Who needs commercial auto insurance?

Imagine Larry, the owner of a small landscaping service, has four people working on his crew. They pick up supplies, deliver them to project sites, and haul all their equipment in a trailer pulled by Larry’s personal truck. Larry usually drives the truck himself, but sometimes he sends one of his employees out to run errands while he stays and works on the job.

As a small business owner, when Larry started using his personal truck for work, he understandably worried about what an auto accident would do to his landscaping company in terms of damage to his vehicle or injury to his crew. He also knew that if he or any of his employees were held liable for an accident, that liability could undermine everything he’s worked so hard for.

In this scenario, commercial auto insurance is what Larry needs to safeguard his greatest assets.

What about your small business? Do you or your team regularly need to transport yourselves, your goods, or your services in the normal course of business? You might need to consider commercial auto coverage.

Read on to learn what a commercial auto policy looks like, and what’s covered under its terms.

What is commercial auto insurance?

Commercial auto insurance is a type of business insurance that covers any cars, trucks, vans, or other vehicles used for conducting business.

This insurance provides additional coverage for situations and use cases that personal auto insurance policies don’t cover, such as when someone other than the vehicle owner drives said vehicle.

Liability damages

Do you own, lease, hire, or use vehicles for any business purposes? It’s recommended that you at least carry commercial liability insurance.

Liability insurance covers bodily injury to other parties involved in the accident, as well as property damage to any other vehicles if you or your employees are found to be at fault.

The bodily injury portion of the policy pays the injured parties’ medical expenses and lost wages, as well as your legal expenses should you find yourself in a lawsuit as a result of the accident.

However, a liability policy alone won’t protect you if you’re the victim of someone else’s mistakes or carelessness. And it won’t cover your own bodily injuries or property damage if you’re at fault, so it’s the absolute minimum coverage you should get.

Collision

A collision is likely the first thing you’ll think of when considering the need for auto insurance.

Commercial collision insurance pays for damage to your business vehicles, regardless of fault. It also pays if you hit another vehicle, if another vehicle or object hits you, or your vehicle rolls over for any reason.

In terms of frequency, collision claims are the most common, averaging 5.8 claims per 100 car years.

Comprehensive physical damage

Comprehensive physical damage refers to vehicular damage due to causes other than a collision. For instance, your automobile might fall victim to:

  • Theft
  • Flood
  • Vandalism
  • Earthquakes
  • Fire
  • Animal damage (rabbits and other rodents, for instance, can chew on car wires) 

A comprehensive commercial auto insurance policy should cover all such cases.

Medical expenses

Unfortunately, in the event of an accident, vehicles aren’t the only things that can be damaged or injured.

Your employees are your greatest asset and their health and wellbeing are important. After all, vehicles can be repaired or replaced far more easily than people. For that reason, make sure you have a commercial auto policy that covers medical expenses including:

  • Imaging (x-rays, MRIs, CT scans, etc.)
  • Any needed outpatient or inpatient care
  • Physical or occupational therapy if necessary

Uninsured or underinsured motorists

When an accident occurs, the person at fault (or rather, their insurance carrier) typically is responsible for paying for all damages. 

Although all but two states require drivers to carry car insurance, it unfortunately doesn’t mean all drivers do. In the event your commercial vehicle is struck by an uninsured or underinsured motorist, a full commercial auto policy will cover you. Your carrier will step in where negligent parties fall short and cover the bases.

Options and extras

Most commercial auto insurance policies provide coverage in the areas mentioned above: 1) liability damages, 2) collision damages, 3) comprehensive physical damages, 4) medical expenses, and 5) uninsured or underinsured motorists.

However, some carriers also allow you to customize your commercial auto policy with coverages such as:

  • Roadside assistance: Assists with situations like being locked out of your car, dead batteries, and flat tires

  • New vehicle replacement cost: Replaces a new car in the event that it becomes “totaled”

  • Hired auto physical damage: Covers comprehensive and collision damage for a leased or rented vehicle

  • Auto loan or lease: Covers the difference between what you owe on a loan or lease and the actual cash value of a totaled vehicle

  • Expanded towing: Towing coverage beyond what your standard commercial auto policy covers

  • Rental reimbursement: Pays for a rental car so you still have transportation and can carry on with business after an accident

Do you really need commercial auto insurance?

You might not think you need a commercial auto insurance policy if you’re not in a field that uses commercial fleets. However, many common business activities—from simply driving to meet clients to driving to locations for on-site work—constitutes commercial use of a vehicle.

A few instances when you need commercial auto insurance include:

  • When your business owns or leases the vehicles
  • When your vehicles have a commercial license plate, registration, or tag
  • When your vehicles are an essential part of your business operations, such as a taxi or delivery truck

Don't let a fender bender be a business ender

Operating a vehicle for your business comes with risks. Even the safest driver can find themselves in circumstances out of their control, and no one wants to be stuck paying the cost of repairs out of their own pocket.

Luckily, commercial auto insurance can help you – just like it did for Larry and his landscaping service – avoid expensive repairs and keep the business running smoothly.

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