Commercial Auto Insurance 101: All You Need to Know

A commercial auto insurance policy is a type of business insurance that covers vehicles used for business purposes. The policy covers both business-owned and leased vehicles, as well as the occupants of such vehicles at the time of a covered accident. Therefore, your commercial auto insurance provides essential financial protection to you and your employees while driving company-owned vehicles. It can also protect you if you’re using personal vehicles for business purposes. It is important to note that personal vehicle insurance policies may not cover certain vehicle types and business usage. This is because personal auto policies are not meant for businesses, and therefore, they are rated and underwritten differently. Importantly, businesses often need certain coverage options that are only provided by commercial auto insurance policies.

How Does Commercial Auto Insurance Work?

Commercial auto insurance protects vehicles used for business purposes as well as those who drive them. If you accidentally cause injuries or damage others’ property while driving a covered business vehicle, those harmed could file a claim or sue you. In this case, your liability insurance coverage will kick in and compensate for the damage up to your commercial auto coverage limit. Your liability insurance can also pay for your legal defense expenses if you’re sued due to an accident.

What Is Covered?

Commercial auto insurance combines the policies offered by personal auto insurance with policies specially tailored for businesses. Common commercial auto insurance policies include:

  • Liability Insurance – Bodily injury liability coverage covers bodily injury to others, whereas property damage coverage covers damage to other people’s property resulting from an accident caused by either you or your employees. Bodily injury coverage pays others’ medical expenses and lost wages as well as your legal costs if you’re sued because of an accident.
  • Collision Insurance – Compensates for accident-related damage to covered vehicles, regardless of who is responsible for the accident. This coverage may be required for leased or financed vehicles.
  • Comprehensive Insurance – Pays for damage to covered vehicles resulting from non-collision causes like fire, vandalism, theft, or weather.
  • Uninsured Motorist Coverage – Covers property damage and injuries if an insured vehicle is in an accident and the at-fault driver is uninsured. In some states, it covers hit and run cases.
  • Underinsured Motorist Coverage – Compensates you if your business vehicle is damaged in an accident and the at-fault driver’s liability insurance isn’t sufficient to pay for the damage.
  • Medical Payments Coverage/ Personal Injury Protection Coverage – This coverage pays for medical expenses or funeral costs of the insured vehicle’s occupants if they are injured in an auto accident, regardless of who is at fault.

These policies cover any vehicle you use for business purposes, including your personal vehicle. Take note that commercial auto insurance requirements vary across state borders.  Therefore, if your business vehicle is garaged or used out of state, you should talk to your insurance agent to ensure they comply with the different auto coverage requirements across state lines. Beyond the basic coverage options, you can customize your policy and can include the following endorsements:

  • Rental Reimbursement – This policy covers the cost of leasing a vehicle while the insured vehicle is being repaired after an accident.
  • Roadside Assistance – Covers issues typically not covered by commercial auto policies, such as flat tires, dead batteries, and towing.
  • New Vehicle Replacement Coverage – Covers the cost of buying a new car if a covered vehicle is totaled in an accident.
  • Auto Lease or Loan Coverage – Pays the loan or lease if a vehicle that’s leased or bought on loan is totaled in an accident.
  • Hired Auto Physical Damage Coverage – Provides collision and comprehensive coverage for rented or leased vehicles and covers other contractual obligations.

Who Needs Commercial Auto Insurance?

If you use vehicles for business, whether they are your own, leased, or rented, you should carry at least carry minimum liability insurance.  Most states have minimum liability coverage requirements. Moreover, if your business entails moving people or goods across state lines, you’re required by federal law to carry liability insurance.

You need commercial vehicle insurance for autos that:

  • Are used by you or your employees for business
  • Have a commercial license tag or plate
  • Are registered

You should also get commercial auto if you and your employees use personal vehicles for businesses purposes such as:

  • Picking or dropping clients at the airport
  • Visiting clients
  • Taking products to a shipper
  • Work-related shopping

Importantly, you may be required to carry additional coverage if you use business vehicles for particular functions, including:

  • Transporting hazardous or flammable materials
  • Providing transport services, like limo or taxi services
  • Delivering publications, products, or food
  • Carrying equipment
  • Moving freight and trucking
  • Towing services

Does Commercial Auto Insurance Cover Personal Use?

Commercial auto insurance generally covers you when you’re using your vehicle for non-commercial purposes. However, a commercial policy may not provide certain coverages to your family members. To determine if you need extra coverage for your family members, talk to your insurer.

How Much Does a Policy Cost?

The cost of commercial insurance depends on several factors, including:

  • The size and operations of a business
  • The type and number of vehicles insured
  • Cost of the insured vehicles
  • Amount of coverage
  • Driving and business risks

An independent insurance agent can help you find a policy that suits your needs and budget.

Are Premiums Tax-deductible?

In some cases, premiums for commercial vehicle insurance are tax-deductible. Consult a tax expert to ascertain the same.

How to Purchase Commercial Auto Insurance

At the Reardon Agency, we can help you find a commercial auto insurance policy that suits your budget and needs. Our team of experts will assess your business’s insurance needs and help you find a suitable and cost-effective insurance policy. We can also help you navigate the claims process if an incident occurs. Contact us today to get started.

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