The Small Business Owner’s Guide to Commercial Auto Insurance

Contractor stepping out of truck with phone in hand

What are the chances that one of your employees will be involved in an auto accident while driving a company vehicle this year? According to Automotive Fleet, a whopping 2 out of every 10 commercial fleet vehicles (20%) are involved in an auto accident every year. The average claim ($70,000) is almost twice the cost of the average workplace injury.


And what if your company vehicles are underinsured because you’re only covering your minimum amount of risk?

You’ll be covering the difference out of your own bank account, and that could be devastating to your small or medium business.

You need sufficient commercial auto insurance coverage if:

  • Your company owns, rents, or leases vehicles
  • Employees drive company-owned, leased, or rented vehicles
  • You or your employees drive company vehicles for business and/or personal use

Employees who operate company vehicles generally drive more miles annually than drivers who don’t, and thus they’re more likely to be involved in an accident simply because they’re on the road more.

In addition to bodily and auto damage, business owners run the risk of missed revenue, decreased productivity, property damage, and third-party liability claims from at-fault crashes.

Considering this high amount of risk—20%—it pays to make sure you have the commercial auto insurance coverage that’s right for your business.

What is Commercial Auto Insurance?

Commercial Auto Insurance is critical for your business. If you or one of your employees gets into an accident in a company vehicle, commercial auto insurance will help protect your company’s assets and pay for any damages. If you or your employee are found at fault, and there are bodily injuries or property damage, you could open yourself up to the risk of being sued.

Commercial Auto Insurance provides coverage for cars, trucks, vans, buses, construction vehicles, and more that you may use to operate your business. Coverage typically falls into one of three categories:

  • Physical Damage – collision & comprehensive coverage
  • Liability – bodily injury, property damage, uninsured/underinsured vehicle operators
  • Other – medical, towing, rental reimbursement, labor, auto loan, or lease gap coverage

Many states require commercial auto insurance for your company vehicles. We think this is prudent.

What if an underinsured or uninsured driver strikes one of your company vehicles and can’t pay for the damages? If you don’t have the right kind of coverage, then you might get stuck paying the bill. Likely you will have to sue the guilty party, which is never quick or affordable, but you will need your vehicle fixed now. Can you afford to wait?

You might wonder, “Do I need more than minimum coverage?” or “How much coverage do I need?”

Many agencies will recommend a minimum of $500,000 in coverage, but the best thing to do is to talk to one of our agents today because everyone’s risk varies depending on the type of business they operate and where it’s located, among many other factors

What Does Commercial Auto Insurance Cover?

Male Motorist Involved In Car Accident Calling Insurance Company Or Recovery Service

Generally, commercial auto insurance covers the following risks:

  • Collision (Auto) – Reimburses you for damage to your automobile sustained in a collision with another car or with any other object, movable or fixed.
  • Comprehensive (Auto) – Provides coverage for any direct and accidental loss of, or damage to, your covered automobile and its normal equipment due to occurrences such as fire, theft, natural disasters, animals, or vandalism.
  • Liability (Auto) – Policyholders are protected from legal liability resulting from injuries to others or damage to their property.
  • Uninsured Motorist Bodily Injury – Pays for any bodily injury to your and your passengers caused by negligent uninsured drivers, hit-and-run drivers, or a driver whose insurer is insolvent.
  • Uninsured Motorist Property Damage – Pays for damages to your vehicle (up to a limit) if the damage is caused by an uninsured driver.
  • Underinsured Motorist Coverage – Pays if an at-fault driver in another vehicle doesn’t have enough liability insurance to cover your incurred expenses. The caveat here is if you live in a “no-fault” state, in which case your own insurer would provide coverage for your losses.

Commercial auto insurance can also be customized (sometimes referred to as “endorsements”) with upgrades to meet your specific needs:

  • Roadside Assistance – This covers issues that may arise that aren’t covered under your existing policy, like breakdowns, dead batteries, flat tires, and getting locked out of your vehicle.
  • Vehicle Replacement Coverage – In the event of an accident, if your vehicle is considered a total loss, this type of coverage will replace your vehicle with a new or comparable one. It can also provide gap coverage in case you owe more on your car than it’s worth.
  • Expanded Towing – Provides towing coverage beyond what’s covered by your standard business auto policy. It also covers jump-starts and minor roadside repairs
  • Rental Reimbursement – If you get into an accident and can’t drive your car while it’s being fixed, this coverage will provide funds to rent a vehicle.
  • Auto Loan/Lease Coverage – If your vehicle is a total loss after an accident, this coverage will provide funds for the difference between the unpaid amount on the loan/lease and the cash value of the vehicle.
  • Personal Injury Protection – This covers medical expenses if your health care insurance or that of your passengers’ does not.

Which Factors Affect the Cost of Commercial Auto Insurance?

Many variables can affect the cost of your premiums. It all comes down to the specific risks associated with your type of business, which is why it’s so important to talk to an agent about your needs. That said, some of those factors include:

  • Size & Value of Your Fleet
  • Types of Vehicles
  • Age of Vehicles
  • Number of Drivers
  • Amount of Coverage Needed
  • Parking Locations
  • Driving Distances
  • Number of Vehicles
  • Claims History
  • Deductibles
  • Type of Cargo
  • Credit History
  • Industry

Vehicle Buying Tips from an Insurance Perspective

We know how important it is for you as a business owner to keep your costs down, so when you need to add vehicles to your fleet, whether you have dozens of vehicles or just a handful, consider these pro tips:

  1. The more expensive the vehicle, the more it will cost to insure, so buying used vehicles for your business can help keep your premiums down.
  2. Passenger vehicles usually are cheaper to insure than commercial trucks, so take the time to consider your needs when adding vehicles. Do you really need a full-sized truck when a smaller SUV might do the trick?
  3. Lighter-weight trucks usually cost less to insure. Consider these classes of trucks when making your next addition to your fleet:
    • Light Trucks (up to 10,000 pounds). These can include panel vans, pick-ups, parcel vans, refrigerated trucks, and flatbed trucks.
    • Medium Trucks (10,001 to 20,000 pounds). These can include mid-size refrigerated trucks, stake bed, and box trucks.
    • Heavy Duty & Extra Heavy Duty Trucks (20,001 to 45,000+ pounds). These can include beverage trucks, farm trucks, and grain trucks.
  4. Are you hauling equipment and goods around on a trailer? Commercial auto insurance premiums increase depending on the size and weight of the trailer, so be sure to select the trailer that’s right for your needs.
  5. Service vehicles generally cost less to insure, whereas vehicles that deliver goods cost the most, so consider what you will use the vehicle for before purchasing it.

When 2 out of every 10 commercial fleet vehicles are involved in an auto accident yearly, it makes sense for business owners to get the right kind of commercial auto insurance for their needs. Unfortunately, you’re likely to need it. In addition to protecting your business with proper coverage, you will want to decrease the chances of ever having to file a claim.

How can you help to prevent your employees from accidents and keep your commercial auto insurance costs in check?

Be sure to read our next blog post on distracted driving. According to Automotive Fleet, it’s the number one factor contributing to increased accidents … especially among company drivers.


Automotive Fleet. Commercial Fleet Accident Rate Reaches 20%.

California Department of Insurance. Glossary of Insurance Terms.

Car and Driver. Commercial Auto Insurance Cost: Everything You Need to Know.

Insurance Council of Texas. ICT Membership links on Distracted Driving.

Shopify. Commercial Auto Insurance Guide for Business Owners.

Nationwide. Understanding Commercial Auto Policies.

*Disclaimer: We offer content for informational purposes; Co-operative Insurance Companies may not provide all the products listed here. Please contact your local agent to find out more about how we can help with your insurance needs.

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