What is Auto Insurance for Commercial Vehicles?

Auto insurance for commercial vehicles is a special type of auto insurance policy that’s specifically designed to protect businesses by covering financial compensation for bodily injuries, vehicle and property damage. It covers you, and every employee of your business with vehicles registered with the company.

There are a wide variety of commercial auto insurance policies that you can choose from, and combine to financially secure yourself, your business, and your employees from collateral loss of a road accident regardless of how minor or severe it is.

Before exploring commercial auto insurance further, it is crucial to know why it’s necessary for your business, the types of commercial auto insurance policies that you can purchase, and what do they cover vs what they don’t.

Plus, this article delves into details regarding the types of vehicles that are covered, the amount of commercial auto insurance coverage that you should get, and its cost, along with practical tips to buy affordable policies.

What is Commercial Auto Insurance?

Commercial auto insurance, also known as business vehicle insurance, is a type of auto insurance policy that covers vehicles that are used for business purposes. It typically covers all types of commercial vehicles including sedan cars, vans, trucks, and any other vehicle that’s registered as business property or used for commercial purposes.

In a nutshell, commercial auto insurance covers your business vehicles when:

Your employees are injured or killed in a company-registered motor vehicle.

You or your employees cause an accident that results in vehicle damage, property damage, injuries, or death.

Your business vehicles are damaged by events outside your control, such as vandalism, fire, or natural disasters.

Your commercial vehicle has been stolen.

Who Needs Commercial Auto Insurance?

Typically, anyone involved in any sort of commercial activity requires commercial auto insurance. For instance, if you use your car or motorcycle for ride-sharing, food delivery, or any other commercial purpose then you need to get commercial auto insurance.

If you’re involved in any commercial activity, and you get involved in a car accident, your personal auto insurance won’t cover it, as it’s exclusively covered by a commercial auto insurance policy.

So, whether you’re running a business, or performing commercial activities involving the use of vehicles, you need to get commercial auto insurance to stay financially protected against accidents and unexpected events.

Why Should Every Business Have Commercial Auto Insurance?

Regardless of whether you’re running a small business, or a large enterprise, if you have vehicles operating in the streets then there’s a substantial risk of getting into a road accident.

Whether the vehicles are being used for transportation or to distribute products, a road accident can lead to unprecedented costs. Depending on the severity of the accident, you will have to bear vehicle repair/replacement costs, compensation for bodily injuries and property damage to your employees, the other driver, any third party affected by the accident.

This certainly adds up additional costs, and these expenses can amount to a huge number of thousands or even millions of dollars. Things can get from bad to worse, if you, or any of your employees are at fault for the accident. It can even lead to lawsuits that lead to serious financial costs of mitigate legal litigations.

It’s normal to stay under the assumption that if you or your employees drive carefully then it's possible to prevent such accidents. Well, it’s true but on the other hand, ask yourself, are you willing to take that high risk without having adequate commercial auto insurance?

According to NHTSA there were 10.53 million traffic accidents throughout the USA in the year 2022. Based on NSC reports, there have been 117,200 injuries in 2021, and 120,200 injuries in 2022 in accidents involving large trucks. And the number of large truck fatalities involved 5,733 in 2021, and 5,837 in 2022 which is a 1.8% increase from 2021 and 41% increase in the last 10 years.

Given the fact that the number of road accidents caused by commercial vehicles is so high in the US, it is crucial to ensure that your best is financially secured with adequate policies and coverage within your budget.

Apart from the financial risks, it is mandatory for businesses to have commercial auto insurance in every state in the USA except New Hampshire. So, it’s vital for every business to have an active commercial auto insurance policy as it secures your business both financially and legally.

Types of Auto insurance for commercial vehicles and What Do They Cover?

To keep your business protected from unprecedented financial loss, it is crucial to determine the types of commercial auto insurance policies that are necessary. Here are 9 essential commercial auto insurance policies that you should consider as follows.

Bodily Injury Liabilities

The bodily injury liability policy will cover the medical costs of the other driver, the passengers of that vehicle, pedestrians and any other third party that needs medical treatment for a motor vehicle accident that’s caused by you, or an employee of your company.

If the other party sues you for sustaining injuries, or for an accidental death then legal costs such as dealing with court proceedings and paying fines will be covered by this insurance policy.

Property Damage Liabilities

The property damage liability insurance covers financial compensation to repair and replace any tangible asset of another person that has been damaged due to an accident you, or your employee is responsible for.

This includes vehicles, fences, trees, guardrails, mailboxes, buildings etc. Similarly, like bodily injury liabilities, the property damage coverage will cover the legal costs if you or any members of your business is sued for damaging their property in an at-fault accident.

Combined Single Limit (CSL) Coverage

Often the bodily injury, and property damage liability coverages are purchased together, so many auto insurance companies offer these two insurance policies together as combined single limit also known as CSL coverage in short.

In CSL coverage you get a combined limit for the bodily injury and property damage liability policies instead of two separate limits. Here’s an example, if you have CSL coverage of $100,000, and if you’re or any employee is liable for bodily injuries of $50,000, and property damage of $30,000 the CSL policy will cover $80,000 from the insurance policy.

But if you have two separate polices for each, let’s say your bodily injury coverage is $50,000 and property damage coverage is $25,000. The bodily injury would be covered but you would have to pay the remaining $5,000 of $30,000 for the property damage liability out of your own pocket.

So, that’s why the CSL coverage policy can be beneficial for you, especially to cover hefty liabilities.

Uninsured/Underinsured Motorist Coverage

According to IRC as of 2022, 14% of drivers in the USA are uninsured. As of 2024, there are approximately 239.24 million licensed drivers which means about 33.5 million drivers are uninsured.

So, based on that, if you get into a road accident for which the other driver is at-fault, and if they don’t have adequate auto insurance, or if they don’t have any auto insurance at all, and if they can’t cover their liability costs that they owe to your business then you would have to pay for the damages from your business’s capital.

But with an active uninsured/underinsured motorist policy, your insurer will cover the expenses that the other driver is unable to compensate for. In this way, you stay financially secure from such mishaps.

Personal Injury Protection (PIP) Coverage

With personal injury protection insurance coverage, you, your employees and the passengers will stay financially secure for paying medical bills, and loss of income after a motor vehicle accident regardless of whoever is at-fault.

Depending on the severity of the accident, you can keep yourself, and your employees financially covered with the PIP insurance coverage. This will also help your business stay safe from being sued by an employee for not compensating them for the financial expenses incurred for their medical expenses, or loss of income.

Medical Coverage (MedPay)

MedPay is an alternative, and a back auto insurance policy for the PIP coverage. Incase if the PIP coverage runs out, and if your business has access to the MedPay coverage then you, and your employees wouldn’t have to worry about hefty medical fees.

The remaining medical bills will be covered by the MedPay insurance depending on your coverage limits. Having medical insurance is crucial, as medical treatments can be very expensive depending on the severity of the accident.

So, that’s why it’s important to consider acquiring MedPay coverage in your commercial auto insurance policy.

Collision Insurance Coverage

Collision insurance coverage specifically covers the repair and replacement costs of your vehicle after an accident regardless of whoever is at-fault. This commercial auto insurance policy is often required by dealerships if you’re purchasing a vehicle for your business, especially if it’s on loan.

If you’re renting vehicles for business purposes on rent or lease, then you may need to show proof of collision insurance coverage. Apart from these requirements, having a collision insurance policy keeps your business financially secure from hefty repair and maintenance costs.

Comprehensive Insurance Coverage

Comprehensive insurance coverage is a special type of auto insurance policy that protects your vehicles financially from damage that is beyond your control. This includes damages and financial loss incurred due to theft, vandalism, fire, and natural disasters like storms, and earthquakes.

To keep your business vehicles protected, it is crucial to have comprehensive coverage especially to prevent financial burdens from an unprecedented event. Just like collision insurance, many dealerships require you to have comprehensive coverage, and that’s why these two insurance policies are often purchased together.

Hired and Non-Owned Auto Insurance

This is one of the most commercial auto insurance policies especially if you’re renting vehicles, or if you and your employees are using your personal vehicles for business purposes.

Typically, commercial auto insurance will not cover your personal vehicles that are used commercially by you or your employees. But with the HNAO (hired and non-owned auto insurance), you can get commercial auto insurance coverage for personal vehicles that are used for business purposes.

Additional Types of Commercial Auto Insurance to Consider

Apart from that, here are a few types of commercial auto insurance coverages to consider depending on the situation, business capacity, and the extent of financial protection required.

The following includes additional types of commercial auto insurance coverages for extended or enhanced financial protection that can severely affect your business.

Individually Rated Commercial Auto (IRCA) Insurance

Individually rated commercial auto insurance is specifically necessary for small businesses with a few vehicles. Or, if the vehicles are used for both commercial and personal use, you can get insurance for the vehicles that are used specifically for business.

With this coverage, you can individually cover the commercial vehicles that require financial protection, while saving a substantial amount of your business’s capital.

New Vehicle Replacement Coverage

If your commercial vehicle is damaged to the point that it’s beyond repair or repair, it would be very costly and expensive. The best solution is to replace it. With the new vehicle replacement coverage, your insurer will pay your car’s actual cash value and any amount that you owe for financing or purchasing the car on loan.

Commercial Gap Insurance

Commercial gap insurance is a special type of business vehicle insurance that’s designed to cover any additional amount that you owe your lender for financing the car on a lease agreement, or for purchasing it on loan.

It’s an optional add-on insurance that applies immediately after a collision or comprehensive auto insurance. For example, if person A gets into an accident with another driver, the collision auto insurance will cover the actual cash value of the car, i.e. the car’s purchase price minus its depreciated value.

So, if you have purchased the car with a loan of $40,000, and 3 years later if its ACV (actual cash value) is $35,000 then your collision auto insurance would pay $35,000 up to your coverage limit. Here’s where the gap insurance comes in, it will pay the additional $5,000 required to repay your loan.

Often business vehicles are acquired on loan, so that’s why commercial gap insurance is crucial to repay debts when your commercial vehicle is stolen or totaled.

Roadside Assistance Coverage

While delivering your commercial products, or while traveling, your company-registered vehicles such as trucks, or sedans can break down. It can be something as minor as a flat tire to critical issues like engine failure.

In this case, if you have roadside assistance coverage, your insurer will cover the expenses required for emergency roadside repair which typically include replacing flat tires, dead batteries, or if you accidentally get locked inside your car.

Roadside assistance coverage also includes towing, so that you can get your vehicle to the nearest repair shop if it’s necessary. For businesses, roadside assistance coverage is highly essential especially because commercial vehicles often cover long distances that can lead to sudden breakdowns.

Rental Reimbursement Coverage

Usually, commercial vehicles have high dependencies. Even if one of your commercial vehicles is not operational, it can lead to a tremendous loss for your business. While your vehicle gets fixed at the auto repair shop, it’s crucial for you to manage an alternative vehicle in the meantime.

The rental reimbursement coverage pays the rental cost for a commercial vehicle for up to 30 days. However, if you need rental reimbursement coverage for more than 30 days, you should consult with your insurer. Some insurers extend the coverage time depending on your requirements.

What Isn’t Covered by Commercial Auto Insurance?

Commercial auto insurance policies are specifically designed to protect businesses financially.

So, your commercial auto insurance does not cover:

• Vehicles that are not registered to your company: If you, or your employees use a personal vehicle for business purposes then it wouldn’t get covered by the commercial auto insurance unless it’s under the HNAO coverage.
• Items inside the Vehicle: The commercial auto insurance protects the vehicle, but not the items inside it, so if you’re transporting goods and if it gets damaged or destroyed, it won’t be covered by the commercial auto insurance.
• People who are not officially part of your business/organization: The commercial auto insurance coverage only covers you, your employees or any registered member of the business. So, if your friend, spouse or relative drives your company registered vehicle and if they get into an accident then it won’t be covered by the commercial auto insurance policy. Unrelated Medical Expenses: Any medical expenses that are incurred by an employee other than getting into an auto accident will not be covered by the commercial auto insurance policy.

Know about more: Do Auto Body Shops Report Damage to Insurance?

Types of Vehicles that are Covered by Commercial Auto Insurance

The types of vehicles that are covered by commercial auto insurance includes:

• Passenger vehicles such as cars, SUVs and vans.
• Trucks such as light trucks, box trucks, food delivery trucks, tow trucks, and large trucks.
• Farming vehicles such as trucks used for transporting farming materials and livestock.
• Specialty vehicles like limousines, and hearses.

How Much Commercial Auto Insurance Coverage Should You Get?

When it comes to auto insurance, there is a general minimum state mandated requirement, but there isn’t any specific minimum coverage limit for commercial auto insurance. Although, if you’re running a business that involves the use of company registered vehicles then it is legally mandatory to have a commercial auto insurance policy.

According to the Insurance Information Institute, most auto insurance companies recommend businesses to have a minimum coverage of $500,000 to a standard coverage of $1 million or more.

What is the Cost of Commercial Auto Insurance?

The cost of commercial auto insurance depends on various factors, mainly the size of your business and the policies that you choose to purchase. On average the cost of commercial auto insurance can vary from $142 to $147 per month, which is $1,704 to $1,764 annually, or more.

What Factors Influence Commercial Auto Insurance Rates?

Just like personal auto insurance, commercial auto insurance is also determined based on multiple factors. If you want to ensure lower rates, it is important to thoroughly learn and understand what influences your commercial auto insurance premiums as follows.

Vehicle Type, Make and Model

This is the most important factor when it comes to determining commercial auto insurance rates. Auto insurance rates significantly vary depending on your vehicle type, make, and model.

Larger vehicles such as vans, trucks, and delivery vehicles cost more to insure compared to sedan cars. Insurance rates also depend on the total number of vehicles that you need under a commercial auto insurance policy.

Number of Employees, and their Driving History

As commercial auto insurance covers the bodily injuries, and liability compensation of every employee in your company, their driving records can significantly influence your commercial auto insurance rates.

Employees who have a good driving record are less prone to getting into accidents which reduces the chances of insurance claims, whereas employees with poor driving records have a higher risk. So, that’s why insurance companies evaluate the driving records of every member of your organization, including you and all your employees.

Insurance Claims History

One of the main criteria for determining commercial auto insurance rates is based on the number of insurance claims in the past few years. Generally, the more claims you’ve filed, the higher your premium is likely to be in the following year.

Insurance companies view a high number of claims as a sign of greater risk, which can lead them to increase your rates or even impose stricter policy terms. Even small claims for minor accidents can add up over time and impact your premiums.

Coverages, Limits, and Deductibles

It depends on what type of commercial auto insurance you’re purchasing. The more coverage you purchase the more you need to invest in each coverage. Your commercial auto insurance rate also depends on the limit you purchase for each coverage.

Also, your commercial auto insurance deductible can significantly influence insurance premiums. Higher deductibles can reduce your commercial auto insurance rate, but at the same time, it can increase the risk of more out-of-pocket investment from your business’s capital.

Vehicle Usage and Distance Covered

Insurance companies also evaluate for what commercial purposes your company vehicles are used. Whether it’s used for transportation of employees, providing services, or for the distribution of products.

Another important factor is how many miles your vehicles cover each year. Typically, vehicle usage and distance are a crucial factor when it comes to determining commercial auto insurance premiums, especially because the more time your vehicles spend on the road, the higher the risk of accidents.

How Does Commercial Auto Insurance Work in Michigan?

Similarly like many other states in the USA, it is mandatory for businesses with registered vehicles to have commercial auto insurance. There aren’t any minimum coverage limits for commercial auto insurance in Michigan, the general state minimum coverage limits and mandatory types of auto insurance apply here as well.

There are many auto insurance companies in Michigan that offer various commercial auto insurance policies at different rates. If you’re looking for a wide variety of commercial auto insurance services at an affordable rate, make sure to check PLPD Insurance Agency in Michigan.

Currently, PLPD Insurance Agency has offices located in 3 cities in Michigan which includes Flint, Saginaw, and Mt Pleasant.

Personal vs Commercial Auto Insurance: Which One is More Suitable for You?

If you’re operating a business that does not require you, or your employees to drive for work related purposes then you don’t need commercial auto insurance.

You only need commercial auto insurance if you need to register a vehicle under your business’s ownership and financially protect your employees and business vehicles in the event of a car accident.

Here’s one thing that a lot of people often mix up which draws a common question does my personal auto insurance cover business use? Well, the short answer is, no, it does not.

Personal and commercial auto insurance are two different types of insurance policies, so if you end up in a car accident and if your insurer finds out that you were driving for commercial purposes with your personal auto insurance then you won’t get any financial compensation.

Similarly, it’s the same for commercial auto insurance, it does not apply for personal use, nor for personally owned vehicles unless you have it enlisted in your HNAO insurance.

Tips to Purchase Affordable Commercial Auto Insurance for Your Business

Whether you’re located in Michigan, California, Florida, New York, or any other state in the USA, there are dozens of auto insurance companies out there offering full-fledged commercial auto insurance services.

But out of all these options, if you want to save costs, and get a good deal it is necessary to find auto insurance companies that offer the best insurance policies and coverage within your budget.

Here are some practical tips that you can use to find and purchase affordable auto insurance for your business.

• Compare Quotes from Multiple Providers: Gather quotes from the top auto insurance companies in your city, or state and ask for price quotes to compare and determine which company offers the best deal for you.
• Assess Your Coverage Needs: Talk to insurance agents to understand your coverage needs, and based on that choose commercial auto insurance policies and coverage that you require.
• Seek Bundle Offers and Discounts: When it comes to commercial auto insurance, there are bundle plans with discount offerings, while you’re talking to an insurance agent make sure to ask about these offers.
• Review Policies Annually: The lowest rate in the first year may not remain the same, in fact it could be a special offer used to attract your business as a new customer, and there are times when an auto insurance company can significantly increase your rate so make sure to review it annually before renewing.
• Leverage Local Agencies: Local agencies may have a special rate for companies within a certain area. For instance, PLPD Insurance offers affordable commercial auto insurance policies in Michigan with regional offices in Flint, Saginaw and Mount Pleasant.

Bottomline

If you’re still wondering whether to need to get commercial auto insurance or not. Here are 2 questions that should help you decide.

Do you need to register vehicles under your company? If so, then yes, it is legally mandatory for you to get commercial auto insurance.

Secondly, does your business have activities or operations that require the use of a vehicle for transportation of employees for providing a service or to distribute products? If that’s a yes too, then it’s crucial for you to have an active commercial auto insurance with adequate coverage.

Regardless, auto insurance itself is confusing, so if you have queries or if you’re looking for affordable commercial auto insurance in Michigan, please contact us for a free quote today!

FAQ

What is a commercial auto insurance policy?

A commercial auto insurance policy is designed to provide financial protection for businesses by covering bodily injury and property damage expenses. It applies to your company’s vehicles, employees, and third parties affected by accidents involving your business vehicles.

Is commercial insurance the same as full coverage?

If you go for bundle plans, or commercial auto insurance packages then you can go for full coverage insurance plans. In general, you can also buy customized commercial auto insurance policies by selecting specific types of policies and coverages based on your needs.

What is the difference between commercial and personal insurance?

The main difference between commercial and personal auto insurance is commercial auto insurance only covers company registered vehicles and employees of the business. Similarly personal auto insurance only covers financial compensation to you, and anyone else covered by your auto insurance policy. When it comes to the cost, commercial auto insurance is much more expensive as it covers the whole business, whereas personal auto insurance only protects you individually.