What Is Commercial Car Insurance?

If you own a business that operates with vehicles, you may require commercial auto insurance. Also, if you use your personal vehicle for business purposes other than commuting to work, running errands, or going on road trips, commercial coverage may be necessary.

What Is Commercial Car Insurance?

While commercial auto insurance is similar to personal auto insurance in many ways, it is specifically designed for vehicles used by or for a business. This can include vehicles purchased for your own business as well as personal vehicles used for business.

Commercial auto insurance, for example, can cover:

  • Delivery trucks or vans
  • Work vans
  • Dump trucks
  • Forklifts or other construction vehicles
  • Food trucks
  • Service utility trucks
  • Box trucks
  • Company cars

Commercial auto insurance can provide liability and collision coverage for business vehicles and drivers. If you are in an accident, the former pays for the other driver's repairs and/or medical expenses. If you're in an accident, the latter pays for any repairs or medical expenses you incur for yourself or your vehicle.

One advantage of having commercial auto insurance for your company is that your premiums are usually tax deductible. You can deduct them as a business expense, potentially lowering your tax liability for the year. Personal car insurance premiums are generally not tax deductible unless the vehicle is used for business purposes. Even so, you may not be able to deduct the entire premium amount paid.

How Commercial Car Insurance Works

Commercial auto insurance is intended for situations that are unique to a company and its needs. If you have employees who drive company cars or trucks, for example, you may need nonowned vehicle coverage as part of your policy. If you are self-employed and use your vehicle solely for business purposes, you will need a commercial policy that covers it.

Again, commercial auto insurance can cover both liability and collision damage. Your liability coverage limits may be higher than those of a standard personal insurance policy. That's good news if you're concerned about your company being sued as a result of an accident involving yourself or one of your employees.

Aside from liability and collision coverage, commercial car insurance may also include coverage for:

  • Accident-related medical expenses or personal injury claims
  • Theft, vandalism, falling objects, and weather events all cause damage.
  • Damages caused by uninsured or underinsured drivers
  • Trailers used in conjunction with commercial vehicles
  • If you need to rent a temporary replacement vehicle for your business, rental vehicle costs will apply.
  • Vehicles rented to transport employees or clients
  • Employee automobiles used for business purposes

Your policy may also cover items inside commercial vehicles. Assume you own a contracting company and transport tools or supplies in your work vans. If the contents of the van are stolen, your commercial car insurance policy may cover it.

Who Needs Commercial Car Insurance?

If you run a business that relies on business vehicles to function, you will almost certainly need commercial car insurance to cover them. However, determining whether you need commercial coverage as a self-employed person or sole proprietor can be more difficult.

Consider the following when deciding on a commercial policy as a sole proprietor:

  • What coverage your personal car insurance policy offers
  • How do you normally use your vehicle for business?
  • The type and weight of the vehicle
  • What type of liability coverage you have through your personal policy vs. the amount of coverage you require based on business activity

If you already have personal auto insurance and are unsure whether you need commercial coverage, an insurance agent should be able to assist you. Simply be prepared to explain how and how frequently you use the vehicle for business so that the agent can accurately assess what coverage you require.

How Much Does Commercial Car Insurance Cost?

The cost of commercial car insurance can vary depending on a number of factors, including the amount of coverage you have, the number of vehicles covered, and the type of vehicles your business uses. According to the business insurance advice website Insureon.com, the median cost for commercial car insurance is $142 per month or $1,704 per year, assuming a $1 million policy limit.

However, this is a median figure, and your costs may be higher or lower depending on your industry's risk profile, who is driving the vehicles, and what is covered by your policy. For example, if you run a high-risk business, your premium costs may rise as a result. On the other hand, if your business is low-risk, you may pay far less than the national average for commercial coverage.

When comparing commercial car insurance quotes, make sure to ask the insurance company if any discounts are available. For example, if you insure a fleet of ten vehicles, the insurance company may be willing to lower your premiums, potentially saving your company money.

How to Compare Commercial Car Insurance Providers

If your company requires commercial auto insurance, take the time to compare different policy options before committing.

Consider the following when comparing policies:

  • Basic liability and collision coverage options
  • Optional coverage for trailers or rental vehicles
  • Policy minimums and maximums
  • Vehicles that are covered
  • Insurance premiums
  • Deductible amounts
  • Premium discounts

If you already have personal auto insurance, check with your current provider to see if they offer commercial policies. You may be able to negotiate a discount on commercial coverage as an existing customer. When you're busy managing day-to-day business operations, having your policies in one place may be easier than working with multiple insurers.

Your insurance requirements may differ depending on the types of vehicles you use in your business. When looking for commercial truck insurance, for example, there may be a few additional factors to consider. To account for heavier and more valuable vehicles, as well as the cargo they transport, commercial trucks typically require higher coverage limits.