Cars are important for business. Some businesses like transportation and food delivery cannot do without cars. For these business owners that need vehicles to run their business, keeping these cars on the road is crucial to business and keeping their livelihoods.
Sadly, accidents, theft and natural disasters can happen at any time. These issues can easily leave your business cars with damages that might be difficult to repair. Worst still, accidents can result in overly expensive lawsuits. To avoid all these issues, you must protect your commercial vehicles with the right auto insurance.
In this article, we share some insights about the cost of commercial auto insurance. We also have some ideas to help you reduce the cost.
- How much does commercial auto insurance cost?
- How much is the monthly average cost of commercial auto insurance?
- What factors affect commercial auto insurance costs?
- How to save money on your commercial auto insurance?
- What does commercial auto insurance cover?
- Commercial auto insurance minimum requirements
- Who needs commercial auto insurance?
- Commercial auto insurance companies
How much does commercial auto insurance cost?
The typical cost of commercial auto insurance for a policy with maximum coverage of $1 million is $2,100 per year. About 45% of small businesses spend less than $1,700 per year. These estimates are from examining hundreds of commercial auto insurance contracts purchased by small businesses.
The estimates are only to show you what the average cost looks like. In reality, your quotes might be higher or lower than these values depending on several factors discussed below.
How much is the average monthly cost of commercial auto insurance?
The average commercial auto insurance cost per month is $175. There are two types of commercial auto insurance: a policy covering the minimum requirements of the state and federal regulations, which usually includes liability coverage only, and the other is comprehensive policy. The costs are different for these 2 policies. Obviously the minimum coverage policy is much cheaper.
| Commercial auto insurance policy types | Monthly average costs |
| Minimum coverage (liability only) | $85 a month |
| Comprehensive coverage | $330 a month |
Again, these are just the average premiums of hundreds of commercial auto insurance policies. Your quotes and rates will be different. Be sure to shop around with a few companies or work with a broker such as Simply Business, commercialinsurance.net, CoverWallet, or Smart Financial so that they can help you get several quotes easily. You can compare these quotes to select the cheapest one for you.
What factors affect commercial auto insurance costs?
The cost of commercial auto insurance is not fixed. That explains why the estimate we gave above is a large range. Insurance companies have different rates for their commercial auto insurance. Usually, the final quotes depend on a range of factors as follows:
The insurance policy you select
Commercial auto insurance comes in different types, and the type of coverage you choose plays a major influence on the cost of your commercial auto insurance. You have the option of purchasing auto liability coverage or comprehensive coverage.
In most states, commercial auto liability coverage is compulsory for businesses that have cars. This coverage protects you if you or an employee is at fault in an accident involving your business vehicle. Auto liability is your cheapest choice; however, it offers limited coverage. A typical commercial auto liability insurance will only cover damages like:
- Physical damage to other vehicles or property damage to a third party
- Medical expenditures resulting from bodily harm to another party
You can easily raise the level of protection with comprehensive commercial auto insurance. However, you will also raise your insurance premiums. Comprehensive business vehicle insurance covers theft and damage caused by weather, vandalism, or fire and what is covered by the auto liability policy.
Insurance companies might also have additional coverage choices for you. These include coverages such as:
- Roadside assistance coverage
- Rental reimbursement
- Collision coverage
The more of these policies you need, the more money you’ll pay for the extra protection.
The coverage limits that you choose
Like the policy, the limit of coverage you require will determine your commercial auto insurance cost. If you want commercial auto coverage that covers a wide range of damage, you must select higher policy limits. However, higher coverage limits are more expensive than basic coverage.
Location
The location or state in which you do business directly influences the cost of your commercial auto insurance. You might pay more for your commercial auto insurance
premium if you do business in a densely populated area.
That is because accidents will likely occur in states with dense populations. Similarly, your insurer might charge you more if the location has a high accident or insurance claims rate. Rates are also high in areas where theft and natural disasters are common.
If your company requires you to travel beyond state boundaries, your rate may be greater than if it is completely local.
Your industry
Your industry hazards and how you use your vehicles for business will affect your commercial auto insurance cost. For example, a pizza delivery car that is constantly moving might have higher rates than an IT consultant’s car that moves once in a while. Similarly, a construction truck that frequently does hazardous job sites might also pay more than an accountant’s car.
Vehicle type
The more expensive your business vehicle is, the more you will pay to insure it. For instance, you will pay more for a 2019 Toyota corolla than a 2008 Toyota Camry.
Parking location
The location where you keep your cars affects your commercial auto insurance cost. Companies that park their vehicles in places with a high risk of vandalism, vehicle theft, and crime will pay extra for coverage.
Credit score and driving record
When setting the policy rate, the insurer will want to see the driving record of your drivers. The more accidents, claims, and moving infractions the driver has, the higher the cost of the commercial vehicle insurance. Your company’s credit score and the credit score of the principal business owner are taken into account when pricing commercial insurance. A lower credit score is viewed as a higher risk, which raises the cost of coverage.
How to save money on your commercial auto insurance?
Keeping a clean driving record is the greatest method to keep your commercial auto insurance costs low. Even one driver on your company’s insurance who has an accident or a driving offence will raise your premiums significantly.
You may also save money by doing the following:
Obtain multiple quotes
Auto insurance policies differ from one company to another. So, to find the best price, ensure you contact many insurance companies and brokers. With that, you will obtain various quotes and compare providers and policy levels. The best way to obtain several quotes easily is to work with a broker like Simply Business, CoverWallet, Commercialinsurance.net, or Smart Financial. These brokers will be able get several quotes for you to compare and select the cheapest one conveniently.
Collaborate with an experienced agent
The correct agent can ensure that you have the appropriate level of coverage for your company’s needs. If you feel you don’t understand the policy and how to go about things, you can seek the help of expert agents.
Combine your coverages
If you bundle commercial automobile insurance with other company insurance policies or a personal auto policy, you may receive a lower premium.
Prepay your premium annually
Some renowned providers will reduce your premium by 15% or more if you pay it in one payment rather than monthly installments.
Modify your deductibles
Choosing a larger deductible might help you save money on commercial vehicle insurance. However, ensure that the deductible is not too high, as you will have to pay for it if there is a claim.
What is commercial auto insurance?
Commercial auto insurance is just like personal auto insurance since it covers both liability and physical damage. However, it differs from personal auto coverage in some ways. The key distinction is that it is for vehicles used for commercial purposes. In addition, the following are some differences:
- the policy may accommodate a wide range of vehicle kinds and sizes.
- Most insurers do not restrict the number of cars covered by the policy.
- Most insurers do not limit the number of drivers covered by the policy.
- There are higher liability limitations available.
You can choose from various endorsements available to expand the types of coverage.
One of the most significant benefits of getting commercial auto insurance is the option to extend coverage for vehicles that are not owned by the company or belong to workers. That is, if one of your employees uses their vehicle for business purposes, you can extend this policy to cover them.
By electing this endorsement, your business’s rental vehicles or employee-owned vehicles can be covered with the same liability limitations as your vehicles, providing superior protection for your company.
What does commercial auto insurance cover?
Below are the typical coverages of a commercial auto policy:
Bodily injury liability
This coverage will compensate for any form of bodily harm or even death caused by an accident in which you were at fault. The coverage will also provide you with legal representation in such circumstances. This coverage is mandatory and is usually included in the minimum requirements by state and federal regulations.
Property damage liability
This coverage protects you and offers you legal representation if your commercial vehicle accidentally damages someone else’s property. Similar to bodily injury coverage, property damage liability coverage is also required by state and federal regulations.
Combined single limit (CSL)
Sometimes, liability insurance can include separate limitations for bodily injury and property damage claims. A combined single limits policy provides the same monetary amount of coverage per covered incident, whether it is bodily injury or property damage, and whether it affects one person or multiple people.
Medical payments liability
This is also called the “no-fault or personal injury coverage.” This coverage pays for the treatment of everyone present in your commercial vehicle incurred as a result of a covered collision, regardless of who is at fault.
Uninsured motorist coverage
This coverage pays for your injuries caused by an uninsured or a hit-and-run driver. In some cases, it might also cover for property damage and also the underinsured motorist coverage. That would be in a situation where the driver at fault is the person without sufficient insurance.
Comprehensive physical damage coverage
This coverage pays for damage to or replacement of your car from theft, vandalism, flood, fire, and other covered perils. If your company’s car still has a loan on it, lenders usually require you to have comprehensive damage coverage since they want to make sure if anything happens to the car, its value has to be protected.
Collision coverage
Collision coverage pays for damage to your car when it hits or is hit by another object.
Commercial auto insurance minimum requirements
Commercial auto insurance is compulsory in most states of the US. Virginia and New Hampshire are the only states where commercial auto insurance is not mandatory. Asides from those two states, you will need commercial auto insurance to use cars for business in the US.
However, the minimum amount required varies from state to state. In most states, all you need is proof of commercial auto insurance. But then, these minimum insurance requirements will only cover you if you do business in the state where your commercial car is registered.
If your company car crosses state boundaries, you might need to meet the minimum federal requirements. Federal insurance requirements are set by the Federal Motor Carrier Safety Administration (FMSCA).
Usually, federal requirements vary based on the weight of your car and what you do with it. But then, the minimum coverages are between $500,000 and $1,000,000.
Who needs commercial auto insurance?
So far your business uses cars for business; you will need commercial auto insurance. That includes businesses that borrow, lease, rent or own cars. This is because most states require that you carry commercial auto insurance. The major reason is that personal auto plans do not provide the liability limitations necessary by the state agency.
Generally speaking, the following rules apply for commercial vehicles regarding commercial auto insurance.
- Vehicle weight: Many jurisdictions require cars weighing more than one ton to be covered under a commercial insurance policy.
- Vehicle type: Utility-style vehicles, including trucks, vans, dump trucks, and other specialized utility vehicles, are required by most states to be insured under a commercial auto policy.
- Transportation vehicles: Commercial auto insurance is necessary for any vehicle transporting passengers for a fee, such as limos, taxis, and buses.
- Goods vehicles: Regardless of size or weight, most states need commercial auto insurance for any vehicle that delivers cargo, such as a semi-truck, cargo van, pickup truck, tow truck, log truck, farm truck, or box truck.
You should note that even if your state does not require commercial insurance for vehicles used for business purposes, it is still a wise decision. That’s because you will need the policy to protect you from accidents and damages. Sadly, a personal auto policy will likely not cover you for business activities such as pizza delivery, even if you do it part-time.
Commercial auto insurance companies
Getting the right commercial auto insurance can be challenging if this is your first time. There are several options, and picking the best can sometimes be confusing. However, you don’t have to go through all that stress.
We have done all the work for you in advance. We have a list of the best commercial auto insurance companies you can use.
