By Rakesh Gupta
Commercial auto insurance provides important financial protection to businesses that own or lease vehicles used for work purposes. Personal auto insurance does not always cover those vehicles.
That means if an employee is involved in an incident in a company vehicle that is not covered by commercial auto, the business can be left with a large financial burden, especially if the other party sues the business. And, unfortunately, the cost of one lawsuit can be enough to put an uninsured or underinsured small business out of business.
What kinds of vehicles can be insured? What’s covered by commercial auto insurance? What does commercial auto insurance cost? Am I required to have commercial auto? Read on for answers to these and other important commercial auto insurance questions.
Coverage for a Wide Range of Vehicle Types
You might expect that commercial auto insurance covers things like cars, pickup trucks, and delivery vans. But those are just the beginning of a long list of vehicle types that can be insured, including:
- Limousines
- Buses
- Food trucks
- Passenger vans
- Motorhomes
- Truck tractors
- Motorcycles
- Tow trucks
- Box trucks
- Flatbed trucks
- Dump trucks
Commercial auto can also cover non-motorized vehicles such as dry van trailers and refrigerated trailers.
Financial Protection From Liability and Damage
When operating business vehicles, there are two main areas of financial risk: being sued by another party following an accident and the cost of repairing the company’s damaged vehicle. Commercial auto insurance can protect a business from both.
A typical commercial auto policy includes:
Bodily injury liability coverage
This aspect of commercial auto coverage provides payment when a pedestrian, driver or passenger of another vehicle, or paying passenger in your vehicle is injured or killed in an accident for which an authorized driver is at fault while operating a company vehicle. This typically includes paying for legal defense expenses depending on the type of policy purchased.
Property damage liability coverage
This coverage is for liability related to damage to another party’s vehicle or property. Here again, policies typically pay for legal defense expenses.
Medical payments, no-fault, or personal injury coverage
This part of a commercial auto policy pays for medical expenses for employees or passengers traveling in a company vehicle, regardless of who is at fault in an accident.
Uninsured motorist coverage
This coverage pays for medical expenses, or in some cases property damage, caused by a hit-and-run driver or an uninsured driver. Underinsured motorist coverage (when the at-fault driver has insurance but not enough to cover the damage) may also be included depending on the type of policy and state.
Comprehensive physical damage coverage
This pays for damage caused by something other than a car accident. Examples include damage from theft, vandalism, flood, fire, and other hazards.
Collision coverage
This is coverage for company vehicles or trailers for damage caused by a collision with another vehicle or a single-car accident.
Every Business With Company-Owned Vehicles Needs Commercial Auto Insurance
The question often is asked, “Does my business need commercial auto? We really don’t use our company-owned or leased vehicles much.” Yes, you do need coverage, whether it is mandated by your state or not. If you choose not to cover a vehicle, you risk your company being put out of business by an unbearable financial burden from a lawsuit..
The reality is that every time a company vehicle is on the road—no matter how short the trip and how careful the driver is—there is risk involved. If an incident occurs and a lawsuit is filed, the fact that company vehicles are rarely used and always driven carefully doesn’t prevent the court from issuing a decision that results in a large payment to the other party.
In addition, every state other than New Hampshire requires that all vehicles being driven on public roads have minimum-limit auto liability coverage. This is called the “financial liability limit” and it is typically between $20,000 and $70,000.
Cost-Effective Coverage
Given the risks involved in operating business vehicles and the financial protection afforded by commercial auto insurance, companies find that it is well worth the investment. Many factors are taken into account by insurers when issuing policies, but some examples of per-year, per-vehicle premiums include:
- Smaller vehicles used primarily for traveling to job sites or customer locations—$600 to $1,500 annually
- Vehicles used in for-hire trucking—$5,000 to $20,000 annually
- Livery vehicles—$2,000 to $6,000 annually
Companies can help keep their premiums low by focusing on safe driving. This includes actions like checking the driving record of applicants and hiring safe drivers, documenting and promoting company safety rules, discouraging texting while driving, and purchasing vehicles with good safety records.
Hired and Non-Owned Auto Liability Coverage: Essential for Employee-Owned or Rented Vehicles
Commercial auto insurance is for company-owned vehicles. Without an additional endorsement (meaning a policy modification), commercial auto does not cover vehicles that the business doesn’t own or lease, such as an employee’s car used for deliveries or a rented truck.
To protect those vehicles, the company needs what is called hired and non-owned auto liability. It can be purchased as an add-on to other small business insurance, like general liability insurance or a business owners policy (BOP).
Accessible Insights from Licensed Insurance Experts
After doing some research and understanding the importance of commercial auto insurance, many business owners feel confident moving forward with getting a quote and making their purchase online. However, top insurers like biBERK have licensed insurance experts who can answer any questions owners have and help them find the insurance policies they need to fully protect their business.
About Rakesh Gupta
Rakesh Gupta is chief operating officer at biBERK, part of Warren Buffett’s Berkshire Hathaway company. biBERK specializes in commercial insurance for small businesses. In his role, Gupta focuses on simplifying the insurance buying experience using technology and process innovations that make it easier for small business owners to get the coverage they need.
