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Commercial auto insurance, sometimes known as business auto insurance, provides protection for your business, vehicles and employees when business operations require driving on the job. Business vehicles typically aren't covered by personal auto insurance or your general business insurance policy, nor are employee vehicles when they're being driven for work. A dedicated commercial auto insurance policy protects your assets and employees, and may help you comply with insurance requirements in your state.
If your business owns company cars, delivery trucks or specialized vehicles, you need commercial auto insurance. You may also want to consider a business auto policy if you regularly drive your personal vehicle for business. Here's what to know about business auto coverage.
What Is Commercial Auto Insurance?
Commercial auto insurance provides coverage for liability and damages when vehicles are owned or driven as part of your business. Business auto insurance is similar to personal auto insurance, except that it's used to protect business vehicles and assets instead of your personal vehicle and assets.
If a vehicle your business owns is involved in an accident, your company could be liable for the injuries and property damage that results. The same may hold true if you or your employee are driving a personal vehicle on the job. Commercial auto insurance provides protection where your personal auto policy and regular small business insurance do not. Some business owners also choose higher liability limits for a business auto policy, to provide even more protection against potential lawsuits or loss.
What Does Commercial Auto Insurance Cover?
Commercial or business auto insurance covers cars, trucks, trailers and other vehicles your business owns. Optionally, it can also cover vehicles your business leases or rents, as well as vehicles owned by others that are driven for business purposes—for example, your employee's personal vehicle they use to make deliveries.
Business auto policies typically break coverage down into these basic categories:
- Liability coverage is for bodily injury and property damage that results from an accident. Your state may have mandatory requirements for liability insurance that includes medical (or personal injury) coverage and uninsured/underinsured motorists' coverage. Businesses often choose high levels of liability coverage to make sure their assets are protected.
- Collision coverage is for damage that results from a collision or from the vehicle overturning. If you lease a vehicle, you may be required to carry minimum levels of collision and comprehensive coverage as well as liability coverage.
- Comprehensive coverage is for damage that results from something other than a traffic collision, such as a fire, theft or flood.
- Specified perils coverage is similar to comprehensive coverage but only covers perils that are named in the policy. Because it covers a limited number of perils, specified peril coverage may cost less than comprehensive.
- Hired and non-owned auto insurance covers vehicles that are not owned by your business, such as personal cars belonging to you or your employees.
You may be able to choose different types and levels of coverage for each business vehicle listed on your policy, so you can scale coverage up or down based on the vehicle's value, age, frequency of use or safety rating.
Some items may not be covered by basic business auto insurance; for example, goods or equipment you transport in a business vehicle. You may want to cover these items under your business insurance policy instead. If you or your employees drive company vehicles outside of work, ask your insurer how to make sure you're covered for personal use.
Do I Need Commercial Auto Insurance?
You need business or commercial auto insurance when your business owns or operates vehicles, and when you or your employees drive on the job. Your commute to and from work is covered by your personal auto policy, but any of the following cases may warrant adding business or commercial auto insurance.
Your Business Owns, Leases or Hires Vehicles
Any vehicles your business owns should be insured under a commercial or business auto insurance policy. Examples include company cars, delivery trucks or vans, vehicles or trailers used to haul equipment, transport vehicles (such as buses or taxis), and specialized vehicles like box trucks or food trucks. You may also want to add coverage for vehicles your business leases or rents.
You Drive a Personal Vehicle for Business
With limited exceptions, a personal auto policy won't cover business use of your vehicle. Talk to your personal auto insurer about using your personal coverage if you rarely use your car for business—for example, you visit the bank and the office supply store a few times a year. You may be able to adjust your policy to accommodate minimal business driving.
Consider adding business coverage or a commercial policy to your existing auto insurance if you do any of the following types of business driving:
- Gig work for delivery or ridesharing apps
- Driving from one work site to another
- Transporting people, for instance driving clients to view real estate properties
- Hauling equipment or towing a trailer using your personal vehicle
Your Employees Drive on the Job
Employees who drive on the job may not be covered by their personal auto insurance if they're involved in a major accident while at work. Additionally, their personal liability coverage may not be adequate to protect your business. A business auto policy can cover your employees when they use their own vehicles to make deliveries, visit clients, run errands and transport equipment or people.
How Much Does Commercial Auto Insurance Cost?
The cost of a commercial or business auto insurance policy can vary substantially, depending on the number and type(s) of vehicles, number of drivers, coverage limits and deductibles, optional coverages, your location and more. Minimal coverage for a single car might start at less than $600 per year; insuring a fleet of limousines, for example, could cost tens of thousands of dollars.
The best way to determine how much commercial auto insurance will cost you is to get a quote or, preferably, multiple quotes. Discussing your needs with an insurance agent may help you identify the right coverages and find ways to save money, for instance by adjusting your deductible or forgoing optional coverage you don't need.
How to Get Commercial Auto Insurance
You can get quotes for commercial auto insurance from any company that offers this coverage or by using an online marketplace that gives you access to quotes from a range of insurers. You may also want to ask for a quote from your personal auto insurer or the company that insures your business; they can help you work through your coverage options and avoid overlaps or gaps between your personal auto policy, general business insurance and commercial auto coverage. Keeping multiple policies with the same insurance company may entitle you to multi-policy discounts as well.
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Frequently Asked Questions
Minimum coverage requirements for commercial auto insurance vary by state. To avoid penalties, check your state's minimum requirements for bodily injury and property damage liability coverage, as well as any additional requirements for personal injury protection and other types of coverage. Be aware: State minimums may be higher for business auto insurance than for personal auto insurance.
If you own and operate vehicles registered with the U.S. Department of Transportation (such as tractor trailers or cargo trucks), your vehicles may also be subject to insurance coverage minimums maintained by the Federal Motor Carrier Safety Administration.
All of part of your commercial auto insurance premiums may be tax deductible, depending on a few factors. Commercial auto insurance premiums for vehicles used 100% for business purposes are typically 100% deductible. If you drive your car for both business and personal purposes, you may be able to deduct part of your insurance cost, based on the percentage of your car's usage that's for business purposes.
Some business owners choose the standard mileage deduction instead of deducting some or all of their actual vehicle expenses. If you choose to take a mileage deduction, you can't deduct insurance costs separately.
Not sure how to proceed? Deducting vehicle expenses can be complicated. Consulting a qualified tax pro may help you better understand your options and choose the deduction method that works best for you.
The Bottom Line
Commercial auto insurance provides key protections for you, your business, your vehicles and your employees in the event of a work-related accident. Taking the time to figure out the right combination of coverages can help you reduce your exposure while staying within budget, so you and your employees can focus on the road ahead.