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Commercial Auto 101
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Commercial Auto Insurance 101 | Pie Insurance

Commercial auto insurance isn’t just for large fleets. If you regularly use a vehicle for business purposes, you may need a commercial auto policy.
Commercial Auto Insurance 101 | Pie Insurance

What to know before you hit the road

Owning a business comes with a lot of responsibility, which often translates to liability. Coverages like workers’ compensation insurance, business owners’ policies, and general liability insurance can help make sure your business, customers, and employees are covered in case of accidents or damages incurred during the course of operations. But what happens when you add vehicles into the mix? The answer: commercial auto insurance.

What is commercial auto insurance?

Commercial auto insurance is a type of business insurance that applies to vehicles owned or operated by a business. Commercial auto insurance policies protect businesses and business owners when a company-owned vehicle is involved in a collision or otherwise damaged. While they are similar in coverage, a regular auto insurance policy will not necessarily cover company-owned and operated vehicles. While commercial auto insurance policies typically refer to company-owned vehicles, it’s important to note that personal vehicles used for business can also be covered, and personal auto insurance may not be enough in those cases, too.

Without commercial auto insurance, business owners may be left paying medical bills, vehicle and property repairs, and in more serious cases, legal fees, out of pocket. While larger companies may be able to pay up without too much financial strain, for small businesses these costs can be devastating. Moreover, the large price of not having commercial auto insurance is completely avoidable by simply purchasing a commercial auto policy for your small business.

What does commercial auto insurance cover?

As with personal auto insurance policies, there are a variety of different coverage options to choose from. Collision, comprehensive, liability, personal injury, and medical payments for others are some common coverages. The specifics of your commercial auto insurance policy will depend on factors like the number of vehicles you need to insure and the level of risk your business faces based on how you’re using your vehicles.

Do I need commercial auto insurance?

You may not think of your company as needing a commercial auto insurance policy if you’re not in a field traditionally associated with commercial fleets, like trucking, taxis, or delivery services. However, more and more companies rely on vehicles in a variety of capacities beyond the transportation industry. Many common business activities, from simply driving around town to meet with clients to driving to locations to perform work on-site for customers constitutes commercial use of a vehicle, regardless of the vehicle type.

A few instances when you need commercial auto insurance include:

  • When the business owns or leases the vehicle(s)
  • When the vehicle has a commercial license plate, registration, or tag
  • When the vehicle is an essential part of your business operations, such as a taxi or delivery truck

However, the definition of a commercial vehicle can be nuanced, and every case that requires a commercial auto policy may not be obvious. You’ll want to look closely at your own situation and consult with a licensed insurance professional.

Who needs commercial auto insurance?

If you have a business that owns, leases, or hires vehicles, you probably need commercial auto insurance. “Hiring” means non-owned vehicles (those belonging to employees, for example) which are sometimes used for business purposes, such as an employee running a business errand. Even if you’re the business owner and use your personal vehicle in part for business use, regardless of whether the business owns the vehicle, you still likely need to be covered by a commercial auto policy.

What if I have personal auto insurance?

Most states in the U.S. require vehicle owners to carry liability insurance regardless of whether the vehicle is for personal or commercial use. It’s important to make sure you have the right type and level of coverage for any vehicle you’re performing work with, even if you do have personal coverage on that vehicle. In addition, no matter your state, if your business operations involve moving people or products across state lines, federal regulations require you to have a commercial auto policy in place.

So, while having personal car insurance on your vehicle is absolutely important, it may not be the right type of coverage for accidents that happen while using a vehicle for business.

How much does commercial auto insurance cost?

Costs will vary, but one thing is for sure: it’s less expensive to insure your business vehicles than to pay out of pocket if you aren’t carrying the right type of coverage.

The cost of a commercial auto policy will depend on the amount of coverage you need. This is based on multiple factors, including:

  • Vehicle size and number of vehicles
  • Typical travel radius and frequency of trips
  • Geographic location and unique risk factors
  • The type of business you’re conducting

Why is commercial auto insurance important?

While owning company vehicles can provide great benefits to your business (including tax perks), it also adds an additional level of risk to your operations. If you or your employees are involved in a car accident and you don’t have commercial auto insurance, you could be facing large out-of-pocket costs even if the driver had personal insurance at the time. Just one accident without commercial auto insurance can cost your company tens of thousands, or even millions, of dollars in damages and liability.

The number of drivers on U.S. roads in 2020 was lower than any time in the previous 20 years. Commuters rejoiced, but not so fast. Traffic deaths were actually higher during 2020, despite fewer cars on the road. Two years later, the number of drivers and the level of traffic is returning to pre-COVID levels, which means the risk of an accident is ever-increasing. Whether your business uses its vehicles to transport materials, equipment, people, or products, you rely on these vehicles to serve your customers and make a profit. The best way to protect your company vehicles and the employees who drive them is with a commercial auto insurance policy.

Don’t let a fender bender be a business ender

Owning a business comes with risks. Operating a vehicle comes with risks. It makes sense that combining the two will only increase the amount of risk you face as a small business owner. Even the safest driver can find themselves in circumstances out of their control, and no one wants to be stuck paying the cost of repairs from their own pocket.

Luckily, commercial auto insurance can help business owners avoid this outcome and keep business running smoothly, even when accidents happen. If you think you may need a policy, we can help with that too!