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Why Your Business May Need Commercial Auto Insurance Coverage

Business owners often distort the lines between personal auto insurance and commercial auto insurance, but it’s important to understand that a standard personal auto insurance policy has limitations or exclusions relating to the business use of a personal auto. If a small business operates company cars, vans or trucks, there is a great likelihood they need commercial auto insurance.  

Further, if a business is involved with any of the following functions (but not limited to), they most likely need commercial auto insurance:

• Transporting product or equipment including heavy machinery

• Hauling tools and equipment to job sites

• Regularly driving long distances to meet clients or visit job sites

• Delivering any goods for retail

• Trucking or freight transportation

• Transporting people (livery)

• Hiring your vehicle out to tow other vehicles

Protection Against Liability

Business owners need commercial auto insurance to protect against auto liability for bodily injury and property damage to a third party. In addition to liability, medical expenses for injuries sustained, physical damage of the owned or rented vehicle, and uninsured motorists’ coverage would apply to a business auto policy. Just like any insurance policy, the range of coverage can be broadened by purchasing options or endorsements. For example, a policy could be written to apply to one specifically described auto or to apply to the named insured’s liability exposures arising from any auto. Any auto could pertain to the vehicles owned by the business, hired or leased, and lastly all autos used for business including those not owned.

Protecting Your Business Financially

A business auto policy is critical for protecting the business financially—and is required by the law. Commercial auto insurance policies have coverage limits in terms of liability. Typical coverage limits available for a commercial auto policy are $500,000 and $1,000,000. Having higher limits for your commercial auto prevents a financially damaging event from putting your business at risk. A general liability policy for the business does not cover the costs of claims that arise from work-related auto accidents!

Types of Commercial Auto Coverage

Several types of coverage may be included in a commercial auto policy, others are options that can be purchased separately. Those options include: collision coverage for costs associated with an accident regardless of fault; comprehensive coverage for damages other than collision; non-owned auto coverage for when you or your employees drive rented or borrowed vehicles; substitute transportation when a scheduled vehicle is being repaired along with towing and labor costs.

Take for example the individual who owns a business on their homes premise—they make furniture. They only have a personal auto policy. The business owner is delivering a piece of furniture to a client and proceeds to run the red light and hit the other vehicle. The damages include: physical damage to the business truck, physical damage to the other vehicle, and medical payments for sustained injuries. The personal insurance carrier denies the claim on the basis that the owner was using his vehicle for business purposes. The resulting $100,000 in damages to a third party (not including damages to the business vehicle) will be the financial responsibility of the business.

Learn more about Commercial Auto Insurance 

An insurance agent can determine the need for a small business to have commercial auto insurance. Contact Wallace & Turner Insurance to determine if a business auto policy is right for you. Interviews P.J. Miller on Factors That Impact Auto Insurance Rates

P.J. Miller

P.J. Miller

In an interview with, independent insurance agent and partner P.J. Miller noted that auto insurance rates vary by state for many reasons.

"Typically, there are different legal mandates or requirements that are more liberal to the injured party, making it easier to receive a greater settlement [thereby raising costs for the insurance company]," Miller says. "Lower labor rates, lower parts prices for vehicles, lower sales tax rates, fewer vehicles on the road, and mandatory auto insurance are a few of the factors that tend to keep rates down."

One factor that might surprise drivers is their credit score. Nearly every state allows insurers to base their rates at least partially on a person’s credit history.

"Most carriers use credit as a portion of the rate-setting process, where permitted by law. While it is supposed to be a portion of the rate calculation, most believe it plays a significant role in determining price," Miller said. "There are countless other factors that enter into the behind-the-scenes formulation that make it almost impossible to know exactly why you pay, or are quoted, the final rate."

Sticking to the state minimum will limit your costs, but it will also increase your risk. Miller commented that states typically have an incredibly low minimum mandatory limit. “Keep in mind that $25,000 doesn’t go far in crashes.” 

When you shop for car insurance, first determine what level of coverage suits your needs.

Depending on the age of your vehicle, you might not need comprehensive and collision coverage. Miller also advised the following:

  • Combine your coverage: Bundle auto coverage with your home or renters’ insurance policy: Showing your loyalty to one insurer could help you land a discount, especially if you have multiple policies. Renew your plan early and you could get a discount, as well.

  •  Be a good driver: "Speeding tickets can dramatically impact your rates," Miller said. Being a safe driver can lower your car insurance by 5% typically. Driving fewer miles a year will also reduce your rate.

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If you have questions regarding auto insurance, please contact Wallace & Turner at (937) 324-8492 or via our contact form.