Commercial Auto Insurance: Most Frequently Asked Questions
Shopping for commercial auto insurance is an integral part of any business. You must consider getting a commercial auto policy for vehicles that:
- Deliver goods
- Transport materials
- Haul merchandise and equipment
- Carry Passengers
A commercial auto insurance policy protects your business’s vehicles. A commercial auto policy also covers your listed drivers in case of injury. The coverage in a commercial auto policy can save you thousands of dollars in case of a wreck. In this article, you will find the answers to the most commonly asked questions.
1. What is commercial auto insurance?
Commercial auto insurance or commercial vehicle insurance protects business vehicles. Business vehicles are those whose primary purpose is work-related tasks. Commercial auto insurance covers vehicles such as:
- Delivery vans
- Company cars
Commercial vehicle insurance covers damages to third-party property in an accident. Also, this insurance covers injuries to listed drivers. However, commercial auto doesn’t cover a personal vehicle. A commercial auto policy will not cover employees’ personal vehicles. Commercial auto insurance will only cover your business’s vehicles.
Commercial auto coverage is not necessary when hiring rental vehicles. Rental vehicles usually have their insurance billed into the fee. There are times rental fees don’t include insurance. In those situations, you need commercial auto coverage.
2. What does commercial auto insurance cover?
Commercial auto insurance covers two main aspects.
First, it covers damage and liability to property. This property includes owned vehicles. Owned vehicles are the ones the business uses to perform business operations. Coverage to the property also comprises third-party vehicles and buildings.
Second, commercial auto insurance covers injuries to drivers and passengers. This type of coverage is “personal injury protection.” Insured drivers receive medical treatment for injuries sustained in an accident. Third-party individuals that sustain injuries can also receive coverage.
Commercial auto does not cover equipment or merchandise unless stated on the policy. The policy must explicitly state merchandise or equipment. The policy must also indicate the value of the merchandise or equipment.
Your business will need commercial auto insurance for the following:
- Client materials
- Special equipment and tools
- Own and third-party merchandise
Your General Liability Policy may not cover the items above. As such, you may need additional commercial auto coverage.
3. What are the requirements for commercial auto insurance?
Commercial auto insurance requirements vary from state to state. Therefore, you ought to check your state’s specific requirements. This handy table will help you get a good sense of the coverage you need.
In general, your commercial auto insurance policy should cover a minimum of $250,000. This amount refers to both property damage and personal injury protection. Most standard policies cover up to $1 million per event.
Your business’s vehicles listed on the policy must pass all safety inspections. These vehicles must remain compliant throughout the policy’s lifetime. Drivers must have a valid license. For instance, truck drivers must hold a valid trucking license. Drivers must also be legal age according to their state. Drivers with impairments such as a suspended license cannot receive coverage.
4. How much coverage do I need for commercial auto insurance?
There are no specific coverage amounts for commercial auto insurance. The minimum requirements vary from state to state.
The coverage amount on a commercial auto policy depends on the type of business. For example, a pizza delivery car would need less coverage than a large delivery truck.
A standard policy has a minimum of $250,000 and a maximum of $1 million per event. This type of coverage should be enough for most businesses. For expensive equipment and materials, a higher coverage amount may be necessary.
Business with passengers needs a high personal injury protection amount. Taxi and ridesharing services should get commercial coverage. Individual injury claims can be very costly. A coverage amount above $1 million might be necessary for passenger service companies.
Please check the required minimums with your insurer. Some insurers have higher minimums for commercial auto than required by the state. Typically, insurers may require a minimum of $100,000 to $500,000 in coverage. This amount depends on your turn of business.
5. Does the law require commercial auto insurance?
In general, all states require commercial auto insurance. Virginia and New Hampshire are the only exceptions. The difference lies in requirements from state to state. Some states require a minimum of $50,000 in commercial auto coverage. Others do not have a specific minimum. Therefore, you must ensure to check your state’s particular laws.
A commercial vehicle may be liable in an accident. Therefore, it needs commercial auto coverage. Personal insurance policies will not cover business vehicles.
When your business’s vehicles do not have commercial insurance, you have to pay out of pocket for damages. Also, federal law requires all drivers to have insurance. Thus, your business must ensure all drivers have appropriate insurance coverage.
6. Do rideshare drivers need commercial auto insurance?
The simple answer is yes. Rideshare drivers must have auto insurance.
The long answer is that it depends on who owns the vehicle. If the rideshare drives their personal vehicle, the driver must obtain the policy.
Personal auto policies can get additional coverage for rideshare purposes. Please note that individual auto policies don’t cover rideshare activities.
Rideshare coverage includes injury protection for passengers. It also covers injuries to third parties and property damage.
If a company owns the car, the company needs commercial auto on the car. Therefore, the driver must get rideshare coverage for themselves. The commercial auto policy should cover third-party property damage and personal injury.
The driver’s own policy should supplement the commercial policy. The commercial auto policy wouldn’t cover the driver unless the company lists the driver. As such, the driver needs their own policy to cover their personal injuries.
Rideshare drivers can get rideshare insurance through Uber or Lyft. This policy comes into effect as soon as the rider is in the car. However, the driver must still own a personal auto insurance policy. The rideshare will not cover the driver of the vehicle when the app is off.
7. Do delivery drivers need commercial auto insurance?
Yes, delivery drivers need auto insurance. The difference lies in the nature of their work.
Let’s assume that the delivery driver works for your business. In this case, your need commercial auto coverage for the vehicle and driver. The commercial auto policy must cover the minimum state requirements.
Now, let’s assume your business owns the vehicle but hires freelance drivers. In this situation, your business needs commercial auto for the vehicle. The driver must get their own coverage.
Your business can help freelance drivers you hire get their own insurance. This practice makes sense when they drive your vehicles. In this situation, your business won’t need commercial auto coverage.
Freelance pizza delivery drivers, haulers, or messengers should get their own insurance. Nevertheless, a non-owned policy may be necessary to cover possible liability. Non-owned policies may only cover the goods on third-party vehicles.
8. Do personal vehicles need commercial auto insurance?
In short, personal vehicles do not need commercial auto insurance coverage. Individual vehicles should be for personal business only.
Personal auto insurance covers vehicles in drivers in non-business situations. For example, a vehicle an employee uses to go to and from work needs personal auto insurance.
If employees use personal vehicles for business purposes, commercial auto insurance is necessary.
Business owners shouldn’t use their personal vehicles for business purposes. Commercial auto insurance doesn’t cover personal vehicles unless listed on the policy. A business owner may incorporate their personal vehicle into a General Liability Policy.
Please note that commercial auto coverage does not protect employees’ vehicles. There are occasions you may use personal vehicles.
In these scenarios, you may consider a non-owned auto policy. This type of policy covers vehicles the business doesn’t own. A non-owned policy can cover occasional use.
Regularly used personal vehicles need to go in a standard commercial auto policy. Doing so will cover them.
9. How long does it take to get a commercial auto insurance policy?
Nowadays, getting commercial auto insurance is straightforward. In general, it takes about 24 to 48 hours to get your proof of insurance. This is the document you need to drive legally.
The application process varies somewhat among insurers. You can do this process online. Online would be the fastest way to get your proof of insurance.
You can go on your insurer’s website to get started. The site will ask you some questions about your vehicles. You will also need to submit all relevant paperwork. Mainly, you need to submit vehicle registration and proof of ownership. Also, you will need to submit your driver’s license information. You have to include any listed drivers’ information.
Then, you must pay the initial fee. The website will generate an automatic policy number. However, this is not proof of insurance. You will get your proof of insurance once the application process completes.
You may get same-day coverage if you visit your insurer’s office in person. However, not all insurers offer this type of service.
You can also get a commercial auto policy over the phone. The process is the same as in person. Your insurer will ask you to submit your documentation by email or through their website. Some insurers use a mobile application to submit paperwork.
10. How much does a commercial auto policy cost?
A “premium” is the price you must pay for a commercial auto policy. This price depends on several factors. First, the type and number of vehicles you insure affects the premium. Second, the number of drivers listed influences the policy’s cost. Third, the amount of coverage you purchase is the most significant factor.
On average, a commercial auto policy costs between $900 to $1,200 annually per vehicle. You can pay for your policy in monthly installments or one annual payment. This cost assumes drivers with a clean record. You may have to pay a higher premium for younger drivers (under 25) or drivers with an accident history.
A $1-million policy would have the following costs:
- A $500-deductible for comprehensive coverage.
- A $500-deductibe for collision coverage.
In general, your policy’s deductible should remain constant in all situations.
You may also get additional coverages such as:
- Roadside assistance usually costs $50 annually.
- Rental reimbursement typically costs $100 annually.
These services are add-ons. You can choose to include them depending on your specific needs.
It pays to shop around. If your vehicles and drivers have clean records, you can negotiate a better price.
11. What is a hired commercial auto policy?
A hired commercial auto policy is a policy that covers rental and lease vehicles. Usually, rental and lease vehicles come with their own insurance. As such, the driver would need to get their own insurance coverage.
Your business needs commercial auto coverage for unlisted drivers. This type of insurance is useful when non-listed drivers carry out work-related tasks. For example, an unlisted driver takes over while one of your regular drivers is on sick leave. In this situation, a temporary hired commercial policy would make sense.
Hired policies also cover unlisted vehicles. For instance, one of your vehicles is unavailable. So, you use your personal vehicle to fill in. In this case, commercial coverage protects you from liability.
A hired policy can be part of your usual commercial auto coverage. You would only need to pay an additional premium for the coverage. Additionally, you could purchase an entirely new policy. This policy could be temporary. Temporary policies are useful for specific events. Hired policies can last for a few days or a few weeks.
The cost of a hired policy depends on duration and coverage. A policy lasting a few days can cost less than $100 for minimum liability coverage.
12. What is a non-owned commercial auto policy?
A non-owned commercial policy pertains to vehicles your business uses without owning. These vehicles could be any type of vehicle. For example, employees’ personal vehicles fall under this category.
Also, a business owner’s unlisted vehicle would fall under the non-owned designation. These types of policies can be part of a General Liability Policy. They can also be part of commercial auto coverage. Like hired commercial auto policies, non-owned ones can be temporary.
Non-owned policies also cover unlisted drivers. A non-owned policy is advisable for occasional and freelance delivery drivers.
A non-owned policy can cost less than $100 monthly for a single driver. Non-owned coverage for vehicles depends on the policy’s duration and driver’s record.
Commercial auto insurance is necessary for your business’s vehicles and drivers. In general, a commercial auto insurance policy will cover vehicles’ damages. It will also cover drivers’ injuries. Also, commercial auto insurance covers damages to third-party property.
All states except New Hampshire and Virginia require commercial auto insurance. Consequently, you must be aware of the minimum requirement for your state. Nevertheless, minimum state requirements may not be enough coverage.
$250,000 should be the minimum you should consider for your policy. Standard commercial auto policies range from a minimum of $250,000 to a maximum of $1 million. On average, $500,000 is enough for most businesses. A commercial auto policy generally costs between $900 to $1,200 annually per vehicle.
Please bear in mind that drivers must be on the policy. Unlisted drivers will not receive coverage from your commercial auto policy. A hired or non-owned policy can cover unlisted drivers temporarily. If you regularly employ a driver, then their name ought to be on the regular policy.
Rideshare and freelance delivery drivers must get their own policies. Uber and Lyft drivers can access commercial auto coverage through their employer. Freelance delivery drivers can get additional commercial coverage built into their personal policies.
You can negotiate a great deal if your vehicles and drivers have clean records. You can shop around to find the best option for your business.
- The law requires businesses to get commercial auto coverage for vehicles and drivers. Each state has different minimum requirements. Please check the specific requirements for your state. Only New Hampshire and Virginia lack commercial auto insurance by law.
- A typical commercial auto policy costs between $900 and $1,200 for a minimum of $250,000 coverage. Standard policies cover up to a maximum of $1 million.
- Commercial auto insurance doesn’t cover personal vehicles in work-related activities. A non-owned policy is advisable for personal vehicles in business activities.
- Rideshare and freelance delivery drivers must get commercial auto policies. Rideshare drivers can get coverage through their employer. Freelance delivery drivers can get commercial coverage in their personal policy.
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