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Commercial Auto Insurance: What to Ask Before Buying

Congratulations on becoming a business owner! You’ve performed the necessary industry research, secured financing, and made note of the advice of those who have preceded you down one of the most potentially rewarding paths you’ll ever travel.

Next on your list is to buy commercial auto insurance. Here is a list of valuable questions that will help you find the best commercial auto insurance policy that will best protect your business assets and employees at the most affordable rate.

Questions to ask yourself about commercial auto insurance:

Who owns the vehicles my business uses?

Your insurance company will need to make a comprehensive list of the named insured – the individual and/or entity that owns your vehicles – so that claims will not be denied. For example, if a company lists Sunny Corporation DBA: Patty’s Pet Sitters, only Patty’s Pet Sitters will be covered.

Should an employee on behalf of Sunny Corporation not doing business as that name conduct business activities requiring a vehicle, they may be uncovered. Be sure to document all relevant parties.

What kind of commercial vehicle does my business own?

The two main categories that vehicles fall under when insurance companies calculate the premiums for commercial auto liability are 1) private passenger autos which are based on a flat rate, and 2) trucks, tractors, and trailers which are broken down by gross vehicle weight (GVW).  Vehicle class is one of the key factors in determining your policy rate.

How many total drivers and vehicles does my business require?

The number of vehicles and number of drivers are also factors that insurers use to calculate policy rates. Fleet insurance – which is bulk buying insurance from a single supplier – can reduce your cost on premiums and administration.

CHECK OUT: When Do You Need Commercial Insurance?

Fleets typically start as low as three autos and can include trucks, private passenger vehicles or a combination thereof.   

How are my commercial vehicles being used?

The type of work activities you conduct with your vehicle will impact your insurance rate. For example, driving a 1 ton truck in adverse conditions through the mountains multiple times per day exposes you to greater risk than picking up a few supplies twice per week.

Common activities can include transporting goods or people for a fee, traveling to see client or between job sites, making deliveries, and/or hauling tools or equipment.

How often are my vehicles on the road? 

The more time spent on the road means the greater chance of an accident. Vehicles that aren’t used very often will need less coverage than those that are used more frequently. For example, a flower delivery business that makes 30 deliveries per day will be at greater risk than a consulting firm that requires its employees to commute to a client site once a week.

Questions to ask your insurer about commercial auto insurance

What constitutes ‘commercial vehicle use’?

Because commercial vehicle insurance requirements vary by state, you will want to meet at least the minimum liability requirements of the state in which your business operates. In most states, insurance for commercial will be, minimally, the same coverage limits as it is for personal vehicles.

In most cases, the minimum state requirement is liability insurance, though some states also require uninsured motorist insurance and no-fault coverage.

What Vehicles Are covered under commercial auto insurance?

A business auto policy can be customized to fit the needs of your business ranging from a very narrow to a more broadly defined scope. For example, it can be narrowly written to apply to one auto or it can be written to apply more broadly to the named insured’s liability pertaining to the use of any auto.

CHECK OUT: 5 Things Uber Drivers Should Know About Auto Insurance

Vehicles you cover fall into the following categories:

  • Some autos your business owns
  • All autos your business owns, hires or leases
  • All autos used for the business, including those that your business does not own, hire or lease

Does commercial auto insurance cover personal use?

Yes, personal use is covered for a business-owned vehicle under your commercial auto policy. However, if you are using your personal vehicle for business purposes, you will need either enough liability coverage under your personal auto policy or the necessary commercial auto insurance for your personal vehicle.

How much commercial auto coverage does my business need?

Insurers typically recommend a business liability coverage minimum of $500,000 and a limit of $1,000,000. If you already have a business umbrella policy, it would provide protection for owned, hired, and non-owned autos if the umbrella policy stipulates the auto liability policy as an underlying policy.  

How can I lower my commercial auto premium?

There are several ways to reduce premiums, including hiring qualified drivers with good driving records, opting for higher deductibles, and installing safety devices such as car alarms, a GPS system, and airbags. Using electronic fund transfer as a mode of payment may also provide savings on administration fees.

You’ll also want to ask about any discount programs your insurer might offer such as paying in full upfront, using licensed commercial drivers, and purchasing multiple policies.

Is commercial auto insurance tax deductible?

Yes, the Internal Revenue Service (IRS) allows small businesses to deduct the cost of commercial auto insurance.

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