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Commercial Auto Policy 101: Terms to Know

If you’re considering auto coverage for your business, it’s important to understand the basic elements of a business auto policy. The more you know, the easier it is to compare coverage — and make an informed choice.

Commercial auto insurance policy basics

There are three basic parts of every commercial car policy:

  1. Physical damage insurance − includes collision and comprehensive coverage
  2. Liability insurance − includes bodily injury, property damage, uninsured motorist and underinsured motorist
  3. Other coverage − includes medical payments, towing and labor, rental reimbursement and auto loan or lease gap coverage.

Types of coverage in a commercial auto policy

Collision insurance
Pays 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
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
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
Pays for your injuries or property damage caused by an uninsured motorist, a driver who does not carry insurance or, in some states, an unidentified driver.

Underinsured motorist coverage
Protects you if the at-fault driver fails to carry enough liability insurance to cover your bills, unless you live in a no-fault state, where each driver’s auto insurance policy responds to their own losses.

Business auto policy options

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

Roadside Assistance
Provides protection for problems that are not typically handled by your commercial 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
Replaces your new vehicle under a total loss with a new or comparable vehicle. Also provides gap coverage for any amount you may owe that’s above your car’s actual cash value.

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
Covers the difference between the unpaid amount on the loan or lease and the actual cash value of the vehicle, if your vehicle is a total loss after an accident.

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

Rental reimbursement
Pays for a rental car up to the limits of your policy so you have transportation after an accident.

Medical payments or personal injury protection coverage
Pays for medical expenses if you or your passengers’ health care insurance does not cover the costs.

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