Unravelling the Mysteries of Commercial Auto Insurance

Posted by Matt Reilly on Mar 6, 2018 11:32:53 AM

Buying personal auto insurance is crazy confusing. Everyone thinks they know what car insurance is, and then they sit down with an agent, or open up their policy online and it’s like trying to read a book written in Latin.

Property damage, medical bills, liability coverage, average mileage discounts, AAA memberships, car value, car age, your age...the list goes on and on. Some things just seem unfair. Remember that bit about being injured in a collision with an uninsured driver? How you have to pay for it in your car insurance because neither the other driver (who has no auto insurance) nor your health insurance will cover medical bills in a crash like that?

But you’re too exhausted trying to understand all this, so you sign the papers and just write the check. In a lot of states, it’s sign on the dotted line...or don’t drive.

Now imagine business car insurance, where the people involved aren’t just drivers and pedestrians, but also businesses and employees and clients and third party entities and on and on. Things get even more confusing.

In this blog, we will touch on some of the major points you should understand about commercial auto insurance, so that the next time you’re speaking with an agent or reading your policy online you won’t be as totally lost as usual.

#1: Who is covered?

If you have ever been in a situation where you needed to drive a friend’s car, or vise-versa, then someone is bound to have mentioned “but so-and-so is not covered under your/my insurance.” This is a facet of personal car insurance: it’s only really in effect when the covered car is being driven by the covered driver. If you want other people to be insured while they drive your car, you need to add extra coverage before purchasing the policy.

But if you’re looking at Commercial Auto policies, you are in luck! Commercial Auto policies automatically include any and all business personnel who might operate the vehicle. So long as the person driving is an official member of the business (owner, employee, etc.) and the car or truck is owned or leased by the business, then your policy should cover whatever accident has occurred.

#2: What if I don’t own a vehicle, but I rent a vehicle/transportation service?

There are plenty of small businesses who never own vehicles, but need to occasionally use one or more to get things done. In these cases, a standard Commercial Auto policy is not sufficient (or even recommended, as you’ll see below).

If your employees are going to use their personal vehicles for business purposes, or if you are going to rent a vehicle (and possibly the services of a driver), then you need to have Hired/Non-Owned Auto Liability coverage. As the name suggests, this coverage protects you from the costs of being sued (that’s what makes it a “liability” policy) when a car or driver that is not technically part of your business causes harm or damage to a person or property.

So let’s say you are being visited by an important client, and you want to impress them by sending a limo service to pick them up at the airport. If the limo gets into a collision and the client spends time in the hospital, you can be found liable for the medical bills (and more) even though it was not your limo and not your driver. That’s where Hired/Non-Owned coverage kicks in.

#3: I’m definitely in the “not-owned” situation. But does that mean I shouldn’t buy a Commercial Auto policy?

Probably. Insurance companies know that plenty of small businesses will need to use vehicle services, but won’t ever invest in a vehicle. In these cases, a Commercial Auto policy is excessive. Instead, you can make sure your business’s General Liability policy includes Hired/Non-Owned Auto Liability coverage when you buy it.

Doing this can actually save you money, because you’ll be able to provide proof of liability coverage to any car or truck rental service that you use, who would otherwise force you to buy a (usually overpriced) short term liability policy through them before letting you use their vehicles.


#4: I have a towing business, is a Commercial Auto policy all the protection I need?

Absolutely not! Just because your business operates almost entirely using vehicles does not mean that a Commercial Auto policy is enough protection. You will still need General Liability, Workers’ Compensation, and possibly even Professional Liability to protect you fully.

Let’s say your employee is towing a small car when they hit a bump and the lock keeping the small car attached disengages. All the damage that car sustains as it rolls off the road and into some trees is not covered by your Commercial Auto insurance. The owner of the car can sue you over the damages, and you’ll need to count on General or Professional Liability for protection.

#5: I restore and transport antiques for a living. What does Commercial Auto do for me?

If you are running a business that regularly transports valuable cargo, then a regular Commercial Auto policy covers you in the same way it covers everyone else (which in this case is unfortunate for you). You’re protected from damages to other vehicles, third-party property like fences and gardens, and injuries to drivers, passengers, and pedestrians. But if your car was loaded with rare china on its way to a customer’s house, and all that cargo is now ruined, you’re up the creek, so to speak.

Businesses like this need Inland Marine coverage. And don’t let the name fool you, it doesn’t (really) have anything to do with sea travel. Essentially, Inland Marine insurance protects valuable cargo in transit on land. Depending on whether the cargo is a client’s property or your property, a different protection may apply (Professional Liability, most likely, if what you are moving is originally the client’s property; Inland Marine if it is your inventory that a customer is looking to buy).

As helpful as a blog post can be, this only scratches the surface of Commercial Auto insurance. But now that you are equipped with some extra knowledge, you can reach out to an expert insurance agency and feel more confident that you are getting what you need.


AP Intego is an innovative national insurance brokerage focused on helping small and medium sized businesses achieve their dreams.

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