Commercial auto insurance: The cost, policy, and coverage

If your business offers a company car to its employees, then it’s important to have commercial auto insurance. Protecting not only yourself as a business but the employee driving the vehicle is essential. Failure to do so will leave employees at risk of penalties to their license. As a business, it results in fixed fines and could go as far as a court case.

No one is able to predict the dangers that come from driving. Purchasing insurance means that you have coverage on the vehicle itself, as well as helping to claim on third-party insurers if required.

With only 6% of drivers on the road being uninsured, you’re in the minority if you’ve not yet purchased commercial auto insurance. For those who have recently started offering company vehicles, commercial auto insurance is something that is part of the setup process.

Commercial auto insurance is an absolute must-have, so we’ve put together a guide to introduce this type of insurance to you. You’ll get a better understanding of the costs that come with this insurance, as well as what the policy includes. Getting the right level of coverage is essential so that you protect your business and its employees fully from financial damage.

What is commercial auto insurance coverage?

Commercial auto insurance is designed for businesses that own and operate vehicles. Insurance coverage helps a business cover the costs that are often incurred for repairing or replacing the vehicle.

There are parameters within each insurance policy that offers a level of coverage tailored to the business needs. Depending what the business needs from an insurance policy, will determine what the insurance provider pays out and how much coverage is given.

Companies will often ask employees to use their own cars as company cars, which is where commercial auto insurance is required. This is handy for businesses as it offers tax deductions. Personal insurance, however, doesn’t typically cover business-related dangers, so extra coverage is useful to pay for.

What are the benefits of commercial auto insurance? Despite the obvious, which is protecting you from legal repercussions, advantages include:

• Safeguards a business from financial harm.
• Helps keep the continuation of business operations.
• Handles the process of a claim, including the repair or replacement of a vehicle.
• Provides peace of mind that both business and employees are protected.
• Coverage for all auto vehicles; cars, heavy-duty trucks, etc.

Is commercial auto insurance affordable?

Rates vary depending on the policy you choose but affordable commercial auto insurance is easy enough to get. There are many factors that insurers need to consider before providing a quote to a business. These factors include:

• Employee driving records
• The value of the vehicle being insured
• Amount of coverage
• Type of coverage
• The type of vehicle being insured
• Items that are being transported in a vehicle

Typically, the average policy will cost between $142 to $187 per month. Risk is the main influence in making a decision on the cost of the policy, as well as the level of coverage.

Insurers will want to estimate the business’ own risk and that of the employees who’ll be responsible for driving. The expense is another cost for the business but it helps protect the company from an even greater one if the worst happens.

The types of policies available for commercial auto insurance

There are a number of policies available when it comes to commercial auto insurance. The type of policy you choose will depend entirely on the business in question. 

Collision coverage – This is included in a policy to cover losses that come from the result of a collision in which the vehicle has come into impact with any object or other vehicle overturning.

Comprehensive coverage – This is the broadest form of coverage for commercial auto vehicles and is also offered in personal car insurance too. There are a few exclusions in this that are worth knowing, so look at the policy with a fine tooth comb.

Specified perils – Covers pretty much everything covered under comprehensive cover but it only covers the named persons in the policy. As a result, it lowers the premiums.

Fleet coverage – For those businesses that have a number of vehicles to cover, a specific policy related to fleet vehicles is more cost-effective.

Commercial auto insurance covers both the business as well as any physical damage that’s caused to the owned vehicles and first-party coverage if required. Not only that but when it comes to renting or leasing a vehicle, this insurance covers damage claim costs too.

What coverage does commercial auto insurance offer?

Understanding the lengths to which your insurance covers the vehicle and your business is essential. After all, you want to avoid paying out anything extra where possible. Here are a few things to look for when it comes to coverage on commercial auto insurance.

Liability

When damage is done to the car, there’s liability held to one or both parties. Having insurance on liability claims is beneficial to protect your own back from paying out. Liability coverage also helps with claiming against bodily injury, death, and property damage. This also covers legal fees, another costly expense.

Medical payments

Medical costs rack up the overall expenditure considerably. From minor injuries to life-threatening ones, having insurance covers medical payments. This is often to both the driver and any other passengers involved, whether it’s your employee’s fault or not.

Other parties that are uninsured

As there’s a small percentage of drivers that are uninsured, a commercial auto insurance policy covers injuries and property damage caused by these individuals. It’s useful in the case of hit-and-run drivers too.

Coverage like this is important, especially as hit-and-runs account for over 5% of traffic fatalities in the US alone.

Comprehensive and collision coverage

This broad type of coverage includes a variety of damages that are made to the vehicle. This could be through flood, fire, or damage to a work vehicle hit by an object or another car. There’s also coverage usually provided for theft and vandalism too.

Tips for purchasing commercial auto insurance this year

To purchase commercial auto insurance, it’s always good to shop around. Getting a number of quotes help you compare each one in detail. To round off, these tips will help you secure the best insurance for your business and any company vehicles you own.

Consider your budget

The business budget available for company cars is the first thing to consider before going ahead and offering a company vehicle to an employee. Consider the budget that’s available once a car has been purchased or leased. If it’s an employee’s own car, then factor in the amount of allowance you’ll give to them for fuel.

Insurance is part of the general running costs, so for some, businesses have a cap on what they pay out monthly. Use the average policy costs mentioned above of $142-$187 as a guideline.

Check that the policy covers everything you need

Does the policy cover everything you need as a business? It’s important to check that the policy details all the coverage that keeps your business, the drivers, and the vehicles protected. If you’re missing anything and you don’t realize it until damage happens, then you could be left out of pocket.

Look through the policy with care and if you’re confused about whether a certain coverage is in place, query it. This will avoid being blindsided and ending up with insurance that doesn’t protect you efficiently.

Set it to auto-renewal and assess it annually

There’s a reason why many of us love an auto-renewal membership. For the most part, you don’t need to think about it and it simply renews itself, year in, year out. However, if you’ve not got this in place, you could be running the risk of having drivers on the road with no insurance.

Nearly all insurance providers will offer an auto-renewals membership and whilst you could let it run for years, it’s good to assess it annually. You could find a better deal elsewhere or it could be that your current deal offers less value for money than it originally did.

Try to cover specific perils to lower premium costs

To save money further, look for policies that have specific peril coverage. Having policies under individual employee names helps to lower premium costs in general. It’s always helpful to find ways of saving money in business.

Buy commercial auto insurance that protects you fully

As a business, it’s important to protect yourself financially from any harm that comes your way. Damage to vehicles, whether it’s the fault of your company or not, is something you want to be covered for. It prevents your business from being held back or delayed due to the repair/replacement of a company vehicle. Not only that but it saves you money.

Use this guide as a reference point when purchasing commercial auto insurance for the first time as a business.

Author Bio: Natalie Redman (LinkedIn)

Freelance writer for many clients across multiple industries. Natalie has three years of copywriting experience. Natalie has a wide range of experience in copywriting for web pages for businesses across many industries. She’s also an owner of two blog websites and a Youtube content creator.

03/10/2022