What Is Commercial Insurance? Everything You Need To Know.

What Is Commercial Insurance
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If you transport work equipment, drive to clients regularly, and so on, you may need commercial automobile insurance.

Small-business owners who use their vehicle for business activities, such as driving to work sites or meeting clients, delivering goods, or hauling tools or supplies, or who have staff who drive the vehicle, need commercial auto insurance.

This covers self-employed people and independent contractors (even part-time). However, regardless of whether you own the vehicle, if you routinely use it for business, it is your employer’s responsibility to insure it for work-related driving.

Commercial auto insurance is distinct from personal auto insurance, though you may typically save money by bundling the two. It may also be possible to bundle it with other types of commercial insurance, such as general liability and commercial property insurance.

In this article, you will have a better understanding of commercial auto insurance and the best company to choose from.

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What Is Commercial Auto Insurance?

Commercial auto insurance covers medical expenses, legal bills, and property damage if one of your company’s vehicles is involved in an accident. Small business auto insurance is necessary when you operate a firm. 

Because accidents can happen, keeping your cars, trucks, vans, and other work vehicles safe should be a top priority. If you are involved in an accident and do not have insurance, you may face enormous expenditures that you cannot afford. 

Furthermore, if your firm relies on your work vehicle, losing it could be financially disastrous.

You should have small business auto insurance to protect yourself from such dangers. Practically every state requires some sort of commercial auto insurance for business-owned automobiles. Only Virginia and New Hampshire do not require it, but drivers are still accountable for any damage.

Commercial auto insurance covers property damage and medical claims resulting from an accident, as well as legal costs if they sue you. Some may cover vandalism and theft under such an insurance policy, and some even pay legal fees if one of your staff is involved in an accident.

However, because this type of policy does not cover personal automobiles, get hired and non-owned auto insurance if your employees frequently use personal vehicles for business (HNOA). They provide liability coverage for automobiles that your firm uses but does not own.

Because of the heightened risk, commercial auto insurance policies typically have larger coverage levels. Personal auto insurance policies cover claims involving personal use, including commuting.

They are frequently less expensive and have fewer restrictions. However, if you get into an accident while working in your personal vehicle, your insurance company may deny your claim, so it’s smart to get commercial insurance as well.

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What Types of Coverage Are Available For Commercial Auto Insurance?

Commercial auto insurance, like standard auto insurance, offers a variety of coverage options.

The following are some of the types of coverage you should think about:

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Liability Insurance

This type of coverage is required in most states. It safeguards others if your work vehicle is involved in an accident.

This form of coverage includes bodily injury, which pays for medical costs and related expenses, as well as property damage, which covers the cost of repairs to the other vehicle.

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Payments for Medical Services

This sort of insurance covers the costs of medical treatment and related charges for your staff and passengers.

This type of coverage is not available in all areas, so ask your agent for more details.

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Insurance against Physical Damage

This form of insurance covers your business vehicle and might help you avoid damages. Consider getting this coverage if you have a lease or are still paying off your car.

Comprehensive Coverage

Comprehensive coverage protects you against weather-related mishaps and vandalism, while collision damage coverage protects you if your car collides with another object or overturns.

Specified peril insurance adds fire and theft protection to your policy.

Motorist who is Uninsured or Underinsured

You may be responsible for the bill if your business vehicle is involved in an accident caused by an uninsured or underinsured motorist.

Even if the other driver is at fault, this policy will pay for the damage.

Business Owners’ Policy (BOP)

A business owners’ policy (BOP) is a type of insurance that combines various types of coverage into a single policy.

Property and commercial general liability coverage, as well as many smaller amounts for umbrella coverage, are included in many BOPs. You can save money on your overall premiums by combining these coverages into one policy.

As a business, you can also specify the coverage limit of your policy, which will influence whether you pay monthly, semi-annually, or annually.

Commercial auto liability coverage limits, according to CoverWallet, are typically between $500,000 and $1,000,000.

Choose a policy with a higher maximum if your business puts your drivers at a higher risk of accidents or damage to the corporate vehicle.

What Don’t Small Business Auto Insurance Policies Cover?

Keep in mind that a cheap auto insurance policy may not cover certain types of occurrences. The following are some instances of these:

  • While committing a crime, there was an accident.
  • Vehicle damage caused by relocation companies
  • Damage that occurs because of civil unrest

Who Needs Commercial Auto Insurance?

If you simply drive your automobile for business frequently, your personal policy may be enough.

Whether you use your car for work regularly, other than commuting, you’ll need a commercial insurance, which you’ll need if you’re self-employed or operate a small business.

If you do any of the following, you’ll almost certainly require a business policy:

Drive for money. A personal policy will cover you if you’re driving pals to a concert or getting lunch for a coworker, but not if you’re carrying people or commodities for money.

Regular travels to store locations or job sites, for example, can cause a lot of mileage.

Items for work, such as heavy tools or equipment, must be transported.

How Are Commercial Policies Rated, Deductibles Selected, and Premiums Developed?

They calculate the policy premium based on how a policy is evaluated. The rating variables differ depending on the type of insurance you’re buying.

The building rating method for commercial property insurance is based on characteristics such as square footage, type of construction, sprinklered or non-sprinklered status, and fire protection classification.

Depending on the general liability classification codes used, the rating method for general liability insurance might be based on square footage, payroll, or total sales. Rating exposures are what they’re called.

They calculate the premium using a simple formula: rate x exposure = premium. Once the rating exposures have been identified and the deductibles have been chosen (usually based on information you provided on the application).

They calculate the premium using a simple formula: rate x exposure = premium.

Also, the amount of your deductible will be factored into the rate. The lower the premium, the greater the deductible (the amount you choose to self-insure).

You can reduce your premium costs by using greater deductibles. But, you don’t want to put your company’s financial future in jeopardy by selecting excessively large deductibles.

When gaining commercial insurance, speak with your broker-agent about the deductible alternatives available to you.

Other modification elements, such as experience modifications, timetable rating, or judgment rating, are frequently included in the fundamental rating equation.

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Because rating formulas vary based on the line of insurance, it’s vital to talk to your broker-agent about how your policy is rated and how the policy premium is determined.

How Can I Purchase Commercial Insurance?

Contacting a registered insurance broker-agent that specializes in commercial coverage is one of the first steps in acquiring small business insurance.

Establishing a working relationship with a trustworthy, knowledgeable broker-agent can be just as important to your business plan as seeking expert guidance from an accountant, banker, human resources analyst, payroll specialist, lawyer, or trusted business mentor.

Business relationships are excellent referral sources for recommending a commercial lines broker-agent, especially if the contacts are in the same or nearly similar industries as your company.

In your quest for a registered commercial insurance broker-agent, professional broker-agent associations can help.

Professional groups such as the Insurance Brokers and Agents of the West (IBA West) and the Western Insurance Agents Association (WIAA Group) can help you find a commercial insurance broker-agent in your area.

What Should I Expect From A Broker-Agent – Who Specializes In Commercial Insurance?

When looking for a broker-agent, check the California Department of Insurance for the broker-insurance agent’s license (CDI). 

The CDI must license all broker-agents who sell or advertise insurance in California. They give a fire and casualty license to a broker-agent, allowing him or her to offer commercial property and casualty insurance. 

Section 1725 of the California Insurance Code (CIC) requires a fire and casualty broker-agent to conspicuously display his or her license in his or her office. 

A CDI licensee must also prominently print his or her license number on all business cards, written price quotations for insurance products, and print advertisements for insurance goods delivered in California, according to CIC 1725.5.

You’ll be better equipped to choose the broker-agent with whom you’d like to do business after interviewing multiple brokers and checking their licensing status with the CDI. 

What to Expect From A Broker-Agent

While the phrase “broker-agent” refers to a specific license status with the CDI, brokers and agents get insurance through distinct methods. Brokers work for a variety of insurance companies and are often compensated through a broker fee charged for placing and servicing your insurance business.

Insurance firms appoint agents who are paid a commission by the insurance company with which they place the business. Because each agent represents a few insurance firms, you can approach many agents for bids on your commercial insurance business.

To begin with, a broker-agent will meet with you to review your business operations and the exposures (the risk of loss) that are unique to your industry and business type. If you already have company insurance, the broker-agent will want to go over it with you.

This is a routine procedure for determining your current coverage. In order to examine any gaps, inaccuracies, or overlaps in your present commercial policy, the broker-agent compares limits, exposure bases, company categories, exclusions, and endorsements.

It is unnecessary to disclose the premiums you have paid for your current or previous business insurance, but any other information that affects your operations should be shared.

The more reliable information you submit during the application process, the better the broker-agent will assess your specific insurance needs and present you with the best solutions to meet those needs while also protecting your business from loss.

What Are Some of the Best Commercial Auto Insurance Companies?

You might wonder, with so many large vehicle insurance companies to choose from, which ones offer small business auto insurance. These are three of the greatest, according to Investopedia:

1. State Farm

State Farm is a company that specializes in insurance. This organization sells insurance in every state and offers numerous forms of small business auto insurance coverage. 

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Retailers, contractors, and professional services are among the industries for which State Farm provides business insurance.

2. Hiscox.

This freelancer’s services are tailored to businesses with fewer than five employees. Although they did not establish it in the United States. 

It is a significant worldwide insurer that operates in every state. It also offers a diverse range of commercial insurance plans, including professional liability, cyber liability, and business owners’ policies.

3. Nationwide

This commercial insurance provider focuses on simple insurance alternatives, which is great if you own a high-risk firm. 

Except for Alaska and Hawaii, it has agents in every state. In addition, the company provides umbrella insurance, workers’ compensation, and commercial property insurance.

Others may include :

4. Progressive

It is the nation’s largest business auto insurer. It offers a variety of discounts to help you save money on your insurance, such as the opportunity to combine your commercial auto insurance with your personal policy, as well as other types of business insurance.

5. Geico

For over 70 years, Geico has been insuring autos.

Bundling commercial and personal auto insurance or combining your coverage with other business insurance are two options for lowering your rate with the insurer.

6. Allstate

Allstate is at the top of the heap for client satisfaction. In J.D. Power’s annual small-business insurance research, the insurer received the highest overall customer satisfaction rating. 

Above all, Allstate is also one of the top ten business car insurance companies in the United States, based on market share.

Frequently Asked Questions (FAQs)

What are the distinctions between commercial and personal auto insurance?

There are several important distinctions between commercial and personal plans, although they both provide similar forms of coverage. Because commercial vehicles require additional protection, commercial auto plans are frequently tax deductible and have higher liability limits. They can also cover vehicles that aren’t company-owned, such as if an employee drives their own car to work.

What is the cost of commercial auto insurance?

According to Insureon, an online marketplace for small-business insurance, the median cost of commercial auto insurance is $142 per month. However, the cost of your policy will be determined by the type of vehicle, all drivers’ driving records, how the car is used, and coverage limits, among other considerations.

What is the best place to get commercial auto insurance?

Several well-known insurers offer commercial auto insurance, including Geico, Progressive, State Farm, Allstate, and Liberty Mutual. Getting many quotes is the best approach to get reasonable rates because policies are often more expensive than personal auto coverage.

Is there a set of rules for the cancelation and nonrenewal of commercial insurance?

Yes. For commercial insurance cancellation and nonrenewal, commercial insurance companies must follow the rules laid out in the insurance code. For workers’ compensation, auto, ocean marine, surplus line, reinsurance policies, and other commercial insurance lines, there are separate insurance code sections that cover cancellation and nonrenewal; therefore, if you run into any problems with cancellation or nonrenewal notices, it may be a good idea to contact the CDI for a complete explanation.


If you operate a business, small business vehicle insurance policies can provide the coverage you need to safeguard your company and employees in the event of an auto accident.

If you don’t have the correct insurance, you’re putting your company at risk.


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