What Is Commercial Auto Insurance & Do You Need It?

When planning your small business, if your company needs wheels then it also needs insurance.

Commercial auto insurance protects the vehicles you own and use for your business in the event of an accident. If you own a fleet of vehicles, commercial auto insurance is a must. But even if you use your personal vehicle for business, you might find yourself improperly insured if you find yourself in an accident during business hours and need to claim business expenses. And even if you have your employees drive their own vehicles to work, a commercial plan would help cover accidents to their vehicles during work hours.

Read our complete guide to commercial auto insurance to learn what commercial auto insurance is, what it covers, who needs it, and how much it’ll cost.

What Is Commercial Auto Insurance?

Commercial auto insurance covers your business vehicles if they are involved in an accident. A commercial auto policy covers both bodily injury and vehicle damage, as well as theft and vandalism.

If your business owns or leases vehicles, if you have employees driving their own cars for business, or if you have employees who drive business vehicles, you need a commercial auto plan to ensure that if your business vehicles are involved and at-fault in an accident, your business can keep on trucking. (But speaking of trucking: If your business owns commercial transport trucks, commercial auto is often not enough coverage. You’ll need to add a commercial trucking plan to your policy. Read our complete guide to Commercial Truck Insurance to learn more.)

What Commercial Auto Insurance Covers

Your commercial auto plan will cover your business vehicles and employees driving their own cars for business-related activities. While certain personal auto policies might cover some business-related costs, most do not, which is why the added security of commercial auto insurance is so important.

Most commercial auto insurance plans cover the following:

• Bodily Injury & Property Damage: In an accident, regardless of fault, a commercial plan will cover the medical costs needed after an injury accident and/or damage done to property or vehicles.
• Accidents Caused By Uninsured/Underinsured Drivers: If someone else causes an accident and that person is uninsured or underinsured, your insurance will help pick up the costs. 
• Physical Damage To Vehicles: Damage caused to either your commercial vehicle or another vehicle on the road is covered under this policy. 
• Medical Coverage: In an injury accident, medical bills are covered. This could also include the cost of transportation away from an accident. 
• Theft & Damage: If your commercial vehicle is broken into, vandalized, or stolen, the policy will cover replacement vehicle costs and the cost to fix your vehicle. 
• Towing & Labor Costs: You can be reimbursed or bill your insurance for towing expenses.

What Commercial Auto Insurance Doesn’t Cover

Commercial auto insurance will insure most things relating to a vehicle collision, but don’t expect all losses to be covered. Also, don’t forget that like traditional auto insurance, you’ll have to pay your deductible before insurance kicks in after an accident.

Here are some things that aren’t covered by a commercial auto policy:

• Loss Of Income After An Accident: If your truck is in an accident and it takes some time to get your business back up and running, your insurance won’t cover the loss of income. You’d want to specifically look into business income insurance or business interruption insurance to cover those gaps.
• Commuting Accidents: In employee-owned vehicles, most commercial plans will cover an accident during business hours, but a commuting accident would be covered under the employee’s own auto insurance policy.
• Car Repairs: Normal wear and tear on commercial vehicles is to be expected and even if a broken transmission affects business, fixing it isn’t covered by this policy.
• Personal Items Lost In A Car: Things stolen from your property are covered under a commercial property plan or a renter’s insurance plan.
• Worker’s Compensation Claims: While your plan will cover hospital bills related to an accident, loss of worker income or other costs that arise from an employee’s injury on the job are covered as part of worker’s compensation.
• Damage Above Your Liability Protection: Once you’ve reached your liability limit, any additional costs are owed by you.

Who Needs Commercial Auto Insurance?

Are you thinking about your business and trying to determine if commercial auto insurance is the right fit?

There is a thin line between personal auto and commercial auto, but if you are a small business owner that works from home, doesn’t have employees, and doesn’t have a need for a company vehicle, you can skip commercial auto insurance. Your personal auto insurance is probably enough (although we do ask that you check with an insurance expert in your state and determine the insurance policies for your needs).

However, if you can say yes to any of these situations, then you should look into a commercial auto policy:

• You own and operate a fleet of vehicles
• You have a company vehicle that you/employees drive
• Your employees drive their own vehicles for business
• You need a car/vehicle to conduct your business
• Any of your vehicles exceed weight limits or carry over 2,000 pounds

Commercial Auto Insurance VS. Personal Auto Insurance

When is your personal auto insurance enough? If you are a sole-proprietor and your car is used for commuting, a commercial auto policy may not be necessary.

The biggest differences between a commercial and personal policy are liability limits and coverage in the event of an accident. In general, a business is going to have more risks, and potentially costlier risks, than a singular person, and those costs are reflected in premiums. Also, there are needs specifically for businesses addressed in a commercial policy that go uncovered in a personal policy.

Here is a list of the few ways a commercial auto policy will differ from a personal auto policy. A commercial auto policy also includes:

• Property and liability trailer exposure
• Vehicle equipment coverage
• Higher liability limits (up to $2 million)
• Loading and unloading exposure
• Hired-vehicle coverage
• Non-owned vehicle coverage

How Commercial Auto Policies Work

When you buy a commercial auto policy, you are insuring any vehicles used for your small business. You can insure a single car or a whole fleet of vehicles. Here’s how it works.

You purchase a commercial auto policy and pick the liability cost that most makes sense for your business. (If you are insuring a single car you won’t need as much coverage as you would if you were insuring ten passenger vans.) You list any employees for your business as covered under the commercial policy. Then, in the event of damage to your vehicle, you will have to pay a deductible. Once the deductible is reached, your insurance company will cover the cost to replace or fix your covered vehicle up to your liability limit.

Buying Commercial Auto Insurance

Commercial auto insurance costs will vary depending on your needs. Talk with an insurance agent about the different possibilities available to you. Your insurance needs will change depending on what kind of vehicles you need to insure, how many vehicles you intend to insure, and what those vehicles are used for. Adding endorsements will also increase your premiums.

Other factors that may affect your insurance costs are:

• Driver age
• Driving record
• Type of vehicle
• Vehicle age and condition
• How far your drivers are driving, how often they are driving, etc.
• Types of products hauled inside the vehicles

According to Progressive, their clients pay an average of $165 dollars monthly for commercial auto coverage, and that rate seems to be comparable to most policy averages. Check with insurance brokers and aggregate sites to compare prices and find a good match. Places like Coverhound, Insureon, or Coverwallet will compare different companies and help you find the best prices.

If you’re looking to save money on your commercial auto policy, you can sometimes receive reduced rates for conducting driving safety meetings.

Frequently Asked Questions

Still don’t know if commercial auto is the right fit or how the policy will work? Here are some frequently asked questions.

Does commercial auto insurance include personal use?

Yes! Under a commercial policy, it doesn’t matter why the vehicle was in use. Even if you are in an accident in a business vehicle during non-business hours, your policy will still cover damages.

Do I need commercial auto insurance if I drive for Uber/Lyft/deliver pizzas?

Some insurance companies will invalidate a personal auto policy if the driver is working for Uber, Lyft, or other ridesharing options at the time of the accident. Uber and Lyft do offer liability protection while the app is on, but liability coverage doesn’t include damage to the driver’s car or property. While it may not be required, a commercial policy is recommended by some drivers familiar with the company policies regarding accidents and car damage.

For pizza drivers, the answer is maybe! If you are using a personal auto for work, your personal coverage might not be enough.

Does a commercial auto policy cover the replacement of lost, stolen, or damaged items? 

No. This is one of the most asked questions and certainly one of the most surprising answers. If someone breaks into your car, even during business hours, while the damage to the car is covered, items stolen from the car are not. For a business vehicle, coverage does include any tools or accessories that are part of the car or van itself, but if it isn’t specifically tied to the vehicle, the theft is covered under a commercial property plan.

Is commercial auto insurance tax deductible? 

Yes! The money you pay for commercial auto insurance is a business deduction.

My commercial vehicle was involved in an accident but I was not at fault. Will I still need to pay anything?

Possibly! Depending on your policy, you are still responsible for your deductible after an accident. After your deductible is paid, the insurance company will cover the additional costs. If you weren’t at fault,  your insurance provider might go after the at-fault driver’s insurance company to reimburse your deductible as part of your claim.

What is non-owned car insurance, and do I need it?

This is an inexpensive liability policy that covers employees who may drive a work car but do not otherwise need automobile insurance. This is also the policy a person would buy if he/she needed proof of insurance for a car rental or business driving.

Final Thoughts

There are many important ways to protect your business and business insurance is one of those ways. Protecting your business assets is the main reason to insure yourself, and if you have vehicles as a business asset, you’ll need insurance. The hunt for business insurance doesn’t have to be arduous and frustrating. You can buy business insurance in four easy steps:

1. Choose the insurance you need
2. Gather business documents (vehicles you need to insure, driver’s ages and driving records)
3. Compare costs
4. Make your purchase

When you send your business automobile out into the world, you can’t control other drivers on the road, but you can control your insurance policy, and rest easy knowing that an accident or damage to your vehicles is covered.