Business Auto Insurance Policy 101: Terms to Know

If you’re considering a new business auto policy, it’s important to understand the basic elements of commercial auto insurance. In many ways, it’s similar to your personal auto policy. But there are differences you should understand as you consider your business automobile insurance options. After all, the more you know, the easier it is to compare coverage — and make an informed choice.

Basics of business automobile insurance

There are three basic parts of every business auto insurance policy:

1. Physical damage insurance - includes collision insurance, and either comprehensive coverage or coverage that specifies the loss you might incur
2. Liability insurance - includes bodily injury, property damage, uninsured motorist and underinsured motorist
3. Other coverages - can be added to your policy. These include medical payments, towing and labor, rental reimbursement, and auto loan or lease gap coverage. These are not mandatory and can be added based on the company’s budget and ability to self-insure some losses.

Understand the details of auto insurance for businesses

Collision Insurance
Helps pay for damage to your vehicle if you hit a vehicle, another vehicle hits you, or your vehicle rolls over, regardless of who is at fault. Collision coverage can be required if your vehicle is financed or leased.

Comprehensive Insurance
This type of insurance on your business auto policy pays for damage to your vehicle from causes other than an accident. These instances may include theft, flood, vandalism, earthquakes, fire or damage from a bird or animal.

Liability Insurance
Liability covers bodily injury to others and any property damage to another vehicle if you are at fault in an accident. Bodily injury pays others’ medical costs and lost wages, and your legal expenses if a lawsuit is brought against you due to an accident.

Uninsured Motorist Coverage
If you, or an employee, are involved in an accident with an uninsured motorist, it can cost you plenty. This coverage on your business automobile insurance pays for your injuries or property damage caused by an uninsured motorist, a driver that does not carry insurance, or, in some states, an unidentified driver.

Underinsured Motorist Coverage
Unless you live in a “no-fault” state, where each driver’s auto insurance policy responds to their own losses, this coverage protects you if the “at fault” driver fails to carry enough liability insurance to cover your bills.

Business auto policy options

Beyond these fundamental components, you can customize your business automobile insurance policy with the following coverages (also know as endorsements):

Emergency Road Service Coverage
Provides protection for problems that are not typically handled by your business auto insurance policy, such as being locked out of your car, needing a battery re-charged or inflating a flat tire.

New Vehicle Replacement Cost Coverage
This coverage can insure your new vehicle if it’s in an accident resulting in a total loss, without a deduction for depreciation.

Hired Auto Physical Damage with Loss of Use Coverage
Covers comprehensive and collision damage to a leased or rented vehicle, as well as additional contractual obligations to the leasing or rental company.

Auto Loan or Lease Coverage
If your vehicle is in an accident and is a total loss, this insurance covers the difference between the unpaid amount on the loan or lease, and the actual cash value of the vehicle.

Expanded Towing
Provides towing coverage for pick-up trucks that’s not part of your standard business auto coverage. This insurance also covers towing, jump starts, and minor roadside repairs.

Rental Reimbursement
If you have a vehicle under repair because of an accident, a standard business auto policy won’t pay for a rental car. This additional coverage will make sure you have a replacement vehicle.

Medical Payments or Personal Injury Protection Coverage
Pays for medical expenses if you or your passengers’ health care insurance does not cover the costs.

The bottom line of business automobile insurance

A business auto policy can protect your business and its employees from financial losses resulting from an accident or other unforeseen incident. These basic terms and ideas will help you compare and contrast options before making a decision on auto insurance for your business.

Contact a Nationwide agent today for a free business car insurance quote that’s customized to your needs.