For small businesses that use motor vehicles as part of their normal operations, commercial auto coverage provides important financial protection if a business owner or employee is involved in an accident.
Commercial auto coverage provides money to meet the financial responsibility if you, or a team member, are at fault in an accident and someone is injured, or the accident causes property damage.
Commercial auto coverage - which can also cover trucks and vans - is required under the laws of most states. In some states, businesses are also required to purchase coverage to protect them against uninsured or under-insured drivers.
Trying to register a commercial vehicle with a personal auto policy can result in a claim being denied following an accident.
Commercial auto coverage is important in several situations:
- A car or truck is titled in the company's name. Personal auto policies won't cover vehicles that aren't registered to a person.
- An employee drives the vehicle for work purposes.
- The vehicle is used to deliver merchandise or transport people for a fee.
- The vehicle carries equipment or has a trailer attached for business purposes.
- The vehicle exceeds a certain gross weight.
Commercial auto policies have similar underwriting criteria to personal auto policies, with rate depending on how and where a vehicle is used. The cost of insuring a small delivery truck, for instance, will likely be higher than buying a policy for a car used by a sales rep making customer visits.
One of the most significant differences between commercial and personal auto policies, though, are the available coverage limits. Commercial policies typically have higher policy limits available than personal auto coverage, which can be important in arranging the appropriate level of protection for your small business.
Rented and Borrowed Vehicle Coverage
Small businesses should also evaluate their need to purchase coverage for hired and non-owned company vehicles.
Hired auto coverage, which can be added to a broader commercial auto policy or business owner's policy, is designed to protect the operation of cars or trucks that are rented for business purposes. If an employee has an accident while driving a rental car, the company can be held liable for any resulting third-party injuries or damage (the policy won't cover physical damage to the rented vehicle).
Similarly, non-owned auto liability coverage protects the company against liability stemming from an accident if an employee is using his or her personal car for business purposes. (Such as a team member running errands or visiting clients in a personal vehicle).