What Is Commercial Auto Insurance and How Does It Work?

All commercial vehicles are required by the government to have commercial auto insurance. Whether your business has a dedicated fleet or you use your personal car for business purposes, the coverage will protect you and your employees in case of an accident. It covers medical fees and other expenses that you may incur.

The cost of commercial auto insurance varies based on a wide range of factors, such as employee driving records, level of risk involved, number of vehicles, and your state of residence. Commercial auto insurance in New Jersey, for instance, costs an average of $150 per month. However, if you're a small business owner, the premiums may go as low as $100 per month.

Read on to learn more about commercial auto insurance and how it works.

What Is Commercial Auto Insurance

Commercial auto insurance is a type of insurance that covers business vehicles. Business vehicles can include commercial trucks, company cars, box trucks, work vans, or any other vehicle that you use to run your company's daily operations.

The coverage is designed to cushion your business from expensive losses if a business vehicle is involved in an accident or faces any other issue covered by your policy.

Here are a few scenarios where commercial auto insurance may come to your rescue:

• If you or your passengers get injured in an accident involving your business vehicle, the coverage will cover medical expenses and lost wages.
• If you acquire new vehicles for your business, the policy automatically covers these vehicles if you have a fleet policy.
• If your vehicle is involved in an accident and you have to rent another one for business operations temporarily, your policy covers the replacement costs.

Who Needs a Commercial Auto Insurance Policy?

Any company that uses vehicles for business operations must have a commercial auto insurance policy. Whether you own a tow truck, a fleet of vehicles, or a landscaping pickup, they must all have commercial car insurance coverage.

If you use your personal vehicle to drive to and from work, then your personal auto insurance policy will cover you. But if you use it to make deliveries or run any other work-related errands, then a commercial auto insurance policy will cover you if you are involved in an accident.

If you're unsure whether you need a commercial auto insurance coverage, ask yourself these questions to help you decide:

• How do you use the vehicle daily? You should have commercial auto coverage if you use your vehicle to perform business operations, such as delivery of goods, transport of equipment, or transport of customers.
• What type of vehicle are you using? You likely need commercial auto insurance if you use big, heavy commercial vehicles like pickup trucks, dump trucks, or trailers.
• Who owns and operates the vehicles? If your vehicle is registered under your business, you should have commercial auto insurance coverage for the vehicle. You must also list all full-time employees who use the vehicle as drivers.

How Does Commercial Vehicle Insurance Work?

All vehicles must have liability coverage, regardless of whether they're for business or personal use. Depending on your budget, you can get basic or standard auto insurance policies. The standard plan includes a minimum of the following:

• $15,000 personal injury protection
• $30,000 per accident bodily injury liability
• $15,000 per person bodily injury liability
• $ 5,000 per damage liability per accident

Commercial auto insurance can cover you for both liability and collision damages. Your insurance agency will recommend the best policy for you based on factors like the types of vehicles you own and how they're used. The coverage limits might be higher than what you'd get with a personal insurance policy.

Besides liability and collision benefits, commercial auto insurance may also cover you for the following:

• Damage related to vandalism, theft, or weather events
• Employee vehicles used for business purposes
• Damages caused by uninsured drivers
• Medical expenses resulting from an accident
• Rental costs if you need to rent a vehicle temporarily for business operations

What Coverages Are Included in a Commercial Auto Insurance Policy?

Liability coverage can only protect you if one of your vehicles causes an accident but cannot cushion you from a mishap caused by someone else. This is why you need to get extra coverage to ensure you're fully protected in an accident. There are different types of coverage in a commercial vehicle policy. They include:

• Bodily injury liability coverage: This type of coverage pays for bodily injury or death resulting from an accident for which you were at fault.
• Property damage liability insurance: Pays for property damages you or your employees cause to someone else's property.
• Collision coverage: Pays for the cost of repairing your vehicle when damaged in an accident.
• Comprehensive physical damage coverage: Pays for damage to your vehicle caused by other things besides a road accident. These include vandalism, fire, flood, or theft.
• Uninsured motorist coverage: Pays for injuries and damages caused by an uninsured or a hit-and-run driver.
• No-fault or personal injury protection (PIP) coverage: Pays the cost of lost wages and medical or funeral expenses after an accident, regardless of who is at fault.
• Rental car coverage: This covers you and your employees when driving a rental vehicle for business purposes.
• Medical payments coverage: Pays for medical expenses for you and your employees if you're involved in an accident while driving your business car.

What Is Not Covered by a Commercial Auto Insurance Policy?

Commercial auto insurance policies do not cover the following:

• Contents inside the vehicle that are damaged during an accident
• Medical expenses not related to an accident that happened while you or your employee was driving a business vehicle
• Accidents that occur when you or your employee is driving a personal car
• Rental vehicles used for work

Get the Right Coverage for Your Business Vehicles

If you run a business that uses trucks, vans, or trailers for business operations, you need commercial car insurance to protect yourself and your employees while on the road. Some of the most common businesses that can benefit from commercial auto insurance include landscapers, engineers, photographers, caterers, and contractors.

Driving a commercial vehicle without insurance could result in fines, penalties, and in the worst-case scenario, revocation of your driver's license. Therefore, it's your responsibility as a business owner to ensure that your work vehicles are adequately insured before hitting the road.