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As a small business owner, you likely have a lot of irons in the fire. Running your company calls for wearing many different hats and taking on a ton of responsibilities. One of those responsibilities may be owning and operating commercial vehicles for your business. If that scenario describes you, it’s crucial to have comprehensive coverage in place.
However, business auto insurance is different from regular car insurance you buy for personal vehicles. So make sure you know what to expect before you sign up for your next auto insurance policy.
In this article, we will discuss what you need to know about business auto insurance so that you can make an informed decision about which type is right for you.
What is Small Business Auto Insurance?
Small business auto insurance is one of the types of business insurance you should never forgo. For example, suppose your business owns and operates a vehicle or leases and operates a vehicle during business operations. In that case, a commercial car insurance policy is designed to protect you from financial losses in the event of an accident.
Moreover, commercial auto insurance can cover damage to your vehicle, damage caused by your vehicle, injuries sustained by you or another driver while operating your vehicle and more. Besides providing coverage to your own car, it can cover business-owned vehicles like fleets of cars or trucks.
In addition, this type of commercial insurance can also help when employees use their own autos for business purposes.
Why Should Small Business Owners Take Out an Auto Insurance Policy?
If you are a small business owner who is using business-owned vehicles to conduct company operations, it’s essential to make sure you have the proper insurance coverage in place.
Here are some of the main reasons you should talk to your insurance company about taking out an auto insurance policy on company-owned vehicles:
1. To protect your business: If one of your vehicles is involved in an accident, commercial auto insurance can help cover the costs of repairs, as well as any liability claims that may arise from the accident. Without this coverage, you could be forced to pay out of pocket for these expenses, putting a serious financial strain on your business.
2. To protect your employees: If you have employees who use their own vehicles for company purposes, commercial auto insurance can help protect them in the event of an accident. This coverage can help pay for medical expenses, as well as any damage that may occur to the employee’s vehicle.
3. To protect your customers: If one of your vehicles is involved in an accident while carrying customers or customer property, commercial auto insurance can help cover the costs of damages or injuries.
4. To get better rates on your insurance: Many insurance companies offer discounts to businesses that have commercial auto insurance. So, not only will you be covering your business vehicles correctly, but you could also save money on the premiums you get from your insurance company.
5. To comply with the law: Besides offering several business insurance benefits, having this type of coverage is mandatory. Most states require you to have a commercial auto policy if you own or operate a vehicle for purposes related to business. Violating these laws can result in legal fees and costly penalties, so it’s essential to make sure you are compliant.
6. To get high limits of protection: Limits on a personal auto insurance policy are usually relatively low, often not enough to fully cover the costs of an accident or costly medical bills. However, you can get much higher coverage limits with commercial auto insurance, giving you peace of mind knowing your business is well-protected.
7. It’s comprehensive: Commercial auto insurance is comprehensive and typically customizable. With just one policy, you can get a wide range of protection against liability, property damage, cargo coverage and even medical payments. This step saves you time and effort and gives you peace of mind.
What is Covered Under a Small Business Auto Insurance Policy?
Now that we’ve discussed why you need small business auto insurance let’s talk about what commercial auto insurance covers. The coverage is slightly different for individual commercial vehicles than for fleets, so we’ll go over each one separately.
Note that commercial auto coverage isn’t part of your business owner’s policy, so you will need to purchase it separately.
Individual Business Auto Insurance
Many small business owners aren’t sure what is covered by individual business auto insurance, and that’s OK. We’ll explain the basics of it in this section.
Individual commercial auto insurance covers a single vehicle used for company purposes. The types of coverage you can get in a commercial vehicle policy typically includes the following:
Collision Coverage
This type of insurance helps pay for repairs to your vehicle if it’s damaged in an accident with another vehicle or object (e.g., guardrail, mailbox, falling tree limbs).
Comprehensive
Comprehensive coverage pays for damage to your vehicle from covered perils like flood, fire, theft and vandalism.
Bodily Injury Liability
This type of liability insurance coverage helps pay for bodily injuries or fatalities resulting from a car crash where the driver is at fault. In addition, it provides for a small business owner’s legal defense in most cases.
Property Damage Liability
This type helps pay for damages to another person’s property (vehicle, home, business, etc.) that resulted from an automobile crash where the driver is at fault.
Read More: how much does business insurance cost
Combined Single Limit (CSL)
This type of policy will help provide coverage for both bodily injury and property damage within one limit. For example, if your policy has a $500,000 CSL, that’s the total amount the insurer will pay for bodily injuries and property damage resulting from a single accident.
Medical Coverage Payments
This type helps pay for medical bills and funeral expenses for you and your passengers if you’re involved in a crash, no matter who is at fault. It’s sometimes called Personal Injury Protection (PIP), Medical Payments Coverage or No-Fault insurance.
Underinsured Motorist/Uninsured Motorist
This type protects you if you’re hit by a driver who doesn’t have insurance or doesn’t have enough liability insurance to pay for accident-related expenses.
Business Fleet Insurance
Business fleet insurance is a type of policy that covers multiple company vehicles or fleets at once. It keeps your costs low and protects your assets.
Some examples of vehicles used under fleet insurance can include anything from everyday vehicles used for food delivery to semi-trucks used for shipping and hauling cargo to heavy machinery used in construction.
The types of coverage available with a business fleet policy are similar to those available with individual commercial auto coverage (comprehensive, bodily, property, CSL, PIP, bodily and uninsured/underinsured, etc.), but with some differences. They include:
- The size: Fleet insurance policies include several vehicles, usually defined as five or more registered under your business’s name. On the other hand, some insurance companies provide fleet coverage for as little as two vehicles.
- The vehicle types can vary: Vehicles covered under fleet insurance do not need to be of the same kind.
- Transferability: You don’t need to have a fixed number of drivers operating vehicles under fleet insurance. Nor do the drivers of the vehicle need to be listed in the policy to drive any of the company’s fleet vehicles.
- Shared single limits: Business fleet policies have the option to share a single limit across all vehicles, rather than having separate limits for each vehicle. In other words, it won’t matter which vehicle has an accident in a fleet of 10 vehicles with a million dollars worth of coverage since they all share the limit.
What is Not Covered by an Auto Insurance Policy?
Now that we’ve talked about what is covered under a small business auto insurance policy let’s talk about what is NOT covered.
First, it’s important to understand that there are two different types of exclusions: complete and partial. A complete exclusion means that the insurer will not cover any damages resulting from that particular peril. A partial exclusion means that the insurer will cover some, but not all, damages resulting from that particular peril.
Some of the most common exclusions found in auto insurance policies are:
Complete Exclusions
- Intentional acts: If you intentionally cause an accident (sometimes DUI), your insurer will not cover the damages.
- War and nuclear risks: If your vehicle is damaged due to war or a nuclear accident, your insurer will not cover the damages.
- Wear and tear: If your vehicle is damaged as a result of normal wear and tear, your insurer will not cover the damages. General maintenance or replacement with custom parts are not included, either.
- Medical expenses not resulting from an accident: If you or your passengers are injured, but not as a result of an auto accident, your insurance company will not cover the medical costs.
- Excluded drivers: With individual commercial coverage, if you allow someone to drive your vehicle who is not listed on your policy and they get into an accident, your insurer will not cover the damages.
- Employee injuries: If an employee is injured while operating a vehicle for business purposes, your insurer will not cover the damages. Workers’ compensation insurance typically covers worker injuries.
Partial Exclusions
- Mechanical breakdown: If your vehicle is damaged as a result of a mechanical breakdown, your insurer will only cover the damages if you have added cases of mechanical breakdown to your policy.
- Animal collisions: If you hit an animal with your vehicle, your insurer will only cover the damages if you have added animal collisions to your policy.
- Windshield damage: If your windshield is damaged, your insurer will only cover the cost of repairs or replacement if you have added glass coverage to your policy.
- Personal belongings: If your personal belongings are stolen from your vehicle, your insurer will only cover the cost of replacement if you have added personal effects coverage to your policy.
How Much Does a Commercial Auto Policy Cost?
Your commercial auto insurance cost will vary depending on a number of factors, including:
- The type and amount of coverage you need.
- The size and type of vehicles.
- The number of vehicles.
- How often people drive the vehicles.
- You and your drivers’ driving history,
- The vehicle’s business use and risks.
- The state in which you live.
- The deductible you choose and policy limits.
- The gross vehicle weight when it comes to loading vehicles like tractor-trailers and dump trucks.
As you can see, the costs vary on several factors. You can still get an idea of costs, though. The median cost you can expect to pay for a commercial auto policy of $1 million is $142 monthly or $1,704 annually, according to the insurance company, Insureon. Bear in mind that the median cost offers a more accurate estimate of what you can expect to pay for your automobile insurance than the average cost. However, Insureon also says that many small businesses spend less than $1,500 per year on their commercial automobile insurance.
How to Choose the Best Commercial Auto Insurance Coverage
If you want to avoid problems down the road, choosing the right auto insurance policy is vital. Here are a few key things you’ll want to keep in mind when choosing the best auto insurance coverage:
- Research different options available: First, educate yourself on the different types of commercial auto insurances available and get an idea of the one your industry will need.
- Determine the amount required: Make sure you have enough coverage to protect your business in the event of an accident.
- Evaluate if you need extensions or specialized policies: Specialized insurance companies can provide additional benefits like roadside assistance, named insureds coverage or rental reimbursement.
- Don’t overpay: Make sure you’re not paying for more coverage than you need.
- Choose the best insurance company: Investigate who the best commercial insurance companies are by looking at online reviews and comparing rates.
- Find an insurance agent: Locate and work with an experienced independent insurance agent who can help you find the right coverage at the best possible price.
Read More: best small business insurance companies
How to Get a Commercial Auto Insurance Policy
Once you’ve decided on the right commercial auto insurance policy for your company, you’ll need to take a few steps to get coverage in place.
Here are the steps you can expect to take:
- Gather information about your company, including the type of vehicles you’ll be insuring and how they’re used.
- Get quotes from multiple insurers to gain insight into competitive rates and coverage options. Often all this part takes is just a phone call. Make sure to compare apples to apples by getting quotes for the same amount of coverage.
- Work with an experienced independent insurance agent who can help you find the right coverage at the best possible price.
- Ask your agent about discounts. Insurance companies offer discounts in several ways for business insurance, including those offered with a full annual payment vs. paying monthly and bundled policies.
- Set up your account. Once you’ve chosen a policy, it’s as easy as logging in with just a few clicks of a button if you are paying online. First, set up an account with your insurance company by creating your user ID and password. Then, pay your premium.
- Set up recurring payments to make things easier. After that, you won’t have to worry about forgetting a premium payment whenever you’re busy. Payment information and setup are usually required for this service, so be sure you take care of that to enjoy this perk. Also, it’s good to audit your payment history to make sure what you are paying is correct, especially in the beginning.
- Audit your policy every year to ensure you’re still getting the best coverage for your needs.
Commercial Auto Insurance FAQs
Commercial auto insurance is required to operate a vehicle for business purposes in most states. Here are answers to some common questions people have about this type of auto insurance.
Does my personal auto insurance cover business use?
No, and commercial vehicle insurance only covers vehicles owned by a business. Your personal auto policy likely excludes business use. The appropriate policy for vehicles a company uses but does not own is what is known as hired and non-owned auto insurance. This type of insurance policy is not required by law.
What is the difference between business and commercial car insurance?
Small business owners must understand the distinction between commercial and business insurance. Getting the wrong kind may result in disastrous results if you have an accident and are involved in a costly lawsuit.
The main difference between the two policies is that business car insurance covers vehicles used for trips that go through routine traffic. In contrast, commercial car insurance covers specialized vehicles that are designed for specific jobs. For instance, a business car insurance policy would cover a vehicle used for making deliveries, while a commercial car insurance policy would cover a dump truck.
Is there business fleet auto insurance?
Yes, and it is available to business owners who have multiple vehicles. However, in the case of fleets, insurance companies don’t differentiate between the words “business” and “commercial” as they do with business and commercial car insurance. In other words, the two terms are often used interchangeably in the fleet auto insurance world.
Is auto insurance for businesses tax deductible?
Yes, auto insurance for companies is tax-deductible in the majority of cases. For example, this deduction applies when vehicles are used as a component of business operations. You can file your premium on your Schedule C tax form if your company is eligible.
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