Q

What is commercial auto insurance?

A

Commercial car insurance has many of the same protections of a typical auto insurance policy, but it covers vehicles that are used for business instead of personal use.

Andrew Hurst

By 

Andrew Hurst

Andrew Hurst

Senior Editor & Licensed Auto Insurance Expert

Andrew Hurst is a senior editor and a licensed auto insurance expert at Policygenius. His work has also been featured in The New York Times, The Wall Street Journal, Forbes, USA Today, NPR, Mic, Insurance Business Magazine, ValuePenguin, and Property Casualty 360.

Updated January 27, 2022 | 5 min read

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Commercial auto insurance is a type of business insurance that covers commercial instead of personal vehicles. Like regular car insurance, a commercial auto policy includes liability and physical damage coverage, along with special forms of protection suited to commercial vehicles.

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You may need commercial auto insurance for cars and trucks you use for business, like towing and hauling, carrying equipment, driving clients, or vehicles that are a part of a fleet of company cars. While commercial auto insurance is more expensive than a personal auto policy, you can get business car insurance from most large insurers.

Key Takeaways

  • You may need a commercial auto insurance policy to cover your car or truck if you use it for work, even if you only use it for business part of the time.

  • Commercial auto insurance covers your car or truck and can be extended to cover your employees, even when they’re driving their own vehicles.

  • It's more expensive to insure a commercial vehicle than your personal car, but you can qualify for discounts just like with your regular personal policy.

What does commercial auto insurance cover?

Commercial auto insurance includes many of the same coverages as personal car insurance. However, because insurance companies limit the amount of protection a vehicle used for business receives under a regular car insurance policy, commercial auto insurance is essential for business owners.

A commercial auto insurance policy is made up of several types of insurance coverage. While most of the types of commercial auto insurance compare with what's covered by a regular auto policy, there are a few forms that are unique to commercial coverage. A commercial policy might include: 

  • Bodily injury liability (BIL): The part of liability coverage that covers injuries you or one of your employees cause while driving an insured vehicle.

  • Property damage liability (PD): Covers the cost of repairing or replacing property that you or your employees damage in a covered accident.

  • Uninsured/underinsured motorist coverage (UM/UIM): Pays for the damage or medical expenses if your covered vehicle is hit by an uninsured driver, or by a driver who doesn’t have enough insurance to cover expenses themselves.

  • Medical payments/personal injury protection (PIP): Pays for the medical expenses of the driver and passengers of your vehicles if they're in an accident, regardless of who's at fault.

  • Collision coverage: Covers damage to your own vehicle that occurs in any type of collision, including single-car crashes, regardless of fault.

  • Comprehensive coverage: Covers damage that doesn't result from a collision, like damage involving animals, weather, or falling objects. Usually purchased alongside collision coverage.

  • On-hook towing coverage: Pays for damage to a customer's vehicle that occurs while you're towing it. 

  • Trailer interchange coverage: Covers trailers that your commercial vehicle pulls that you don't own.

  • Motor truck cargo insurance: Pays for legal expenses that may arise if you're hauling a customer's cargo and you damage or destroy it.

  • Rental reimbursement with downtime: Covers the cost of renting a temporary replacement if your vehicle needs repairs and can't be driven.

  • Hired vehicle coverage: Provides liability coverage for cars or trucks you lease, hire, rent, or borrow for business use.

  • Non-owned vehicle coverage: Covers you when your employees use their own cars to conduct business for you.

How is commercial auto insurance different from regular auto insurance?

Although commercial auto insurance has many of the same policy features as a regular car insurance policy, there are some differences between the two policies. The main differences between a commercial and personal auto insurance policy include:

  • Available levels of coverage

  • The cost of both types of insurance

  • Tax deductibility of commercial insurance

  • Who's covered by both types of policies

The amount of coverage needed to insure commercial vehicles is often higher than a regular car or truck because of their size, the amount of damage they could cause in an accident, as well as the value of their cargo. For these reasons, commercial policies usually cost more than regular car insurance coverage.

However, unlike personal car insurance, commercial auto coverage may be tax deductible. As necessary business expenses, you may be able to deduct the cost of your insurance, along with vehicle repairs, garage rent, lease payments, new tires, and tolls.

Finally, unlike regular auto insurance coverage a commercial policy can cover a variety of drivers, including your employees, your family, and others whom you name on your insurance agreement. Regular car insurance covers members of your household, along with others who drive your car occasionally, unless they have non-owners coverage.

Who needs commercial auto insurance?

If you're a business owner, you must insure the vehicles your company uses for business-related purposes with a commercial auto policy or by adding a commercial use endorsement to your standard policy. Any vehicles that are registered to a business rather than an individual must be covered by a commercial auto insurance policy. 

You may be covered by your regular policy as you drive to and from work, for other personal reasons, but your personal coverage won't extend to the times you use your car for business unless you’ve added specific coverage.

You may be required to get commercial auto insurance depending on the size of vehicle you drive or its customizations, too. If your vehicle has a gross weight of more than 15,000 pounds, you could be required to get commercial insurance. States also require a vehicle to be registered as commercial if it has certain modifications, like if the seats behind the driver have been removed.

However, it's not just large trucks that need commercial auto coverage. If you're self-employed as a painter or carpenter and you're in a wreck while driving to a jobsite, your personal policy won't cover any related claims. Similarly, if you use your own car to make deliveries or own a food truck, you could get the best protection from a commercial vehicle policy.

In most places, though, rideshare drivers don't need a commercial auto policy. Instead, if you drive for a service like Uber and Lyft, you may be required to add rideshare coverage to your personal policy to make sure you’re fully protected.

Do delivery drivers need commercial auto insurance?

Delivery drivers need insurance if they’re driving their own cars, but they don’t necessarily need a commercial auto policy. Companies and restaurants, even app-based delivery services, that employ delivery drivers already carry liability insurance in case you're responsible for a crash while on a delivery. However, these policies won't cover damage to your own vehicle if you don't have a commercial policy with comprehensive and collision protection.

What does commercial auto insurance cost?

Like regular car insurance, the cost of coverage for commercial vehicles depends on a range of factors, including the age of you or your drivers, accident history, and location. The cost of commercial auto insurance also varies depending on the type of business you use your vehicle for, the size of your car, and the number of cars and employees that you have to insure.

Generally, it's more expensive to get commercial auto insurance than it is to insure a personal vehicle. While the average auto insurance premium is $1,652 per year, you could spend hundreds more for commercial coverage depending on your vehicle and how it's used. For the best rates, we recommend comparing costs and coverage options from multiple companies. 

While the cost of commercial auto insurance may be higher than a regular policy in most cases, you may pay less for coverage if you have a smaller fleet of cars — or even a single vehicle — to insure. Because large vehicles can haul a lot of cargo and inflict a lot of damage if they were involved in a crash, they are the most expensive types of commercial vehicles to insure.

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Where do you buy commercial auto insurance?

Most auto insurance companies that sell personal insurance policies, like GEICO, State Farm, and Allstate, also sell commercial auto insurance policies. Insurers usually offer commercial auto insurance policies as a form of business insurance, unlike regular auto coverage.

If you already have car insurance and you need commercial coverage, it could be easiest to consider the coverage offered by your existing company. This way, you could keep all of your insurance policies in one place, making it more convenient to track payments and claims.

Frequently Asked Questions

Can you change your regular car insurance to a business policy?

You will have to exchange your regular car insurance for a commercial auto policy if you use it to conduct business. If you had to change coverage types, you could purchase a commercial policy and transfer your old insurance protection to your new policy, plus any additional endorsements that you need as a business operator. You would receive a refund in the event that you changed to commercial auto insurance in the middle of your policy, as long as your new rate isn't greater than your old rate.

Can you get one-day business insurance for a car?

Insurance coverage comes in six-month or 12-month terms. However, if you need to haul something in your own vehicle for business use, insurance companies may offer limited protection. However, before hauling anything for business-related reasons, you should contact your provider to make sure you're not risking an uncovered property loss.

Does business insurance cover passengers?

Yes, like regular car insurance, another driver's business insurance covers the injuries of those you're driving with, as long as they're responsible. Your own medical payments coverage or personal injury protection insurance would pay for your passengers’ medical expenses if you live in a no-fault state.