Commercial Auto Insurance:

Protecting Your Company on the Road

With the increasing realization of the importance of insurance, many business owners opt to purchase various policies to safeguard their company. Business owners and businesses are exposed to different risks and financial losses. If your company uses vehicles for business purposes, you’ll need a commercial auto policy.

In this article

What is Commercial Auto Insurance?

Auto insurance safeguards you against financial losses in the event of an accident, damage or theft. Primarily, there are two types: personal auto insurance and commercial auto insurance. Personal auto insurance covers passenger cars whereas commercial auto provides coverage for business vehicles in the event of an accident.

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For instance, commercial auto insurance will cover:

  • Work vans 
  • Delivery trucks 
  • Food trucks 
  • Company cars 
  • Forklifts  
  • Service utility trucks and many more 

According to Statista, the US produced approximately 8.4 million commercial vehicles in 2019. Any business that uses vehicles—for whatever reasons they may be—should have commercial auto insurance. This is the mandate in all states except for New Hampshire and Virginia. However, state laws vary regarding the required coverage amounts. 

There are a variety of coverage options available for commercial auto insurance depending on your business’ needs. Insureds are required to specify the vehicles they want to include in their Business Auto Policy (BAP). The BAP determines which vehicles qualify as “covered autos”. Moreover, know that a business owner policy often includes commercial auto insurance bundled in.

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It may be a good option to protect your business on multiple fronts.

Below are the various available coverage options:

Any Auto:

It provides the broadest coverage. It includes automobiles owned by the business, rented, leased, or borrowed autos, and non-owned autos.

Owned private passenger auto

It includes only private passenger type “autos” owned by the insured.

Owned commercial vehicle auto

It includes automobiles owned by the business used for commercial purposes.

All owned auto

It includes all-owned private and commercial automobiles.

No-fault coverage for all owned auto

Regardless of who is responsible for an accident, this policy covers all owned autos. A majority of the states use a tort system. However, it is mandatory in the following states: Florida, Michigan, New Jersey, New York, Hawaii, Kansas, Kentucky, Massachusetts, Minnesota, North Dakota, Pennsylvania and Utah.

Uninsured motorist coverage for all owned autos

It provides property damage and bodily injury coverage for motorists who do not have their own auto insurance. 19 states require this coverage.

Scheduled autos

It is the most restrictive as it only covers automobiles specified in the declaration.

Hired autos

As the name suggests, it includes any automobiles hired, rented, leased or borrowed by the business.

Non-owned autos

It covers automobiles that are not owned, leased, rented, or borrowed by the insured, but used for business purposes. Such autos may be owned by employees or partners of the business.

Mobile equipment

It includes equipment but not limited to forklifts, machinery, tractors, construction equipment and farm machinery.

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What does Commercial Auto Insurance Cover?

Commercial auto insurance is an extensive policy that covers:

Accident liability

It provides liability coverage that will help pay for damages in the event of an accident.

Repair costs

It provides cost for repairing property damage caused to the insured’s covered auto and third-party damage costs. In 2018, the average cost to repair an automobile involved in an accident cost was $3,053 per Motus.
For example, while delivering flowers, a florist gets into a nasty fender bender in their van. They are concerned that they might not be able to pay for the immediate repairs. However, she is reminded by her agent that her commercial van insurance will provide coverage for the expenses incurred. Also stating that the cost of repairing damages to all vehicles involved in the accident will be covered.

Medical costs for bodily injuries

This coverage pays for the medical costs for any bodily injuries (including third-party injuries) caused by the covered autos in an accident.
For example, a commercial car and a truck collide, causing severe injuries to the car’s driver and passenger. Commerical auto insurance covers medical expenses for the injured persons. Per the Bureau of Labor Statistics, between 2016-2018 driver/sales workers and truck drivers had the most casualties compared to any other broad professional group.

Uninsured motorists

The coverage pays when the policyholder meets with an accident and is injured by someone who does not have insurance. It covers the cost of any bodily injury and property damage. Hit-and-run drivers are also considered as uninsured motorists.

According to research from the Insurance Research Council, about one in eight drivers were uninsured in 2015. Moreover, the study is measured based on the ratio of uninsured motorists claims to bodily injury claims.

– Defense costs

Commercial auto insurance provides coverage against defense costs when a third-party files a lawsuit against the policyholder for injury or damage sustained in an accident.

When a third-party is injured or suffers severe damages, commercial automobiles are targets for lawsuits. The insurance pays for the cost of defending the company when there is a liability claim.

Physical damage

Physical damage coverage is also provided as a part of the BAP. It usually includes two options: collision and comprehensive insurance.

Vehicle theft

A 2018 FBI crime report states that an estimated 748,841 vehicles were stolen all over America, accounting for a loss of over $6.3 billion. Comprehensive commercial auto insurance policy includes vehicle theft.

Vandalism

Comprehensive commercial auto insurance also covers acts of vandalism that cause unexpected financial losses to a business.

In early 2020, residents of Whittier, CA woke up to find their cars vandalized overnight. More than 50 vehicles suffered shattered windows in an extreme and costly random.

Collision

It pays for the damages caused from a crash when your vehicle collides with an animal or object. It will also cover the costs of damage caused to your automobile. Including, if you are hit or are hit by another vehicle, or your automobile rolls over.

Commercial Auto Insurance

A study done by the Federal Motor Carrier Safety Administration found that the top 10 causes for commercial automobile crashes were: 

  • Brake problems 
  • Traffic flow interruption 
  • Prescription drug use 
  • Traveling too fast for conditions 
  • Unfamiliarity with the roadway 
  • Roadway problems 
  • Required to stop before crash  
  • Over-the-counter drug use 
  • Inadequate surveillance 
  • Fatigue 

Damage from weather events

A severe storm or any other serious weather conditions can damage your commercial automobiles. For example, a falling tree might shatter your vehicle’s windshield. In that case, commercial auto insurance will pay for the replacement cost of the windshield. 

Since commercial motor vehicles also have different trip characteristics than other types of vehicles, they will have exposure to different types of weather conditions. As stated by the U.S. Department of Transportation, commercial motor vehicles face hazardous weather events that range from: 

  • Wet pavement 
  • Rain 
  • Winter storms 
  • Icing 
  • Temperature extremes 
  • Floods 
  • Hurricane 
  • High winds 
  • Severe thunderstorms 
  • Solar glare or poor visibility 

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Standard Exclusions for Commercial Auto Insurance

Commercial auto insurance provides broad coverage but does not include certain risks that are covered by other policies. Some of the exclusions are:

Contractual liability insurance

It excludes any liability that is assumed under an agreement. However, this exclusion comes with an exception. When the assumed obligations fall under a contract, it covers the claims filed. Contractual liability insurance is a good investment.

Workers compensation insurance

Since workers compensation insurance provides coverage for injured workers, commercial auto insurance is not required to provide coverage for employees.

Employment practices liability insurance

Commercial auto insurance is not subject to cover claims for employers when filed by the employees. This exclusion is not applicable under two exceptions. Commercial auto insurance covers claims arising from injuries to workers while driving. However, this is only acceptable when the liability assumed falls under an insured agreement.

The second exception is it provides coverage for the injured worker(s) who cannot afford or are not qualified to receive benefits under workers compensation. Therefore, Employment practices liability insurance comes in handy to cover lawsuits filed by employees.

Fellow employee injuries

It does not provide coverages for claims made by an injured employee against a fellow employee for causing injuries on the job.

Expected or intended injury

The general principle of commercial auto insurance does not apply if the policyholder intentionally injures someone or causes damage to their property. Also, commercial auto insurance will not cover claims for the insured, if the injured driver sues the insured for bodily injury.

Handling of property

It does not cover bodily injury or property damage that happens before loading or unloading property into or from the vehicle. 

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Movement of property by a mechanical device

Commercial auto insurance will not provide coverage for an injury or damage that results from the movement of property by a mechanical device. For example, your employee is unloading bags of concrete from a forklift and involuntarily injuries a bystander. Therefore, if the victim files a bodily claim against your company, your company’s auto policy will not cover the claim.

Racing or stunt incidents

Racing or stunt activities can cause any form of bodily injury and property damage. If accidents occur while racing, a BAP does not cover the incurred costs.

Operations of mobile equipment

The insurance policy does not provide coverages for claims that result from the operations of mobile equipment (trucks, forklifts, tractors, etc.), such as wear and tear, freezing etc.

Completed operations

Commercial auto insurance does not cover claims that arise from completed products or operations.

Pollution

Commercial auto insurance excludes any third-party pollution claims. It considers cases of the release or disposal of pollutants when transported, loaded or unloaded to or from the vehicle, or stored by a covered auto. Above all, one of the best ways to prevent facing lawsuits related to pollution is to opt for pollution liability insurance.

Leased or personal vehicles

Commercial auto insurance does not provide coverage for damage of owned or rented automobiles. The “Care, Custody, and Control” exclusion also applies to any property damage caused by a driver in one of these vehicles.

Nuclear hazards, contamination and war

If claims arise due to specific causes of loss such as war activities, commercial auto insurance is not applicable to cover such claims.

Common Endorsements for Commercial Auto Insurance

Businesses are exposed to various risks and business auto insurance may not provide coverage for all hazards. But there are a few common endorsements that will help you extend the protection for your commercial vehicle.  

Uninsured motorist and Underinsured motorists coverage 

This coverage helps to pay for car repairs and medical costs incurred in the event of an accident with an uninsured driver. Moreover, it will cover expenses if their coverage is less than the damage inflicted. 

Rental reimbursement coverage 

It covers rental car repair expenses incurred from damages.  

Towing reimbursement coverage 

This coverage helps to reimburse the cost of towing and minor roadside repairs. 

How much does Commercial Auto Insurance cost?

Several aspects determine the costs of commercial auto insurance. It includes:

- Number of vehicles
The cost of a commercial auto insurance policy depends on the number of vehicles that are in the policy.
- Vehicle type and value
The value of your business and the type of auto also determine the premium accordingly. Vehicle traits are taken into consideration to determine the cost. Some traits include model number, date of manufacturing, and identification number.
- Claims history
Various aspects lead to increased claims such as distracted driving or driving under the influence. Therefore, claims history also has an influence over your commercial insurance rates.
- Employee driving records
On average nine people are killed and more than 1,000 are injured each day. The crashes are a result of distracted drivers (Centers for Disease Control and Prevention). Moreover, policy rates will vary based on the employee’s driving record.
- Policy deductibles and limits
The policy limits and deductibles also impact commercial auto insurance rates. Increase your deductible to get lower rates.
- Drivers' demographics and experience level

Premiums also depend on the drivers’ demographics. Therefore, less experienced drivers pose a higher risk, their rates will be higher automatically.  

Every business faces unique challenges and has different needs. Whether you drive your own car or have delivery vans, you need protection to keep your business moving forward. Deciding on commercial auto insurance that meets your specific needs is key to protecting your business. Get a quote here or call an insurance agent to help you deliver a custom-made policy just for you! 

Are you looking for the best commercial auto for your business?