Finding the right commercial auto policy can be challenging, especially if you’re a small business owner. But we are here to help. Depending on the type of your business vehicle and commercial use, you may need one of two types of commercial auto policies – light or heavy commercial auto insurance policy.
Light commercial vehicle insurance covers business vehicles that transport lightweight commercial goods and have a gross vehicle weight of 3.5 metric tons or less. On the other hand, heavy commercial vehicle auto insurance covers larger commercial vehicles with a gross weight of over 3.5 tons.
This guide explains everything you need to know about insurance for light commercial vehicles to help you get the right coverage for your business needs.
What is Commercial Vehicle Insurance for Business?
Commercial vehicle insurance for business is a must-have coverage for companies that use vehicles for business purposes. It offers coverage for various usage and situations not covered by your regular personal auto insurance policies.
With a commercial auto policy, you get comprehensive insurance coverages and higher liability limits to protect your business assets adequately based on their value, frequency of use, and other factors. Your business assets may include all company vehicles and employees.
Commercial auto insurance policy also protects your business from financial losses due to lawsuits you may face after an at-fault accident.
When do you need commercial vehicle insurance?
The law requires you to get commercial vehicle insurance if you move people or goods across state lines. You also need a commercial auto insurance policy in most states if you and your employees use vehicles to perform for-profit work or work-related tasks, like:
- Delivering food and other products locally
- Acting as a taxi service
- Going for client meetings and sales calls
- Shopping for office supplies
- Moving small company packages to a shipper, and so on.
Additionally, you require commercial car insurance if you’ve registered your vehicle as a commercial vehicle or carry a commercial license tag.
What Kind of Vehicles Are Covered by A Light Commercial Auto Insurance Policy?
Commercial vehicle insurance policies generally encompass a wide range of commercial vehicles.
Light commercial insurance specifically caters to minivans, small pick-up trucks, box trucks, and service utility vehicles. It also extends coverage to regular cars used for business purposes.
If you own a light commercial vehicle, you need light commercial vehicle coverage to ensure your insurance suits your vehicle’s intended use.
What does Commercial Vehicle Insurance Cover?
Commercial car insurance offers several coverage options. Some common coverages you may get include:
Insurance carriers typically offer two main types of liability coverage: bodily injury (which covers injuries to third parties) and property damage (which covers damage to third-party property).
This coverage also includes funeral expenses and legal fees in case of fatalities or lawsuits resulting from accidents you cause.
You can purchase bodily injury and property damage coverage separately or combined as a single cover, known as combined single limit (CSL) liability coverage.
Uninsured motorist coverage pays for bodily injury you or the occupants of your covered company-owned vehicle sustain in an accident caused by an uninsured driver. This coverage also protects you in a hit-and-run.
For situations where the at-fault driver has a car insurance policy, but it’s not enough to cover all damages caused, underinsured motorist coverage comes in handy.
Medical payments coverage pays for your medical expenses and the expenses of your passengers if injured in a covered accident. It doesn’t matter whether you are the at-fault party or not.
Roadside assistance covers on-site repairs if your insured vehicle breaks down while on the road. This type of coverage is essential, especially for small business owners just getting started in the trucking industry.
Hired auto liability coverage provides bodily injury and property damage compensation to third parties injured in an accident caused by a vehicle you’ve hired, leased, or borrowed for business use.
How Does Commercial Auto Insurance Work?
Commercial auto insurance works similarly to personal car insurance. In an accident caused by you or your employees, where injuries or property damage occur, the affected parties can seek compensation through a claim or lawsuit.
With appropriate commercial vehicle coverage, your insurance company covers the claim amount up to your policy limit. You only incur out-of-pocket costs if the claim exceeds your policy limit, in which case you cover the excess amount.
Additionally, your insurance company handles the legal expenses for defending you and your employees in the lawsuit, often separately from your policy limit.
Does Personal Auto Insurance Cover Business Use?
Most personal auto policies don’t cover business use. They only cover vehicles driven for personal use. If you use your private vehicle to perform work duties, you may have to get commercial auto insurance to stay protected.
A few sole proprietors may find personal auto insurance sufficient for business activities. They can thrive without a commercial auto policy. But this largely depends on the specific situation.
It’s best to always check with your insurance provider and confirm if your small business falls under this category before you purchase your cover.
How Do I Purchase Commercial Vehicle Insurance?
To secure cost-effective commercial vehicle insurance, assess your current and future business needs. Research top commercial auto insurers in your state, compare quotes and select one that aligns with your business goals.
Consider factors such as insurer reputation, policy customization features (coverage limits, deductibles, and premiums for businesses like yours), claims handling, customer support quality, and available discounts or resources.
Choose an insurer that ensures compliance with federal and state commercial auto insurance laws while offering tailored coverage.
Alternatively, consider using a certified independent insurance agent for a streamlined process, as they can quickly identify the best coverage for your small business and guide you through claims processes.
Remember, the right commercial auto policy is an investment for your small business. It minimizes unexpected business expenditures, giving you a steady cash flow and the financial stability you need to expand your business operations.
Adequate commercial vehicle insurance also offers maximum protection against unpredictable events, allowing you to bounce back faster after a setback. Take enough time to research and find the best insurance provider, knowing you are securing your business long-term.
To learn more about commercial vehicle insurance for small businesses, check out our blog. Also, call us if you need critical additional coverage, like GAP protection add-on coverage. We’re always ready to help.