driver cannot pay.
How Much Does Commercial Auto Insurance Cost?
Like any other type of insurance, the price for commercial auto insurance varies. A number of factors go into determining your premiums. Insurance companies will consider the size of your business, what kind of vehicle(s) you are trying to insure, driving record(s), and the amount of coverage you want.
The average cost to insure a standard business vehicle can be anywhere from $600-$2000 per year and beyond, depending on you and your business. A delivery van costs more to insure than a standard car, ranging from an estimated $3000-$6000 per year for coverage. Costs only increase when you are looking to insure a limousine or taxi. But remember, these are just estimations, and actual rates depend on the various factors outlined previously. You may see higher or lower depending on what you bring to the table. It may not be very cheap to insure a business vehicle, but it will be very worth it.
Shopping For Commercial Auto Insurance Policies
The best place to start looking for a commercial auto insurance policy is through the insurance company you currently have personal insurance under. They typically will have plans relating to commercial vehicles and properties. Begin by pulling a quote from their website and analyzing their available plans. It may also be helpful to shop around. Try pulling quotes from local and national insurance companies to get an idea of what is on the market.
You could also enlist the help of an insurance agent or broker. Someone in the industry should have extensive knowledge of insurance policies. The only way they differ is that an insurance agent usually has the best interest of the company they work for in mind. A broker works to pull quotes and plans from a variety of companies. Either way, they can be very beneficial during your hunt for insurance.
Commercial Auto Insurance Coverage And Personal Use
If you use a company-owned vehicle for personal use, it will be covered under your commercial auto insurance policy. However, this does not go the other way. If you choose to use a personal vehicle in order to conduct business, you will have to make sure your personal auto insurance has reliable coverage. Just because you make deliveries in your personal car does not mean your insurance will recognize it under commercial auto insurance. The best way to think about it is whatever the vehicle is intended for is what insurance it will be covered under. If it is a company vehicle, it will need commercial auto insurance. If you are using your own vehicle, your personal auto insurance coverage will need to be sufficient. When hesitant, it is best to inquire about such insurance policies before taking the risk of driving uninsured.