Commercial Auto Insurance Cost

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Many businesses use various types of vehicles to support their operations. Most use some type of vehicle (food truck, delivery van, passenger vehicle) for supply pickup, product delivery, and business tasks assigned to employees during business hours.

Vehicles used primarily for business purposes need to be insured under a commercial auto policy, even when personally owned by the business owner rather than the business. With the majority of personal auto policies, once a vehicle is designated for business use, it may be excluded from coverage in the policy, leaving the owner subject to significant risk for liability.

What is Commercial Auto Insurance?

Similar to the personal auto policy, the commercial auto policy is a package policy that includes liability coverage as well as physical damage coverage. It differs from personal auto coverage for various reasons that are important to the business use of a vehicle:

  • A broad range of vehicle types and sizes can be covered.
  • Higher liability limits are available.
  • Most insurers do not have a limit on the number of vehicles covered on the policy.
  • Most insurers do not have a limit on the number of drivers on the policy.
  • There are various endorsements available to increase the type of coverages.

One of the most important advantages of the commercial auto policy is the endorsement available to add coverage for vehicles used which are not owned by the company or belong to employees. By electing this endorsement, your business use of rental vehicles or employee-owned vehicles can be covered with the same liability limits that are on the vehicles you own resulting in better protection for your business.

What does Commercial Auto Insurance cover?

As a package policy, commercial auto insurance offers coverage on a first party and a third party basis:

  • Bodily Injury Liability: This coverage provides financial protection for your business if an insured driver is involved in an at-fault accident. The coverage will pay for medical expenses, lost wages, and funeral expenses for a third party if your business is found liable and will pay for any associated defense costs.
  • Property Damage Liability: It pays to repair or replace vehicles or other property when an insured driver is found liable for an at-fault accident or event. Knowing that not all accidents involve two vehicles, it’s important to consider higher limits of liability should an insured driver be found at fault for causing a multi-vehicle accident or significant damage to a structure or other property.
  • Medical Payments: This valuable coverage helps pay medical expenses of an insured driver and passenger if injured in an accident no matter who is at fault.
  • Uninsured/Underinsured Motorist Coverage (UM): UM coverage pays in the event an insured driver (or an insured vehicle in some states) is injured by another motorist, who is uninsured or does not carry enough insurance to cover the medical expenses of the injured driver. In states where approved, the coverage can also apply to property damage caused by an uninsured or underinsured driver. UM coverage also pays for pain and suffering, which is not generally covered under the Bodily Injury coverage.
  • Collision Coverage: The collision coverage on the policy pays to repair or replace the insured vehicle in the event of an accident, subject to the deductible listed on the policy.
  • Comprehensive Coverage: It pays to repair or replace an insured vehicle if damaged by events other than a collision, such as vandalism, hail damage, or windshield damage and will pay to replace the vehicle if stolen and unrecovered. Comprehensive claims are also subject to a deductible if elected.
  • Roadside Assistance: This coverage reimburses the business for expenses when an insured vehicle requires assistance such as lockout, fuel, breakdown, towing, or other assistance needed to get the vehicle back in service.

What Optional Coverages are Available?

Depending on the insurer, there are many optional coverages available, which can be added to the policy by endorsement. These endorsements allow the business to tailor their policy according to their industry and individual needs.

  • Hired and Non-owned Liability: Provides liability coverage on vehicles rented by the business or when an employee is using their personal vehicle for business-related activities.
  • Hired Auto Physical Damage: This endorsement allows the business to provide physical damage on vehicles rented for business use and is subject to the deductible selected.

How much does Commercial Auto Insurance cost?

The cost for your commercial auto policy depends primarily on the liability limits you select, type of vehicle you are insuring, motor vehicle reports of the drivers being listed, and various coverages you elect to purchase. Typically, a restaurant will use one or two cargo vans for picking up supplies and delivering food. Average costs for commercial auto coverage are $900 - $1,200. Let's see some examples:

Common limits, coverage, and costs with the driver having a clean driving record:

  • $1 million liability
  • Comprehensive Coverage: $500 deductible
  • Collision Coverage: $500 deductible

Average insurance cost per vehicle: $750 - $1,200 per year

There are several factors that can drive the $750 rate to the $1,200 rate:

  • Motor vehicle reports with tickets or accidents in the previous three years
  • Vehicles with more than 10,000 pounds gross vehicle weight
  • Usual radius of operation
  • Speedy delivery required

Costs for additional coverage added by endorsement:

  • Hired and non-owned auto liability: $50 per year
  • Hired auto physical damage ($100 deductible): $175 per year
  • Roadside Assistance: $50 per vehicle per year
  • Rental Reimbursement: $100 per year

Is Commercial Auto Insurance Required By Law?

Depending on the state where your business vehicle is registered, there are typically laws requiring commercial auto insurance under various circumstances. The main reason a commercial auto policy is required is because personal auto policies do not offer the liability limits required by the state agency.

  • The weight of the vehicle: Many states require vehicles over 1 ton in gross vehicle weight to be insured under a commercial insurance policy.
  • Type of Vehicle: Most states require utility-style vehicles, such as trucks, vans, dump trucks, and other specialty utility vehicles, to be insured under a commercial auto policy.
  • Transportation Vehicles: Any vehicle used to transport passengers for a fee, such as limousines, taxi cabs, and buses, are required to carry commercial auto insurance.
  • Cargo Vehicles: No matter the size or weight, most states require any vehicle that transports cargo, such as a semi-truck, cargo van, or box truck to carry commercial auto insurance.

It’s also important to note that even if your state does not require commercial insurance for vehicles your business uses, a personal auto policy will typically exclude coverage for various uses such as pizza delivery, even when only done on a part-time basis.

Will Commercial Auto Insurance Cover a Vehicle Used for Personal Business?

Most insurers will allow an owner or employee to use an insured vehicle for personal use if the coverage is requested and proper disclosure is made on the application. The cost for providing coverage for regular personal use is typically an additional $50 per year. In almost every case, the insurance carrier will require every person with access to a business vehicle to be listed as a driver on the policy.