Many businesses rely on company vehicles to make deliveries, visit clients and provide services. When you use a car for business purposes, a standard car insurance policy will not cover everything you need. You need to have a specialized auto insurance policy, called commercial car insurance, to protect the employee at the wheel, the vehicle itself and any injuries or damages caused by an accident.
What is commercial auto insurance?
Commercial auto insurance is a type of insurance policy that covers vehicles used by a business. Any car that is used for business-related purposes should be covered by commercial insurance, whether it’s a van, pickup truck, box truck, utility truck, food truck or a regular car. Employees who use their personal vehicle for business trips or services should also have a commercial car insurance policy.
In terms of protection, commercial auto insurance is similar to personal car insurance. Commercial insurance covers vehicle damages, bodily injury liability coverage for vehicle operators and other drivers, property damage and accidents with uninsured or underinsured drivers.
Commercial vs personal insurance
There are a few differences between commercial car insurance and personal car insurance. For one, commercial car insurance only covers business-owned vehicles. Standard car insurance covers vehicles for personal use—commuting, running errands, carpooling, etc.
Another difference is that commercial auto insurance has higher coverage limits than personal policies. Cars that are used for business purposes generally face more risk, and therefore need more coverage. Because of that, commercial car insurance is more expensive than personal insurance.
Who needs commercial auto insurance?
Any company that owns and uses vehicles as part of their business function—whether it’s one car or an entire fleet—needs to have commercial car insurance. Some examples of businesses that need commercial auto insurance include:
- Electricians and HVAC professionals that visit people’s homes
- Food delivery drivers and catering companies
- Contractors that haul materials and heavy equipment to job sites
- Landscapers and plow trucks
- Realtors who drive to property listings
- Sales people who travel to offices or people’s homes
- People who drive for a ridesharing service like Uber or Lyft
Employees who frequently use their personal vehicle for business purposes should consider buying commercial car insurance. If they got into a serious accident while driving for a work-related reason, their car insurance company could deny the claim, which would put the legal and financial responsibility on their employer.
As an alternative, some insurance companies offer work-based driving coverage that can be added to an existing personal policy if the car is used for business reasons occasionally, but not often.
How to get commercial insurance
Applying for commercial car insurance is much different than getting personal car insurance. If you’re looking to buy commercial insurance for the first time, here’s what you need to do:
- Find a few providers: Shop around and find a few insurance providers that offer commercial car insurance in your area. Evaluate these companies based on customer reviews, financial strength ratings and the types of coverage offered. You can even call up an agent to get a better sense of the customer service.
- Provide information about your business: Some companies have online quote tools, and others require you to call an agent. In either case, you will provide information about your business, including what the business does, how long it’s been around and what your company cars are used for.
- Provide information about the company cars: Next, you’ll be asked to list the type(s) of vehicle your business owns. In addition to the make, model and year, you also need to disclose information like the vehicle’s original cost, the weight and size, how far employees typically drive, and who the main driver of the vehicle is.
- Provide information about the drivers: Next, be prepared to give some information about the people who drive the vehicles. You will probably need to provide the driver’s license numbers of your employees so the insurance company can validate them as legal drivers, and check their driving record.
- Get a quote: Once you’ve submitted the required information, you’ll be given a price quote based on your responses. It’s a good idea to get several quotes from different insurance companies to see which one can give you the lowest rate.
- Sign a policy: After choosing an insurance policy and customizing your coverage with an agent, you can sign the policy and begin your coverage. Get multiple copies of your proof of insurance documentation, and leave one in all of the insured company cars.
How much does commercial insurance cost?
Commercial car insurance is more expensive than personal car insurance because the coverage limits are higher. There are a number of factors that are used to determine the cost of your premium. Some of those factors include:
- The type of vehicle and the original cost
- The driving records of the employees who use the car
- The nature of vehicle’s use
- How far the vehicle is driven
- The number of cars being insured
- The policy’s coverage limit
- The deductible
- The business owner’s claims history
Like personal car insurance, your business might qualify for certain discounts that can lower the premium. You can often get discounts for paying your premium in full, remaining claims-free, having continuous insurance coverage, and bundling your commercial auto policy with other business insurance policies.
Frequently asked questions
What is the best car insurance company?
The best car insurance company is different for everyone. Most car insurance companies offer commercial insurance, so you can take a look at our review of the best car insurance companies as a starting point. Some of our top picks that sell commercial insurance are State Farm, Geico, Allstate, and Erie.
Do I need commercial insurance if I don’t have employees?
Yes, any business owner who uses a vehicle for work purposes needs to have a commercial auto insurance policy. It doesn’t matter if you are the only employee, or if you have a large team working for you. Typically, the fewer drivers you have to insure, the cheaper your policy will be.
How can I save money on commercial insurance?
You can save money on your commercial auto insurance in a few ways. First, make sure to shop around and get quotes from multiple providers before you buy a policy. That’s the only way to know if you’re getting the lowest rate.
You might also qualify for discounts through your insurance company for paying your annual premium in full, having a good driving record, or having continuous insurance. Increasing your deductible is another way to lower your premium, but it is not a significant savings.