Getting from Point A to Point B usually requires a vehicle, and that vehicle needs insurance. You should have protection against accidents, theft, and damage to get true peace of mind. But auto insurance doesn’t stop with your personal vehicles. If you operate a car for business purposes, you’ll need to buy commercial insurance for it, too.
Before you start comparing commercial auto insurance policies, here are a few things to know.
What Is Commercial Auto Insurance?
Personal auto insurance is designed to cover personal use of your vehicle. This includes commuting to work every day, but that’s where business coverage stops. If you use your vehicle to transport work equipment or deliver products to a distributor, your insurance policy likely won’t cover you.
That’s where business insurance comes in. What is commercial auto insurance? It’s a policy that covers your vehicle for business use. This could be your own use of a vehicle, employees’ use of their own vehicles, or a fleet of vehicles you maintain for your workers to drive.
But commercial auto insurance has its limitations, as well.
As with personal vehicle insurance, a commercial policy doesn’t cover intentional damage or personal belongings in the vehicle. Your policy will also have coverage limits and deductibles, so you will be on the hook for some of the cost if you file a claim.
How Does Commercial Auto Insurance Work?
Commercial insurance is a type of insurance specific to business use of a vehicle. With commercial insurance, an insurer tailors a policy to your specific needs. If your employees are using their own vehicles for business purposes, you can purchase a non-owned auto insurance policy that covers them while they’re on the clock.
As with personal auto insurance, you’ll simply set up your policy and pay premiums on time each month. Your policy will automatically renew at the end of each term unless you cancel it.
One major difference between personal and commercial auto insurance coverage is that if one of your employees has an accident, you will be responsible for filing the claim. For that reason, you’ll need to have policies in place for employees to handle accidents as they happen. Each employee should be trained to document auto accidents, including getting photos of the damage, filing a police report, and gathering insurance information from the other party so you’ll have the information you need for the claims adjustor.
What’s Covered by Commercial Auto Insurance?
Commercial insurance is designed to cover business vehicles or personal vehicles used for work-related purposes. Although coverage needs vary from one business to another, there are several types of auto commercial insurance that can be combined into one policy as needed:
- Liability: Liability insurance exists to protect your business. Commercial auto liability insurance only covers damages to other parties and property by each vehicle on the policy. You can buy a liability-only policy that keeps premiums low, but your vehicle won’t be protected.
- Collision: With collision insurance, your vehicle is covered in an at-fault accident. It pays to repair your vehicle from damages incurred in the accident.
- Comprehensive: This policy protects your car against theft and damage due to weather or something falling on it. If a deer runs into your car or a tree falls on it, you’ll need comprehensive coverage.
- Uninsured/underinsured motorist: Uninsured or underinsured motorists make up a sizable chunk of those on the roadways. This type of insurance kicks in if an uninsured, underinsured, or hit-and-run driver collides with your vehicle.
- Medical payments: When occupants of a vehicle are injured in an accident, auto insurance commercial policies can cover medical costs if this coverage is included.
- Personal injury protection (PIP) coverage: If you add this to your policy, your coverage will extend to medical expenses for you or your employee. If you live in an at-fault state, this type of insurance may be required instead of medical payments coverage.
- Rental car coverage: Having a car out of commission can be inconvenient if it’s your personal vehicle. If it’s an integral part of your business, it can be a big problem. Rental car coverage will cover you for a rental car during this process. Check the limits on this coverage, though, as though it typically only covers a rental for a short period of time.
It’s important to look at the commercial auto insurance requirements by state and ensure that you are protected there. Once you’ve determined that, you can start adding coverage as needed.
Does Commercial Insurance Cover Personal Use?
Personal policies typically don’t cover business use of your vehicle. However, there’s more flexibility when it comes to the personal use of a business vehicle. If you have business auto insurance, such as a fleet vehicle driven by an employee, your policy will generally kick in if your employee has an accident while stopping for groceries on the way home or driving it on weekends.
Insurance policies can vary dramatically from one insurer to the next, though. It’s important to read your policy carefully to make sure there are no restrictions. If you have any questions, reach out to the insurer and ask.
When Do You Need Commercial Auto Insurance?
You don’t have to run a company with dozens of employees to need commercial insurance. Maybe you’re a small business owner who hasn’t even onboarded an employee yet. You could even have a side gig delivering food using your personal vehicle. If you’re relying solely on your personal auto insurance policy to cover you, an accident could cost you.
You might need commercial insurance if you:
- Drive or manage business vehicles: If you’ve purchased a vehicle for your business, you’ll need a commercial auto policy for that asset, even if it doubles as a personal vehicle.
- Transport items for business: If you have an accident while making those deliveries, your personal insurance policy probably won’t cover you, whether it’s your personal vehicle or one that’s dedicated to business.
- Haul weight: If you hook up a trailer to your personal vehicle to transport business property, you’ll probably need commercial insurance.
- Your business mileage is excessive: For some people, the workday means spending a considerable amount of time in the car. If you’re a road warrior, traveling hours to meet with clients or going from one worksite to another all day, commercial auto insurance is a good idea.
- Transport passengers for a fee: In some cases, you can add rideshare coverage to your personal insurance policy, but not all insurers provide this option. Commercial auto liability insurance can help protect your rideshare or taxi business.
Reasons
In many cases, though, a business relies heavily on employees using their personal vehicles for company business, whether for traveling to meetings and worksites or for making deliveries. That type of use doesn’t fall under the definition of “what is commercial auto insurance,” but instead, a non-owned auto insurance policy might give you the protection you need.
Another option is to add a business use endorsement to your personal policy. This is an add-on option that is designed to cover the exact use of your personal vehicle for work purposes. Your insurer can tailor this part of your policy to fit your needs. Both this and a non-owned auto insurance policy can be a more affordable alternative to a commercial policy.
Commercial auto insurance can protect both personal and business vehicles. Whether you’re occasionally using your personal vehicle to deliver products or you’re a full-time business owner, spending hours on the road each week, it’s important to look into how far your personal policy extends in covering you. You can then price exactly the coverage you need.
Frequently Asked Questions
How do I know if I need commercial insurance for my vehicle?
You’ll need commercial insurance for your vehicle if your personal policy doesn’t cover your work-related use. Your first course of action should be to review your personal auto insurance policy. If you have any questions not covered in your policy, feel free to pick up the phone and speak to your insurance company. Name the specific uses of your auto insurance and identify exactly what isn’t covered. If you have employees, assume business use of their personal vehicles isn’t covered and choose a policy that fits each person’s specific use.
