What Is Commercial Auto Insurance?

If you’re self-employed or a small business owner, you may often drive your vehicle for business purposes — but are you sure you're covered with the right auto insurance? You might think your personal car insurance policy will protect you from the unexpected, but before you head out on your next entrepreneurial endeavor, you’ll want to find out if commercial auto insurance needs to come along for the ride.

Commercial auto insurance offers protection for vehicles used specifically for business — whether it’s a company dedicated vehicle or personal vehicle. A commercial auto policy can be customized to the needs of your business, and provides protection to you and your business from costs associated with property damage, injury and liability claims.

Are you unsure if your vehicle needs commercial coverage? Let’s take a look and find out.

What Is the Difference Between Commercial and Personal Car Insurance?

You’ll find that there are a number of differences between commercial and personal auto insurance, but mostly you’ll notice that the coverage amount and purpose of coverage are what set them apart. A business is going to have much more liability risks than an individual, therefore their liability limit is going to be higher.

Other than that, here are a few ways commercial auto policy helps protect your business:

  • Property and liability trailer exposure
  • Equipment used with or attached to the vehicle
  • Additional insured requirements
  • Higher limits (up to $2 million)
  • Loading and unloading exposure
  • Hired-vehicle coverage
  • Non-owned vehicle coverage

Do I Need Commercial Auto Insurance?

How do you know if you need commercial auto insurance? Consider the following:

How is the vehicle used? If you own a business and own or use vehicles in that business, you’ll most likely need a commercial auto policy to protect that business. Here are some business-related functions you may use your vehicle for:

  • Carrying equipment or tools
  • Going to job sites
  • Delivering any goods, including pizza, newspapers, or any form of wholesale or retail products
  • Taxi services (e.g. Uber, Lyft), limousine or other driving services
  • Transporting flammable or hazardous material
  • Trucking and freight transportation
  • Hiring your vehicle to tow other vehicles

Who owns the vehicle? Your vehicle will most likely need commercial auto insurance if it’s owned by a business, but if you’re sole proprietor, you might only need a personal auto insurance policy. For instance, if you only use your vehicle simply for commuting, you might be covered by your personal auto insurance policy. Contact your agent to make sure.

You’ll typically need commercial auto insurance if:

  • Any of your vehicles are owned or leased by a partnership or corporation.
  • Any of your vehicles are registered or titled to a business, including corporation or partnership.
  • Any of your vehicles are leased or rented to others.
  • Any employees or non-listed drivers use your vehicles regularly.

What kind of vehicle is it? The size and weight of your vehicle are important factors when determining if you need commercial auto insurance. Since a heavy-duty vehicle can cause much more damage if involved in an accident, they’ll often need special insurance coverages. You most likely need commercial car insurance if you answer yes to any of the following:

  • Are any of your vehicles a dump truck, tow truck, or semi and commercial trailer?
  • Do any of your vehicles, including pickups, vans or utility vehicles, exceed a gross weight of 10,000 pounds or have a rated load capacity of over 2,000 pounds?
  • Do your vehicles have equipment installed, like ladder racks or toolboxes, that are used for business?
  • Do any of your vehicles have catering equipment?
  • Is your vehicle outfitted for snowplowing?
  • Are any of your vehicles equipped with altered suspensions, hydraulic lifts or racing equipment?

Does your vehicle require higher liability limits? A commercial auto insurance policy usually offers higher limits than a standard personal auto policy, so if your business protection requires higher liability limits, commercial insurance is the way to go.

Still not sure if you need a commercial auto policy or if a personal auto policy will suffice? Your best bet is to connect with an agent — they’ll help you understand what would best cover your business and can answer any questions you may have about this coverage.

How Much Does Commercial Auto Insurance Cost?

To determine the cost of your commercial auto insurance, you’ll have to look at a number of factors:

  • The cost, new or MSRP, of the vehicle is one of the basis for the cost of your coverage. The higher priced vehicles will typically cost more to insure.
  • Types of vehicles — usually a heavy-duty vehicle, such as a dump truck, is going to cost more than a smaller, passenger auto vehicle.
  • Number of vehicles you need to insure.
  • What do you use the vehicle for? Does it normally sit at a job site all day or is it constantly in motion delivering a product?
  • Risks — an insurance company is going to look at the driving records of the drivers who will be behind the wheel of your commercial vehicle. In this case, drivers who have bad records will cost more to insure.
  • Amount of coverage needed.

Can I Write Off My Commercial Auto Insurance?

If your vehicle is used for commercial or business use, your commercial auto insurance is tax deductible. You can deduct vehicle-related costs as long as you can prove that you use it for business purposes.

Find out more about how to claim your business car as a tax deduction.

Whether you’re a one-man operation or an expanding business, understanding where your company needs coverage will ensure success in the long run. Connect with an American Family Insurance agent today to find the right coverage for business car today.


How would you rate this article?

Related Topics: On The Road , Car Insurance