What Is Unique About Commercial Auto Insurance?

The need for cheap insurance in our private lives is a well known and largely understood reality. Commercial auto insurance is very different from personal auto insurance in a number of ways that are not as well known. Business owners should not assume that the commercial auto policy is as straightforward. The search for low cost insurance for a business should not result in a coverage gap. Here are a few of the key aspects of commercial auto insurance that makes it unique.

The primary rating factors of the commercial auto policy are the vehicle details (its value and safety factors), the vehicle class (private passenger or truck), and the usage. Special usage classes for commercial trucks are service, delivery, and commercial. In the commercial auto policy, the driving records of the drivers are generally not considered in the premium calculations, only in the overall underwriting for acceptability.

There may be a surcharge on a commercial auto policy if one of the drivers requires a financial responsibility filing such as a SR-22. Any owner who needs an SR-22 filed, should make that known early in the process of applying for the business auto insurance. Many commercial insurers will not prepare financial responsibility filings.

The definition of "the insured" under a commercial auto policy can be somewhat vague. The owners, officers, and directors are insured as well as all employees while using company vehicles for business. Trouble can arise when a business sets up a separate auto leasing subsidiary company for the management of a fleet or when a company has multiple subsidiaries.

If all companies, subsidiaries, dba's and leasing companies are not listed as insured under the policy, a business could face an uninsured loss depending on who is driving at the time and what that driver was doing when the accident occurred. The personal auto policy definition of "who is insured" is far clearer.

In most personal auto policies, anyone who is insured under the policy is usually insured if they rent a car (at least for bodily injury and property damage liability) or borrow a car from a friend. In business auto insurance, that is a separate coverage which must be added by endorsement.

Owners and employees often use their own vehicles to visit clients or travel to a meeting. If an accident were to occur, the employee's personal auto insurance would apply as primary. However, the likelihood that the business will also receive a claim for damages is high. For a business to have any coverage for such a claim, the Hired and Non-owned Auto endorsement must be added to the policy.

Business owners should understand that commercial auto insurance is not the same thing as a personal auto policy. Questions regarding coverage options, limitations and exclusions as well as ways to secure low cost insurance for their business vehicles should be directed to the insurance company or the broker of record.