Commercial Auto Insurance
A Must Have Coverage for Your Business
What is commercial auto insurance?
Auto insurance is mainly of two types – personal auto insurance and commercial auto insurance. While personal auto insurance provides coverage for private passenger cars, commercial auto insurance offers immediate aid for a business vehicle in the event of an accident.
No matter the purpose of the vehicle, any business that utilizes automobiles is required by law to have commercial auto insurance. However, the minimum amount of coverage varies according to state laws. From a food truck selling tacos to a CEO’s passenger car, all vehicles used for business purposes must purchase commercial auto insurance.
According to ACEA, a European automobile manufacturers association, the US produced more than 5.3 million commercial vehicles in 2018. All vehicles used for business purposes is required to have commercial auto insurance by law in all states except New Hampshire and Virginia. The business owner’s policy (BOP) usually includes a commercial auto policy.
Commercial auto insurance requires insureds to specify the vehicles that they want to include with the Business Auto Policy (BAP). This policy specifies the covered auto designated symbol, which determines which vehicles qualify as covered autos. The BAP should include a section explaining these symbols 1 -9 and 19.
Any auto: This symbol provides the broadest coverage since it includes vehicles owned by the business, hired, rented, leased, or borrowed autos, and non-owned autos.
1. All owned auto: This symbol includes all-owned private and commercial vehicles.
2. Owned private passenger auto:
This symbol only includes vehicles that are owned by individuals but used for business purposes.
3. Owned commercial vehicle auto:
This symbol includes business owned autos used for commercial purposes.
4. No-fault coverage for all owned autos:
This symbol provides coverage for all owned autos regardless of who caused the accident but is usually opted for when required by state laws.
5. Uninsured motorist coverage for all owned autos:
This symbol is opted for when required by state laws too. It encompasses property damage and bodily injury coverage for motorists who do not have their own auto insurance.
6. Scheduled autos:
This symbol is the most restrictive as it only covers vehicles specified in the declaration.
7. Hired autos:
This symbol includes hired, rented, leased, or borrowed vehicles by the business.
8. Non-owned autos:
This symbol includes vehicles that aren’t owned by the business. It may consist of commercially used vehicles owned by the employees or partners of the business.
9. Mobile equipment:
This symbol includes vehicles that operate as equipment for the company, including but not limited to automobile trailers, farming machinery, construction equipment, and mobile cleaning equipment.
What does commercial auto insurance cover?
Commercial auto insurance is a vast policy that generally covers these costs:
- Accident liability:
When in an accident, companies will have to deal with the financial burden along with the trauma that follows. Whether at fault or not, businesses will require business vehicle insurance to take care of these expenses.
- Repair costs:
It covers the costs of repairing property damages to the insured’s covered autos and third-party damage costs in the event of an accident. Motus claims that the average vehicle accident repair cost in 2018 was $3,053 in their 2019 driver safety report.
For example, a florist meets with an accident while delivering flowers on her van. She is worried about not being able to afford the repair costs at the moment. However, the florist is reminded by her agent that her commercial van insurance will cover the cost of repairing the damages of the vehicles involved in the accident.
- Medical costs for bodily injuries:
Commercial auto insurance pays for the medical expenses for any bodily injuries (including third-party injuries) caused by the covered autos in an accident.
For example, a collision between a car and a commercial truck causes severe injuries to the drivers and passengers. Commercial auto insurance will pay for the medical cost for the injured in this case. According to the Bureau of Labor Statistics, driver sales workers and truck drivers have the most fatalities compared to any broad occupation group.
- Uninsured motorists:
If the policy includes uninsured, underinsured, or a hit-and-run driver, then commercial auto insurance also covers the costs of bodily injuries and property damage, regardless of who is at fault.
Insurance Research Council estimated that one in eight drivers were uninsured in 2015, measured by the frequency ratio of uninsured motorists claims to bodily injury claims.
- Defense costs:
If a third-party files a lawsuit against an insured for the injury or damage sustained in an auto accident, commercial auto insurance covers the cost of defending the insured.
Commercial vehicles are prime targets for lawsuits when the third-party is injured and suffers grave damages. Commercial auto insurance covers the cost of defending the company when there is a liability claim.
- Physical damage:
Besides auto accidents, these are some other risks to owning commercial vehicles that commercial auto coverage includes.
- Vehicle theft:
According to the report of the Federal Bureau of Investigation (FBI) in 2018, there were an estimated 748,841 vehicle thefts all over the nation, accounting for a loss of over $6.3 billion.
A comprehensive coverage for a commercial vehicle will cover its theft as well.
Comprehensive commercial auto insurance covers acts of vandalism that causes a loss to the business.
Early in 2020, NBC Los Angeles reported one of the most expensive vandalism cases of more than 50 vehicles with shattered windows that occurred overnight.
When a commercial vehicle collides with an object or an animal, commercial auto insurance provides coverage for the damages from the crash. The policy also covers the costs of damage if the collision overturns the vehicle.
A Federal Motor Carrier Safety Administration study found the top 10 factors in commercial motor vehicle crashes.
- Brake problems
- Traffic flow interruption
- Prescription drug use
- Unfamiliarity of roads
- Roadway problems
- Sudden braking
- Over-the-counter drug use
- Inadequate surveillance
- Damage by weather events:
A report by the U.S. Department of Transportation found some hazardous weather events to commercial motor vehicles.
- Wet pavement
- Winter storms
- Extreme temperature
- High winds
- Severe thunderstorms
- Solar glare
Specified causes for loss coverage can include damages done by perils such as earthquakes, flood or rising waters, windstorms, hailstorms, lightning, explosions, and fires.
Are you looking for the best commercial auto for your business?
Standard Exclusions for Commercial Auto Insurance
Like most of the insurance, commercial vehicle insurance does not cover all types of risks. Commercial auto liability coverage is subject to several exclusions which include-
Contractual liability insurance:
Commercial auto insurance excludes any liability assumed under a contract. However, this exclusion comes with an exception to it. It provides coverages for the claims filed when the assumed obligations fall under an insured contract. If you want additional coverage, make sure to invest in contractual liability insurance.
Commercial auto insurance is not obligated to provide coverages for the injured worker, which is covered by workers’ disability or workers compensation insurance.
Employment practices liability insurance:
Commercial auto insurance is not subject to cover claims for the employers filed by the employees. This exclusion is not applicable under two exceptional circumstances. The first exception is commercial car insurance which can provide coverages for claims arising from injuries to the workers while driving. However, this is only acceptable when the liability assumed falls under an insured contract. The second exception is it provides coverages for the injured workers who cannot afford or is not eligible to receive benefits under workers compensation. Therefore, businesses should opt for employment practices liability insurance to cover for lawsuit filed by employees.
Fellow employee injuries:
This exclusion eliminates commercial auto policy to provide coverages for the claims filed by one employee against the other for causing injuries on the job.
Expected or intended injury:
The general principle of commercial auto insurance is to cover for the property damage or bodily injury caused during an auto accident. However, in case of intentional accidents caused by the driver, commercial car insurance precludes to cover the claims.
Handling of property:
Commercial auto insurance does not provide coverages for bodily injury or property damage that happened before loading off the property onto the auto and after unloading the property.
Movement of property by a mechanical device:
Commercial auto insurance precludes coverage for a claim made by the injured party caused due to the maneuver of property.
Racing or stunt incidents:
Be it one’s fault or not, auto drivers can face bodily injury or property damage anytime and anywhere, let alone using it for racing or stunt activities. If accidents do occur while racing, business auto insurance does not cover the costs incurred.
Operations of mobile equipment:
Commercial auto insurance does not cover the claims that result from the operation of mobile equipment, such as wear and tear, freezing, etc.
Commercial auto insurance does not cover the claims arising from completed products or operations.
Commercial auto insurance excludes covering any third-party pollution claims. It considers cases of the disposal or release of pollutants when it was transported, loaded onto, unloaded from, disposed of, stored by a covered auto. If you want to prevent facing lawsuits on claims related to pollution, you need to opt for pollution liability insurance.
Leased or personal vehicles:
Commercial auto insurance does not cover for the damage of the owned or rented vehicles. The ‘Care, Custody, and Control’ exclusion applies to the property damage caused due to its transportation on the auto.
Nuclear hazards, contamination, and war:
If liabilities arise due to specific causes of loss such as war, commercial auto insurance does not apply to cover such claims.
Common endorsements for commercial
Business auto insurance may not cover all the risks it is prone to face. There are a few significant endorsements that can help to extend the protection to your commercial auto.
- Uninsured Motorist (UM) and Underinsured Motorist (UIM) coverage:
UM and UIM helps to pay for car repairs and medical bills incurred in an accident where the at-fault driver does not have car insurance.
- Rental reimbursement coverage:
Rental reimbursement helps to cover the rental car costs temporarily while repairing the covered vehicle from the damages it incurred.
- Towing reimbursement coverage:
Towing coverages helps to reimburse the cost of towing and minor roadside repairs.
How much does a commercial auto insurance cost?
Commercial auto insurance considers several factors in determining its cost. It includes:
- Number of vehicles: Commercial auto insurance cost varies depending on the number of vehicles that are covered.
- Vehicle type and value: The value of business auto helps to determine the premiums accordingly. Several vehicles’ characteristics are taken into consideration. Such as vehicle series – the year the car was made, the kind of model, the vehicle identification number. According to NHTSA, in 2018, a total of 4,136 passengers died in large truck crashes. The commercial auto insurance cost also differs based on the type of vehicles covered.
- Claims history: Claims history tends to influence the commercial auto insurance rates. Several factors lead to increase the claims, such as; increased traffic density, increment in distracted driving, increased number of truck accidents.
- Employee driving records: According to CDC, each day, over 1,000 people get injured in crashes that involve a distracted driver. The rate of commercial auto policy varies based on the driving records of employees.
- Policy deductible and limits: The amount of policy limit also impacts business car insurance costs.
- Drivers’ demographics and experience level: Commercial auto insurance rates tend to depend on the drivers’ demographic as well. The degree of risk is higher in the case of less experienced drivers, which is why the rates can be higher.
Types of insurance that include commercial auto insurance
- Pollution insurance
- Event insurance
- Contractors insurance
- Landscaping insurance
- Handyman insurance
- General contractor insurance
- Lawyer insurance
- Accounting insurance
- Farm insurance
- Church insurance
- Entertainment insurance
- Beauty insurance
- Construction insurance
- Engineer insurance
- Truck insurance
- Livery insurance
- Art insurance
- Commercial drone insurance
- Food business insurance
- Restaurant insurance
- Food truck insurance
- Hotel insurance
- Consultant insurance
- Photography insurance
- Personal trainer insurance
- Pet business insurance
- Nonprofit insurance
- Nursing insurance
- Gas station insurance
FAQs on commercial auto insurance
1) What does commercial auto insurance cover?
Commercial auto policy helps to cover the cost of accidents involving vehicles owned by businesses, such as, medical bills, lawsuits filed by the injured third party and property damage. It includes protection against physical damages such as vehicle theft, and vandalism.
2) Does commercial auto insurance provide coverages for personal use?
Commercial auto policy covers only for vehicles that is owned by business. However, if a person uses a business owned vehicle for personal use and gets into an accident, then commercial auto policy helps to cover for the damages incurred.
3) Is commercial auto insurance required by law?
Yes, businesses are required to have commercial auto insurance by law in all states besides New Hampshire and Virginia. Although drivers won’t need to pay fines for not having insurance in these states, they will still be held liable in the event of an accident. Therefore, all vehicles must have auto insurance whether the law requires it or not.
4) Does commercial auto insurance cover robbery of personal items?
Commercial auto insurance provides coverage only for vehicles and equipment attached to it, such as a ladder rack. It does not necessarily cover the theft of personal items. For you to get coverage in this matter, you need to opt for business liability policy with inland marine insurance as its endorsement.
5) Are possessions in the vehicles covered by commercial auto insurance?
Business owners policy, commercial general liability insurance, or commercial property insurance usually covers stolen or damaged business property that was in the covered auto. However, commercial auto insurance covers possessions if they are attached to the covered auto or a part of the business operation.
For example, commercial auto insurance doesn’t cover the cost of a laptop stolen from the company car but it does cover the cost of repairing the stove of a food truck.