Commercial Car Insurance

Whether you run a small startup or a massive enterprise, the vehicles you use to conduct business require valid insurance coverage. From helping you avoid crippling settlement payouts to ensuring the state doesn't hit you with a hefty fine, commercial car insurance is essential to your organization.

Who Needs Commercial Car Insurance?

Liability insurance is required for any motorized vehicle, regardless of whether you use it primarily for business or personal reasons, in almost every state.

Buying liability auto insurance is also a sound business decision. This protection ensures you won't have to pay out-of-pocket for the financial damages if you or one of your employees is involved in an accident that injures a victim or damages property. Additionally, commercial policies can help you recoup the costs of repairs to your covered vehicle following an accident.

Vehicle Exceptions

Not sure whether your business car requires insurance? Most state laws specify which kinds of motor vehicles need coverage.

For instance, in Connecticut, you must annually report your proof of insurance to the DMV for certain types of trucks and trailers, such as those that have gross combination weight ratings greater than 18,000 pounds. On the other hand, you'll probably get away with not buying coverage for certain pieces of mobile equipment, such as forklifts that you only use inside a warehouse.

What's the difference? Experts say that mobile equipment typically serves a primary purpose other than transporting people or cargo. Even if you're not legally required to purchase a commercial car insurance policy for your backhoe or excavator, you'll still benefit from having some form of liability protection in case something goes wrong.

Commercial Car Insurance Basics

Although they share similar intents, there are a few critical distinctions between commercial and private auto insurance products. For instance, you might take out a business policy with a much higher limit to cover the heightened expenses for damages injured parties may want to squeeze out of your firm.

Additionally, some business insurance plans apply to multiple vehicles. Even though you need to have coverage for each car or truck you operate, buying a fleet-oriented policy may be an effective means of saving money by leveraging premium discounts.

Some companies rely on insurance products known as Business Auto Policies, or BAPs. These plans adapt to cover a variety of vehicles, including those you:

  • Personally own but also drive for business.
  • Hire, lease, or rent.
  • Purchase with cash or financing.

Some BAPs employ structures called Combined Single Limits (CSLs), which merge bodily injury and property damage limitations into one coverage cap. CSLs may be advantageous because they commonly result in higher coverage ceilings for both forms of protection.

Legal Requirements

Each state has its own way of keeping tabs on business' car insurance coverage. Jurisdictions like Maryland require policy providers to notify the state when business car insurance coverage lapses due to termination or non-renewal. The state also performs random sampling to be certain vehicle owners have proper coverage. As with personal car insurance, getting caught without a valid policy could drive your premiums up.

The amount you pay for coverage may also reflect factors like:

  • The level of training and driving records of your employees who operate the insured vehicles.
  • The size of your deductible.
  • The security of the location where you garage or house the vehicle.
  • Whether you install anti-theft and collision prevention devices.
  • Your history of claims (if you're insuring the vehicle under your name instead of the business name).
  • The amount of coverage you want to maintain.
  • The number and types of vehicles you're insuring.

Coverage Tips

Considering the value of the assets you're trying to protect is always a good start. For instance, if your service technicians drive work vans that carry mission-critical hardware and repair equipment, you may want to raise your insurance limits.

If you already have a general umbrella liability policy for your company, you should check its terms carefully to learn if it excludes vehicles. Car insurance providers may also maintain their own definitions of terms like "farm autos", "non-owned vehicles", "utility autos" and other covered assets. Talk to your insurance agent and make certain that any auto policy you purchase addresses all potential risk your business could face.