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If you’re considering auto insurance for your business, it’s crucial to understand the basics of a commercial auto policy. The more you know, the easier it is to compare coverage options and make an informed decision.
In this blog post, we’ll cover the essentials of commercial auto insurance, explaining why it’s vital for businesses, the types of coverage available, and how to choose the best policy for your needs.
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Commercial Auto Insurance Definition
Commercial auto insurance provides various coverages for vehicles used by your business, such as cars, trucks, and vans. Every commercial auto policy typically includes three main components:
- Physical damage insurance − Includes collision and comprehensive coverage.
- Liability insurance − Covers bodily injury, property damage, uninsured motorist, and underinsured motorist.
- Other coverage − May include medical payments, towing and labor, rental reimbursement, and auto loan or lease gap coverage.
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Why Your Business May Need Commercial Auto Insurance?
A minor fender-bender can significantly impact your business. Without proper insurance, you could be responsible for repair costs, medical fees, and more. Smart business owners avoid unnecessary risks.
Consider employers’ non-owned and hired car coverages if employees use their own vehicles for business or if vehicles are hired, leased, or loaned for short-term business use. Note that coverage options and availability may vary by state.
Why Is Commercial Auto Insurance Important?
Your business could face legal and financial jeopardy without commercial auto insurance. Any business that owns vehicles must at least carry auto liability insurance.
If one of your business vehicles is at fault in an accident, you could be faced with an expensive lawsuit or settlement covering damage to other vehicles or property, medical costs, lost wages, pain and suffering, and other related expenses.
Additionally, driving without insurance can lead to severe penalties. For example, in Washington, D.C., it could result in fines of up to $2,500 and suspension of license and/or registration for up to 60 days.
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Who Needs Commercial Auto Insurance?
If you or your employees use vehicles as part of your business, you need a commercial auto policy. This often includes vehicles used by:
- Electricians, plumbers, and HVAC professionals
- Carpenters, painters, and other contractors
- Landscapers and plow services
- Caterers and food vendors
- Other business types, like real estate and sales
Choosing the right commercial auto insurance policy ensures your business is protected from the financial and legal repercussions of vehicle-related incidents.
Without commercial auto insurance, you risk:
- Having limited or no coverage for accidents while using your vehicle for business
- Paying out of pocket for repairs, injuries, and other expenses
- Losing your personal auto coverage
What Commercial Auto Insurance Cover?
Customization is key, so business owners can select from a wide range of commercial auto coverage options.
- Liability: Covers bodily injury or property damage claims you may be required to pay.
- Personal Injury/Medical Payments Coverage: Helps pay for reasonable and necessary medical and funeral expenses for covered individuals.
- Collision Coverage: Helps pay for damages to a covered vehicle resulting from a collision with another object, minus the deductible.
- Comprehensive Coverage: Covers loss or damage to an insured vehicle not caused by a collision or rollover, minus any deductible.
- Uninsured/Underinsured Motorist Coverage: This helps pay for injuries and, in some cases, property damage when you’re in an accident with someone who is uninsured or lacks sufficient liability insurance.
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Additional Options & Add-ons
You can further customize your business auto policy with the following coverages (also called endorsements):
- Roadside Assistance: Covers issues like lockouts, dead batteries, and flat tires that aren’t typically handled under your commercial auto policy.
- New vehicle replacement cost coverage: Replaces your new vehicle under a total loss with a new or comparable vehicle and provides gap coverage for any amount owed above the car’s actual cash value.
- Auto loan or lease coverage: Covers comprehensive and collision damage to a leased or rented vehicle, along with other contractual obligations to the leasing or rental company.
- Auto loan or lease coverage: This covers the difference between the unpaid loan or lease amount and the actual cash value of the vehicle if it’s a total loss after an accident.
- Expanded towing: Provides additional towing coverage beyond what’s included in your standard policy, covering towing, jump starts, and minor roadside repairs.
- Rental reimbursement: Pays for a rental car up to the limits of your policy, ensuring you have transportation after an accident.
- Medical payments or personal injury protection coverage: Pays for medical expenses if your health insurance or your passengers don’t cover the costs.
What Is Not Covered?
Commercial auto insurance policies do not cover the following:
- Unrelated medical expenses
- Contents inside the vehicle
- Accidents in a personal vehicle
- Repairs to a rental vehicle
How Much Does Commercial Auto Insurance Cost?
The cost of commercial auto insurance can vary widely based on several factors. Understanding these key determinants can help you get a better estimate for your business:
1. Type of Vehicle
Larger vehicles like trucks and vans generally cost more to insure than smaller cars due to the potential for greater damage and higher repair costs.
2. Usage
Vehicles used for deliveries or transporting goods are considered higher risk and may cost more to insure than those used for occasional business travel.
3. Number of Vehicles
The more vehicles you have, the higher your overall insurance cost. However, many insurers offer fleet discounts for businesses insuring multiple vehicles.
4. Driving Records
The driving records of your employees play a crucial role. Businesses with drivers who have clean records typically enjoy lower premiums, while those with drivers who have accidents or violations may face higher costs.
5. Coverage Limits
Higher coverage limits mean higher premiums. While opting for minimal coverage might save on costs, it’s essential to ensure that your coverage adequately protects your business against potential risks.
6. Location
Your location can impact insurance costs. Areas with higher traffic congestion or higher crime rates may lead to higher premiums due to the increased risk of accidents and theft.
7. Deductibles
Choosing a higher deductible can lower your premium, but it also means you’ll pay more out of pocket in the event of a claim. Balancing deductible amounts with premium costs is crucial for managing your budget effectively.
8. Industry
The nature of your business also matters. Certain industries that involve higher-risk activities or frequent vehicle use may see higher insurance costs compared to others with lower-risk profiles.
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Best Commercial Auto Insurance Providers
Having the right insurance coverage is crucial for businesses that rely on vehicles for deliveries, transporting equipment, or providing mobile services. This analysis compares commercial auto insurance offerings from four leading providers: NEXT, Chubb, Travelers, and The Hartford.
NEXT Insurance is one of the best business insurance companies specializing in small and medium-sized businesses. They offer tailored commercial auto insurance policies to meet the specific needs of various industries, including landscaping and delivery services.
Key Features:
- Customizable Policies: Flexible coverage options can be customized to fit your business needs, whether you operate a single vehicle or a fleet.
- Online Convenience: The entire process, from obtaining quotes to managing claims, is handled online for quick and efficient service.
Competitive Pricing: Affordable premiums make NEXT an attractive option for small businesses.
- Easy and fast online application and claims process
- Customizable policies to suit specific business needs
- Affordable coverage options
- Limited in-person support, as services are primarily online
- May not suit larger businesses with more complex insurance needs
Chubb is a globally recognized insurance provider known for offering comprehensive and customizable insurance solutions. Their commercial auto insurance policies cater to businesses of all sizes, providing extensive protection and risk management services.
Key Features:
- Comprehensive Coverage: Broad coverage options, including liability, physical damage, and uninsured/underinsured motorist coverage.
- Risk Management Services: Provides resources and tools to help businesses minimize potential vehicle-related risks.
Strong Financial Stability: Solid financial ratings ensure reliability and the ability to handle significant claims.
- Comprehensive and customizable coverage options
- Access to advanced risk management tools and resources
- Excellent customer service and support
- Higher premiums compared to some other providers
- More detailed application process requiring extensive information
Travelers is one of the largest insurance providers in the U.S., offering a wide range of commercial auto insurance options. Known for their robust financial stability and extensive coverage, Travelers is a reliable choice for businesses of all sizes.
Key Features:
- Wide Range of Coverage: Variety of coverage options, including liability, collision, comprehensive, medical payments, and more.
- Risk Control Services: Provides risk management services to help businesses identify and mitigate vehicle-related risks.
Efficient Claims Handling: Known for its efficient and fair claims process, ensuring quick resolutions.
- Extensive coverage options tailored to business needs
- Strong financial stability and industry reputation
- Comprehensive risk management and claims services
- Can be more expensive than digital-first insurers
- Application process may be detailed and time-consuming
The Hartford is a well-established insurance provider with a strong focus on customer service. They offer comprehensive commercial auto insurance policies designed to protect businesses and their vehicles.
Key Features:
- Broad Coverage: Extensive coverage options, including liability, physical damage, medical payments, and rental reimbursement.
- Customer Service Excellence: Known for exceptional customer service and personalized support.
Risk Management Tools: Offers resources to help businesses improve safety and reduce vehicle-related risks.
- Comprehensive coverage options with a focus on business protection
- Excellent customer service and personalized support
- Strong risk management tools and resources
- Premiums may be higher than some competitors
- Less emphasis on online services compared to digital-first insurers
Commercial Auto Insurance – FAQs
Bottom Line
Securing the right commercial auto insurance is essential for protecting your business from the financial risks associated with vehicle-related incidents. Whether you operate a single delivery van or a fleet of service trucks, comprehensive coverage from providers like NEXT, Chubb, Travelers, or The Hartford can protect your assets, mitigate liabilities, and ensure the continuity of your operations.
By assessing your specific needs and choosing a provider that offers the best combination of coverage, customer service, and risk management tools, you can confidently drive your business forward, knowing you’re well-protected on the road.
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Noah is an American copywriter on a mission to help clarify the nuances of the business world through unique insights stemming from backgrounds in both engineering and the medical field. When not working, you’ll likely find him running or traveling.
