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Do I Really Need Commercial Auto Insurance?

What is Commercial Auto Insurance?

Commercial auto insurance covers vehicles used for any business purposes. Different scenarios include:

  1. You’re a sole proprietor, self-employed, or own a small business that uses a vehicle in any capacity (other than commuting from home to the office). 
  2. You own a vehicle (or a fleet) and pay someone else to drive it, making you liable for their insurance. It is the employer’s responsibility to sufficiently insure the vehicle with the right coverage for business use. Whether it’s one vehicle, 5, 50, or 500, any vehicle used for work purposes needs commercial auto insurance. The good news is that any company vehicle covered by commercial auto insurance is tax-deductible. 
  3. You pay an employee to drive their personal vehicle for work-related driving, you must insure the vehicle for work-related purposes only. For example, if you own a home handyman business and your workers use their own trucks, you must put commercial car insurance on their vehicles.

4. Contractors who are not employees of your company are required to insure their own vehicles. So if you hire contractors, you are not responsible.

If you own a contracting business, commercial vehicles are one of your company’s most significant expenses. That’s why it’s so important to ensure these valuable assets are fully covered. To help choose the best commercial auto insurance policy for your small business, this article will explore the coverage, cost, and benefits of this insurance.

  • Liability coverage: Bodily injury and property damage liability insurance will cover loss of life or property, as well as damage and harm done to any person or property caused by your vehicle.
  • Medical payments: Personal injury protection covers any medical expenses caused by diagnosis and treatment of any bodily injury or physical damage caused by the collision, regardless of fault.
  • Collision coverage: Covers all costs involved to tow and repair or replace the vehicle in the event of a collision. It will often include the cost of a rental car suited for your work while you wait for repairs or a replacement.
  • Uninsured motorist: If the vehicle collides with an uninsured motorist––meaning the other driver wouldn’t be able to cover the costs––your insurance policy would pay the damages up to policy limits. This coverage might also payout for the charges owed by an underinsured motorist if their own vehicle insurance coverage limit doesn’t cover the expenses caused by the collision.
  • Comprehensive coverage: Covers the costs involved for repairing or replacing your vehicle if it incurs damage due to theft, vandalism, flood, fire, or any damage caused if your car is hit by an object or another vehicle.

Do I Need to Have Commercial Auto Insurance?

The short answer? It depends. Your need for commercial auto insurance depends on your industry/occupation. Here are a few examples of professions or scenarios that require commercial auto coverage:

  • Transport goods or people in your vehicle for a fee: Suppose you drive for Uber, Lyft, GrubHub, Amazon, or a similar company; you’re going to need coverage. Essentially any time you’re using your vehicle for work purposes, it needs to be covered by commercial auto insurance.
  • Provide a service with your vehicle: Bus? Tow truck? Snowplow? Ice cream truck? If you use your vehicle to provide a service, you need commercial auto insurance.
  • Need more liability coverage because of the nature of your work: If you transport the elderly on field trips or something similar, you’ll want to make sure you have enough professional liability coverage in case something goes awry. If your work puts you or your passengers or cargo at a higher risk of injury or damage for any reason, you need commercial auto insurance coverage.
  • Operate a fleet: Whether your fleet is two delivery vans or 100 box trucks, the more vehicles you have, the more auto insurance coverage you need.
  • Haul weight in tools or equipment: If you’re using your vehicle to transport heavy loads––tools, equipment, cargo, etc.––your car has a higher risk of damage and will require commercial auto insurance.
  • Are not the sole owner of the vehicle: If vehicle ownership is in the name of the business entity, a co-ownership share agreement is in place, or if the vehicle has multiple drivers for work purposes, commercial auto insurance covers all drivers without individual policies. If your group of drivers is regularly changing, you need commercial auto insurance.

Some people make the mistake of thinking that commercial umbrella insurance covers vehicles, but it doesn’t always. Contact us today to make sure you have the auto coverage you need for your business.

Commercial vs. Personal Auto Insurance Examples

Commercial and personal auto insurance are two different types of insurance that cover different events. Commercial auto insurance is only available for vehicles used for work purposes. Personal auto insurance is for when you’re driving your car for personal reasons.

Most personal auto insurance policies have exclusions, which means they may not cover your vehicle for business use or only offer minimal coverage for business use. Likewise, your commercial auto insurance wouldn’t cover loss or damage caused when using a business vehicle for personal use. That’s why you need both. Here are some examples of the two being used in the same scenarios:

Commercial Auto InsurancePersonal Auto Insurance
Delivering food to paying customersGrabbing coffee for your team on the way to the job site
Using a company car to pick up clients from the airportPicking up friends and driving to the airport for vacation
Hauling equipment and towing something with your truck to the construction job siteCommuting to your office job 
Driving to multiple job sites around the cityGoing on a weekend getaway 
Transporting paying customers (such as a rideshare)Being the designated driver for a party on the weekend

How Much Does Commercial Insurance Cost?

Commercial auto insurance costs a little more than personal insurance because it offers broader coverage and higher liability limits. The cost of commercial auto insurance rates are affected by a few factors, including:

  • Type of vehicle
  • Number of vehicles on the policy
  • What purpose the vehicles are used for
  • Who will be driving (driving records matter)
  • Your specific business needs

Each business is unique, so it makes sense for commercial auto insurance policies to be tailored to best suit each company.

Business Insurance with Contractors Liability

Contractors have unique insurance needs. They typically carry contractors liability insurance to protect the job site, materials, and people who could be injured on the job site. However, liability insurance does not cover vehicles, so business owners in some industries need to carry both commercial auto insurance and contractors liability insurance.

Commercial auto insurance covers all events while the vehicle is being used for business purposes. It doesn’t matter if your business involves plumbingroofing, or even driving an Uber; you need commercial auto insurance any time you use your vehicle for work.

Let us take the hassle out of searching for the best insurance quote. Tell Contractors Liability about your business, and we’ll help you find a policy tailored to match your needs at the best price.

Avatar for Tom Hester
Written by: Tom Hester
Tom has worked in the insurance industry since 2005, where he has become a source of knowledge. He’s gained a reputation as a writer. He has published a series of ebooks about insurance, like “A complete guide for Contractors Insurance and Handyman Insurance” and “Understanding Builders Risk Insurance.”