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  • Difference Between Commercial & Personal Auto Insurance
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    Auto Insurance That Protects Your Car and Bottom Line

    Small business owners often face grey areas when it comes to the use of cars, trucks, and other vehicles in the course of doing business.

    For example, you and your employees may use your personal vehicles for errands like taking deposits to the bank—or taking a client to the airport. Probably the biggest concern about relying on personal auto insurance for this or any kind of business use is how it might expose your business to a major lawsuit. If a serious accident occurs under this scenario, a personal auto insurance carrier could deny coverage. And your business could be on the hook for significant damages.

    On the other hand, if you own vehicles that you and/or your employees use exclusively for your business, there’s no grey area: You need to carry a commercial auto policy.

    Commercial Auto Insurance: How Do You Know You Should Have It?
    These are some questions that can help you determine whether your business should carry a commercial policy:

    • What kind of business are you in? If you are engaged in certain types of professional pursuits, you may not be required to carry a commercial auto policy for your business’ vehicles. For example, real estate agents, accountants, doctors, consultants, and clergy will typically be covered under a personal auto policy when transporting clients in their cars. However, if your business focuses on transporting people on a regular basis, a commercial policy would be more likely to ensure adequate coverage.
    • Is any type of vehicle being regularly used for your business—and for what kinds of use? If your business involves physical work like repairs, cleaning, maintenance, or construction, and your vehicles are regularly carrying equipment, commercial insurance is essential. The same goes if you have a limo, delivery, trucking, messenger, towing, or taxi service.
    • Is the vehicle registered in your business’ name or owned or leased by a partnership or corporation? Commercial auto insurance is required.
    • Do any of your vehicles carry commercial license plates? Commercial auto insurance is required.
    • Are your employees driving vehicles for your business? If your employees are regularly required to use any vehicle for business purposes, they—and your business—should be protected with a commercial auto policy.

    These are general guidelines; your best course is to talk through your business’ vehicle uses with a professional. This will help ensure you’re getting the coverage your business needs.

    What Are the Coverages of a Commercial Auto Insurance Policy?
    A commercial auto policy will cover your business’ exposures when you or your employees are using your company’s vehicles for business—or even if you’re using rented vehicles. Many policies will also cover your employees when they’re using their own vehicles while working for you—provided they carry personal auto insurance on these vehicles.
    These are the primary coverages available through a commercial auto policy:

    • Liability: This covers your business for injuries to other people involved in an accident, as well as damage to any vehicle due to an accident in which a driver representing your company is at fault.
    • Physical Damage: Collision coverage applies to damage to a company vehicle due to an accident. Comprehensive coverage applies to other sources of damage like hail or theft.
    • Medical Payments: In some states, coverage may include payment for medical care that is required as a result of a vehicle accident.
    • Uninsured Motorist: If you or your employees are driving on business, this coverage pays for vehicle damage or medical bills if the accident is caused by an uninsured driver.
    • Hired Auto: Hired auto covers your business for accidents you or your employees are responsible for while driving rented vehicles
    • Non-Owned Auto: This covers your business when your employees are driving their own vehicle for your company and cause an accident.

    In most states, the minimum required coverage for commercial vehicles is liability insurance.

    How Much Do Commercial Auto Insurance Policies Cost?
    Commercial policies are designed to provide coverage for the increased risks that arise from a business’ daily operations. This type of insurance is typically more expensive than personal auto because of the higher liability coverage it provides. Your coverage costs will depend primarily on the value of each vehicle and its safety devices, the type of vehicle (a car versus a commercial van, for example), how each will be used, where they’re parked, any accident history, and the amount of coverage that you’re purchasing.

    For example, if you’ve got a delivery van that’s on the road 10 hours a day, the risk of an accident is much higher than a company car that sees little use. And, as with virtually all insurance, the higher the risk, the more you can expect to pay in premiums.
     

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    Game Plan

    Your first step should be to discuss your business vehicle uses and insurance needs with a professional. Be sure to compare both rates and coverage so you can get the best value.

    You might consider contacting your trade association for information; many of these organizations sponsor insurance programs that are tailored to members’ needs.

    If you’re in the process of buying any vehicles for business use, keep in mind that the more you pay for a vehicle, the more it will likely cost to insure it.

    Make sure that the insurance coverages you purchase satisfy your state and local regulations. For example, will any of your vehicles be transporting goods across state lines? This could impact your insurance requirements.

    Are you currently carrying a commercial umbrella policy for your business? If so, it should work in concert with a commercial auto policy, and take over when liability coverage maximums are exceeded. Ask your insurance agent to make sure these policies are in alignment.