What is Commercial Auto Insurance?

What is Commercial Auto Insurance?

March 2024
Share This Story

Cars, trucks, and vans are arguably some of the most used tools on and around our job sites. This is why it’s important that your business purchases commercial auto insurance for any company vehicle you’re operating. Learn what it covers and the costly risks if you decide to go without it.

What is Commercial Auto Insurance?  

Commercial auto insurance is a policy that covers physical damages and liability coverage for amounts, situations, and usage that aren’t covered by personal auto insurance policies. This coverage can be for a number of vehicles, including all of your cars, trucks, or vans, as listed above. 

Why Do I Need Commercial Auto Insurance?

Besides the financial risks of your business, there can also be legal stipulations depending on where your business is located. For example, in California, all businesses that own their vehicles must at least have auto liability insurance. 

If you or your employees get into an accident without coverage, you could face expensive lawsuits or settlements. In addition, you would most likely be required to pay for damage to the other vehicle or property, medical bills, lost wages, pain and suffering, plus other related costs.

Moreover, the absence of commercial auto insurance could lead to harsh repercussions. If you or your employees are ticketed for lacking insurance, penalties could include a fine of $350 or more, impoundment of your vehicle, and a spike in your auto insurance premiums. If you receive subsequent violations, the fine might escalate to $1,800, with the potential for a state-imposed suspension of your license for a duration of up to four years.

Don’t confuse commercial auto coverage with personal, either. Your personal auto policies aren’t designed to cover accidents or injuries if you’re using your vehicle for work purposes. Not only could your personal auto claim be denied if you are in an accident with your work vehicle, but your carrier could drop your personal auto coverage completely as a result.

What Does Commercial Auto Insurance Cover?

Just as with your personal auto policy, commercial vehicle insurance offers similar protections, including liability, collision, comprehensive, medical payments (or personal injury protection), and coverage against uninsured motorists. 

However, it's important to note that there are distinctions between a commercial auto insurance policy and your personal auto policy. These differences might encompass aspects such as eligibility, definitions, coverages, exclusions, and coverage limits.

Here are common coverages that you may see on your policy. 

Note: Policy contents vary depending on state, business, or other regulations.

Bodily injury liability coverage – This covers costs related to bodily injuries or death from an accident you're responsible for and often includes legal defense.

Property damage liability coverage – This ensures protection if your vehicle accidentally harms someone else's property, usually offering legal defense as well.

Combined single limit (CSL) – Unlike separate limits for bodily injury and property damage, a CSL policy provides a uniform coverage amount per incident, covering both bodily injury and property damage to anyone involved.

Medical payments, no-fault, or personal injury coverage – Typically covers medical expenses for you and your passengers after an accident, regardless of who was at fault.

Uninsured motorist coverage – Compensates for injuries and sometimes property damage caused by an uninsured or hit-and-run driver. It may also cover underinsured motorists, where the at-fault driver lacks adequate insurance.

Comprehensive physical damage coverage – Reimburses damage to your vehicle from non-collision incidents like theft, vandalism, or natural disasters.

Collision coverage – Covers repairs to your vehicle in the event of a collision with another object or vehicle.

How Does Commercial Auto Insurance Work in California?

In California, every vehicle, whether used for personal or commercial purposes, must carry a basic level of auto liability insurance. The required coverage limits are as follows:

  • $15,000 for bodily injury or death per person
  • $30,000 for bodily injury or death to more than one person
  • $5,000 for property damage per accident

Depending on the nature of your business and the vehicles you operate, your insurance provider may suggest opting for higher liability coverage limits.

There are specific, additional liability insurance requirements for vehicles like semi-trucks or others bearing a U.S. Department of Transportation (USDOT) of California serial number. These requirements vary based on the vehicle type and its use.

To determine if these additional requirements apply to your business, you can verify your business's needs by looking up your USDOT number or docket number through the Federal Motor Carrier Safety Administration.

Have other insurance concerns or questions?  Learn everything you need to know and check out our other guides on contractor-related insurance policies. 

We Save Our Clients an Average of 23% Per Year!  Get Quote