Commercial Auto Insurance

Embroker helps you get commercial auto insurance to protect you, your employees, and any other hired drivers against financial responsibility in the case of a work-related accident involving injury to people or property.

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What Is Commercial Auto Insurance?

Commercial auto is also referred to as business auto insurance, commercial vehicle insurance, commercial car insurance, truck insurance, or fleet insurance—depending on what types of vehicles you need to insure.

The coverage itself is pretty self-explanatory; a commercial auto policy protects your company against financial responsibility if you or an employee is at fault in an accident involving injury to people or property. It also protects your vehicles from losses resulting from theft, vandalism, certain weather events, and collisions.

Anyone who has ever purchased commercial auto insurance knows that picking the right policy is significantly more complicated compared to purchasing insurance for your personal vehicles. This is because commercial vehicles are exposed to a greater variety of risk on an everyday basis.

Commercial auto insurance does not just protect you and your assets as the business owner, it protects your employees and any other contracted drivers that you might have hired for business purposes of any kind.

A majority of U.S. states make it mandatory for business owners to purchase liability insurance for both property damage and bodily injury that could occur as a result of one of your vehicles getting into an accident while you or one of your employees is operating it. You can also get physical damage coverage for all of the vehicles your business uses, whether you own, lease or hire the vehicles.

As we’ve mentioned, commercial car insurance is fairly nuanced, with a number of different types of coverages available that can be added on to your base commercial auto policy in order to address a variety of situations:

  • Any Auto Liability Insurance: If you are planning on increasing the number of cars you have in your business fleet, this insurance will extend the liability insurance you have on your current vehicles to any new ones you buy or hire.
  • Individual Named Insurance: This enables you to extend your current commercial auto insurance to protect you when operating vehicles that you don’t own.
  • Single Deductible Options: If you have a trailer and are always hauling expensive equipment with you, this coverage allows you to protect these items as well. You’ll pay a deductible one time for claims made for both your vehicle and trailer.
  • Hired and Non-Owned Auto Insurance: This will cover expenses for accidents involving vehicles that your business uses but doesn’t own, including vehicles you rent and the personal vehicles of employees that they use for business purposes.
  • Trailer Interchange Insurance: If you do not own the trailer that you are hauling, this is the insurance to get for those who rent.
  • Rental Reimbursement with Downtime: If your commercial vehicle breaks down and you need to rent a replacement vehicle for the short-term before you buy a new one or fix your old one, this insurance will cover those expenses.

Who Is It For?

In most cases of commercial auto insurance, three categories of people are covered: the named (you), permissive users, and omnibus users.

Naturally, the named insured has the broadest coverage in your average commercial auto policy. It is important to note that as the named insured, you would also be covered in the case of an accident in which you were not a participant. Since employers are technically and vicariously liable for the negligent acts of their employees, you could be sued for such an act, in which case your commercial auto insurance would provide coverage.

Permissive users are people who are driving a covered vehicle that you own, hire or borrow, with your permission to do so. Omnibus insureds include anyone who is liable for both your conduct and the conduct of the permissive users. Basically, this means that coverage is provided to anyone who could potentially be held legally responsible for an accident caused by the named insured or the permissive user.

Permissive users are all employees who drive vehicles you own, hire or borrow for the needs of your businesses, assuming that all of the business vehicles that are being used are covered by your insurance policy.

The widest coverage would include covering all of the vehicles that you need for business, regardless of whether you own them. For example, if your policy only covers vehicles that you own and an employee gets into an accident while driving a vehicle that your company is renting, you will not be covered. Sign up to the Embroker platform, select your preferred coverage, and get a commercial auto insurance quote in just a few minutes.

It’s also important to note that most commercial auto policies do not cover employees who get into accidents while driving cars that they own, even if they were using the vehicle on company business.

Why Do You Need It?

Most personal auto insurance policies do not cover any type of commercial claims. This means that if you get into an accident in your personal car while you are operating it for business purposes, there is no duty to defend the claim and no indemnification of damages covered by your personal auto insurance.

In simple terms, this means that you would have to pay your legal costs and the damages out of your own pocket–your personal auto insurance would not cover anything.

If the vehicle in question is primarily used for business purposes, you should get commercial auto insurance coverage, since most personal auto policies – whether yours or that of one of your employees – do not provide coverage for business-related accidents and incidents.

Commercial Auto Insurance Requirements By State

When purchasing commercial auto insurance, it’s important to note that the amount of insurance you are going to have to purchase will be defined by either state or federal laws. Each state has its own set of laws regarding insurance requirements related to characteristics of your fleet such as the weight of each vehicle and the number of passengers that each vehicle can accommodate.

Both the type of vehicle and the type of job it performs are other factors that are taken into consideration. For example, if your commercial vehicle carries hazardous materials, there will be specific federal requirements that you will need to meet in terms of coverage limits.

However, in most cases, small business owners that operate light vehicles such as sedans or pickup trucks will usually have state requirements to meet that are similar to the ones assigned to auto insurance for personal vehicles.

Personal Auto Insurance vs. Commercial Auto Insurance

It’s often hard for small business owners to tell what the real difference between personal and commercial auto insurance is and why they would need both types of insurance if they use their personal vehicles for work purposes.

If a small business owner or one of their employees uses a personal vehicle to perform business tasks such as picking up clients or delivering goods, it’s important to know that their personal auto insurance will not cover any damages if an accident occurs while they were driving the vehicle for business reasons.

Personal auto insurance policies almost always exclude business use. If you’re a sole proprietor and you are using your personal vehicle for business on a regular basis, the best course of action would be to purchase a commercial auto policy as well.

Another common question people ask is whether personal auto policies cover accidents that occur while driving to work. They will. And that’s another important distinction to note. A personal auto policy covers accidents that occur if you are driving “to work,” but it won’t cover accidents that occur when you are driving “for work.”

Since commercial auto policies tend to cover many more circumstances of bodily injury and property damage than personal auto policies cover, it only makes sense that commercial policies will cost significantly more to procure.

What Does Business Auto Insurance Cover?

Before we get to the question of what your commercial auto insurance policy will cover, there’s another important question to think about: Who will the policy cover?

There are three categories of people that can be covered by commercial auto insurance; the named insured, permissive users, and omnibus users.

If it’s your business and you’re taking out the policy, then you would be the named insured and you would have the broadest coverage possible. The named insured will usually be covered even if they didn’t participate in an accident directly.

Permissive users are your employees or anyone else you have given permission to drive the vehicle for which you have purchased coverage. Omnibus users are people who can be held liable for any accident or negligence committed by you or your permissive users.

For example, if your drivers are making a delivery in the name of one of your clients, that client could be considered an omnibus user. That means that they can’t be held legally responsible for mistakes made by your driver, even if the driver was delivering something for their business.

As far as coverage goes, commercial auto insurance functions just like most other insurance policies, in the sense that there are basic things that standard policies will always cover along with additional coverages that can be added to your policy via endorsement or rider.

The Basics

  • Property and Bodily Injury Liability: If you or your drivers are found liable for an accident that led to third-party property damage or bodily injury, you’ll be covered. Your policy will pay repair bills, medical bills, lost wages, legal fees, even funeral expenses in a worst-case scenario.
  • Medical Payments: No matter which party was at fault, a commercial auto policy covers medical expenses for you, your drivers, and any passengers that are injured. Many states require that your commercial auto policy covers medical payments.
  • Collision Coverage: All damages to your vehicle will be covered. Collision coverage provides repair costs in both accidents that involve other vehicles and collisions with objects such as trees and street signs, for example.
  • Gap Insurance: If you are leasing the vehicle and it is damaged beyond repair, insurance will cover the money that you still owe on it.

Common Endorsements

  • Comprehensive: Provides coverage for damage that doesn’t result from a collision. Comprehensive will cover damage from vandalism, fire, inclement weather, theft, and more.
  • Uninsured Motorist: If the third party involved in the accident is uninsured, you will still be covered by your policy and receive payment for damages and medical fees.
  • Hired and Not-Owned Liability: If your business relies heavily on vehicles that are not owned by the business, this coverage is a must. If you or your drivers are involved in an accident while driving a vehicle that is not yours, this coverage will kick in to cover medical bills and third-party damage. You can add a hired auto physical damage rider if you want damages to the car you were driving to be covered as well.
  • Roadside Assistance: You can also add a roadside assistance rider to your commercial auto policy to provide 24/7 coverage whenever you need a tow, fuel, a flat tire fixed, or your car battery jump-started.

Types of Vehicles Typically Covered

As already noted, commercial auto insurance will cover business vehicles that are either owned by the business or the individual that is using the vehicle for business purposes. The types of vehicles that can be covered by a commercial auto policy are manifold and include the following:

  • Passenger cars
  • Vans
  • Pickups
  • SUVs
  • Cement mixers
  • Delivery Vans
  • Tractor Trailers
  • Flatbeds
  • Cranes

If you need to purchase insurance for larger commercial vehicles such as trucks, it’s best to purchase commercial truck insurance, which is specifically designed to provide coverage for larger vehicles and the risk profile that comes with operating such vehicles commercially.

What’s Not Covered?

As with just about any type of insurance, there are exclusions when it comes to commercial auto insurance for risks that are either uninsurable or covered by other types of insurance policies, including:

  • Contractual liability: Any liability that you assume under some type of business contract.
  • Employer’s liability: Claims made against you by injured employees. These types of claims are covered by employment practices liability insurance.
  • Expected or intended injury: Bodily injury or property damage that was expected or intended from the standpoint of the insured. This usually applies when the insured named is involved in a claim for intentionally causing bodily injury or property damage.
  • Fellow employee injuries: Claims by one employee against another for an injury sustained on the job.
  • Handling of property: Claims related to injuries or damage that occur before you have begun loading property onto a vehicle. Commercial auto insurance will cover injuries or damages incurred during the process of loading property in and out of the vehicle, however.
  • Movement of property: Unless it’s a hand truck or a device that is attached to your vehicle, auto insurance will not cover injury or damage that results from the movement of property by a mechanical device.
  • Operation of mobile equipment: Injuries or damages that occurred on any mobile equipment that is not covered by the commercial auto policy (such as a forklift).
  • Pollution: Injuries resulting from automotive pollution are not covered.

What Does Commercial Auto Insurance Cost?

Obviously, the more endorsements you add to your commercial auto policy, the more you’re going to pay. But that is certainly not the only thing that defines your premium. Businesses are all different and not every company uses the same vehicles in the same way.

Certainly, the industry that you are working in is going to be one of the defining characteristics that influences the cost of your auto insurance. Let’s take a look at what else insurers are going to be evaluating when putting together your commercial auto policy and calculating your premium.

Factors That Influence Cost of Coverage

  • Vehicle Value: The more expensive your vehicles are, the more expensive your insurance will be. Pretty simple.
  • Vehicle Type: If you’re a roofing contractor that uses large trucks and vans, you’re going to pay more than a pizza shop that uses small cars to make deliveries.
  • Mileage: If you’re a local restaurant with cars that drive short distances around town to make deliveries, you will pay less than a company that makes frequent business trips across state lines and puts a lot of miles on their vehicles.
  • Fleet Size: The more vehicles you own and the more staff you employ, the greater the chances are of an accident occurring. More cars and more employees mean higher premiums.
  • Cargo: If you carry cargo, you’ll pay more. If your cargo is difficult to transport, very expensive, or potentially hazardous, you will be paying significantly more for auto insurance.
  • Driving Record(s): The driving records of your employees are important, especially if they are operating large vehicles. It might even be hard to get insured if your drivers have significant traffic violations on their records. Make sure to check driving records thoroughly before hiring personnel.
  • Claims History: The more accidents you’ve been in and the more claims your business has experienced, the higher your insurance rates will be.
  • Coverage Limits: Higher limits provide you with more protection in the case of a claim, but it also means you pay more in premiums.

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