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What Is Commercial Auto Insurance And How Does It Work?

Updated: Apr 9

Commercial auto insurance is a crucial form of coverage for businesses that rely on vehicles for their operations. Whether you own a fleet of delivery trucks, service vehicles, or even just a single company car, having the right insurance protection is essential. In this blog post, we will explore the ins and outs of commercial auto insurance, including what it covers, who is covered, and why it is necessary for businesses in the United States.


Commercial Auto Insurance

Table of Contents:



What Is Commercial Auto Insurance?

Commercial auto insurance is a type of insurance policy specifically designed to cover vehicles used for business purposes. It provides coverage for both property damage and liability in the event of an accident or other covered incidents involving a business-owned vehicle.


How Does Commercial Vehicle Insurance Work?

Commercial auto insurance works similarly to personal auto insurance but with some key differences. In addition to liability coverage and physical damage coverage, commercial auto insurance may also include other types of coverage tailored to the specific needs of businesses. These additional coverages may include:


  • Cargo coverage: This coverage protects the goods or products being transported in the insured vehicle. It provides compensation for damages or losses to the cargo in case of accidents, theft, or other covered events.

  • Rental reimbursement coverage: If a business-owned vehicle is temporarily out of service due to an accident or covered event, rental reimbursement coverage can help cover the cost of renting a replacement vehicle.

  • Equipment coverage: This coverage protects specialized equipment or tools that are permanently attached to or stored in the insured vehicle. It provides compensation for damages or losses to the equipment in case of accidents, theft, or other covered events.


What Does Commercial Auto Insurance Cover?

Commercial auto insurance covers a range of risks and potential losses, including:


  • Liability coverage for bodily injury and property damage caused by the insured vehicle.

  • Collision coverage for damages to the insured vehicle resulting from a collision with another vehicle or object.

  • Comprehensive coverage for damages to the insured vehicle caused by non-collision events, such as theft, vandalism, or natural disasters.

  • Medical payments cover medical expenses incurred by the driver and passengers of the insured vehicle.

  • Uninsured/underinsured motorist coverage protects against damages caused by drivers who do not have sufficient insurance coverage.


What Isn't Covered by Commercial Vehicle Insurance?

While commercial auto insurance provides comprehensive coverage, there are certain exclusions to be aware of. These may include:


  • Intentional acts: Commercial auto insurance does not cover damages or injuries caused intentionally by the insured driver.

  • Racing: Any damages or injuries that occur while the insured vehicle is being used for racing or other high-speed events are typically not covered.

  • Non-business use: Commercial auto insurance generally does not cover accidents or incidents that occur while the insured vehicle is being used for personal purposes unrelated to the business.

  • Cargo or specialized equipment: Certain types of cargo or specialized equipment may require separate coverage, as they may not be covered under a standard commercial auto insurance policy.


What Kind of Vehicles Are Covered by Commercial Car Insurance?

Commercial auto insurance can cover a wide range of vehicles, including:


  • Delivery trucks

  • Service vehicles

  • Vans and SUVs used for business purposes

  • Company cars

  • Trailers and tow trucks

  • Specialty vehicles, such as food trucks or mobile businesses


Why Do You Need Commercial Vehicle Insurance?

Commercial vehicle insurance is necessary for several reasons:

  • Legal requirements: Most states require businesses to carry a minimum amount of liability insurance for their vehicles.

  • Financial protection: Commercial auto insurance protects your business from costly lawsuits, property damage, and medical expenses in the event of an accident.

  • Peace of mind: Knowing that your vehicles and drivers are adequately protected allows you to focus on running your business without worrying about potential risks.


Who Is Covered By Commercial Auto Insurance?

Commercial auto insurance typically covers the business entity itself, as well as any employees or drivers authorized to operate the insured vehicles. It is important to accurately list all drivers and their driving records when obtaining commercial auto insurance. Additionally, some commercial auto insurance policies may also provide coverage for hired or non-owned vehicles, which are vehicles that are rented or owned by employees but used for business purposes.


How Much Does Commercial Auto Insurance Cost?

The cost of commercial auto insurance varies depending on several factors, including the type of vehicle, the number of vehicles, the driving records of the drivers, the coverage limits, and the location of the business. Insurance providers consider these factors, along with the business's industry and the level of risk associated with its operations, to determine the premium. It is recommended to obtain quotes from multiple insurance providers to find the best coverage at the most competitive rates.


What is Hired and Non-Owned Auto Insurance?

Hired and non-owned auto insurance is an additional coverage option for businesses that do not own their vehicles but use rented or employee-owned vehicles for business purposes. This coverage provides liability protection in case of accidents involving these vehicles. Hired auto insurance covers vehicles that are rented or leased by the business, while non-owned auto insurance covers vehicles that are owned by employees but used for business purposes. This coverage is important as it extends liability protection to situations where the business may be held responsible for damages or injuries caused by these vehicles.


Tips for Buying Commercial Auto Insurance:


  • Assess your business's specific needs and risks to determine the appropriate coverage limits. Consider factors such as the type of vehicles, the nature of your business operations, and the value of the cargo or equipment being transported.

  • Shop around and compare quotes from multiple insurance providers to ensure you get the best coverage at the most competitive rates. Consider working with an independent insurance agent who can help you navigate the options and find the right policy for your business.

  • Consider bundling your commercial auto insurance with other business insurance policies to potentially save on premiums. Many insurance providers offer package policies that combine multiple coverages, such as general liability, property insurance, and commercial auto insurance, into a single policy.

  • Review your policy regularly and update it as your business grows or changes. As your business expands or acquires new vehicles, it is important to update your policy to ensure adequate coverage. Regularly reviewing your policy with your insurance provider can help identify any gaps in coverage and make necessary adjustments.


Commercial auto insurance is a crucial investment for businesses that rely on vehicles for their operations. By understanding how commercial auto insurance works, what it covers, and who is covered, businesses can make informed decisions when selecting the right coverage for their specific needs. Additionally, considering factors such as cost, additional coverage options, and tips for buying commercial auto insurance can help businesses secure the necessary protection and peace of mind.

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