Commercial Auto Insurance: What’s the Difference?

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UPDATED: Mar 13, 2020

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Commercial auto insurance has similarities to standard policies, but there are significant differences.

Commercial auto insurance has similarities to standard policies, but there are significant differences. (image by carrepairleeds.com)

First things first. If you’re a running a small business, even if it is out of the confines of your home, and you’re using a personal automobile in the course of this business, you should be looking at placing that automobile under a commercial car insurance policy.

We expect many of you who do this to ask a simple question – “why?” The standard auto insurance policies we’re all required to have as drivers aren’t designed to address the amount of risk associated with a commercial vehicle.

Even if you rarely do utilize a personal automobile for that small business, there is something more important at stake than just the risks of doing business. If an insurer finds out that you are using a personal car for business purposes – even if you’re doing so under the auspices of your employer – meaning you have no ownership claim in the business, they can not only cancel your policy for violating the policy terms, but they can also deny claims made on the policy as well.

Commercial auto insurance is intended for people who own and operate a business that use vehicles in the course of doing business. Typical examples of these situations would include: making a business delivery, picking up business supplies, engaging in sales and any other assorted errand that has a commercial or business intent.

What Types of Coverage Are Available?

There are as many types of coverage for commercial auto insurance as there are for regular insurance. In most cases, they are the same, although with different coverage limits. Coverages available for business automobiles are:

  • Bodily Injury Liability – Also referred to as simply BI, this coverage is intended to cover a business’ liability to others for injuries or death from crashes where their driver is at fault.
  • Property Damage Liability – Also referred to as simply PD, this coverage is intended to cover a business’ liability to others for damages to their property when their driver is at fault.
  • Personal Injury – This coverage is also known as PI. Normally part of no-fault coverage, it is intended to cover medical expenses of the insured or their drivers.
  • Collision –  Collision insurance covers the costs involved to repair or replace a vehicle when it is involved in an auto accident. There is no medical coverage, and the upper limit of collision insurance is typically the actual cash value of the car.
  • Comprehensive – Like collision insurance, comprehensive coverage is intended to repair or replace a vehicle if its damaged, but unlike collision, comprehensive is only applicable for non-crash incidents, such as natural disasters or theft.
  • Uninsured/Underinsured Motorist –  There are a number of insurance products that fall under the uninsured and underinsured motorist categories. These include both bodily injuries and property damage, just like liability coverage. They are intended to protect when one is involved in a crash with a driver who either has no insurance coverage, or insufficient insurance coverage.

I own a small business, and employees use their own cars

If you have employees that are required to use their personal cars for any business purposes, you’re entering dangerous territory if you don’t have employer non-owned car liability coverage. Liability could come from two different places: anyone involved in a collision with your employee while they’re using their own car for your business purposes (remember, personal auto policies don’t cover such use); and from the employee themselves if they’re injured or their car is damaged.

If your small business is operating in these sorts of ways, you should speak with an agent or your insurer about employer non-owned car liability coverage. You’ll not only know that your employees are protected, but so is your business, since the employees will have proper insurance coverage.

What about truck drivers?

Commercial truck drivers need a completely different type of insurance than the standard business or personal auto policies. Typical coverages for commercial truck drivers are:

  • General Liability – while similar to regular auto liability, the requirements are much higher, usually between $35,000 and $1,000,000.
  • Physical damage – physical damage coverage types are normally referred to as comprehensive and collision coverage. As with liability, the requirements are normally much higher.
  • Motor Truck Cargo – This type of coverage is intended to protect what ever cargo the truck driver is carrying. It will protect the cargo’s value in case it is lost or damaged.
  • Trailer Interchange – This protects drivers when they’re behind the wheel of tractors or trailers that they do not own.
  • Bobtail – Also referred to as “non-trucking liability” insurance, bobtail coverage is for when a truck driver is either off dispatch or driving the vehicle for purely personal reasons.
  • Truck Insurance ICC (Interstate Operating Authority) – This coverage is required by the federal government for any drivers that carry cargo between different states. Local or state-only trucks are not required to carry this type of coverage.

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