Decision Guide
Learn About Business Insurance
Commercial Auto Policy: How Much Is Enough?
It’s hard for a business owner to know just how much commercial auto coverage is needed because every business has their own unique needs when it comes to coverage. How much is too much, and what happens if you don’t buy enough?
Basics of business auto coverage
To get a sense for what you need, it’s important to understand the basics of commercial auto coverage, including:
- Physical damage insurance, which includes collision insurance, and either comprehensive coverage or coverage that specifies the loss you might incur
- Liability insurance, including bodily injury , property damage, uninsured motorist and underinsured motorist coverage
Physical damage insurance pays for damages to your vehicle resulting from an accident or other event. The amount of business auto insurance coverage you purchase is based on the actual cash value of the vehicle. You cannot buy more coverage exceeding the value of the vehicle.
Liability insurance requires the insurance company to pay damages the business is legally obligated to pay because of bodily injury or property damage caused by the insured vehicle.
Uninsured motorist liability coverage provides bodily injury coverage for the driver and passengers if a driver that fails to carry auto liability coverage is legally responsible for the accident causing the injury.
Underinsured motorist liability is essentially the same but occurs in cases where the driver did actually carry liability insurance but failed to carry a limit high enough to cover all of the bills.
Some states mandate this coverage and certain minimum requirements. The amount paid depends on the degree of injury or damage, up to the limits of the policy. You can purchase up to $1 million with basic coverage from business auto liability insurance.
Other coverage can be added by endorsements to your commercial auto 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.
For business auto liability coverage in excess of $1 million, a business umbrella policy is the answer. It picks up where your business auto liability, general business liability or other liability provided in your primary policy stops. Umbrella insurance is an inexpensive way to provide extra coverage against bodily injury and/or property damage.
Other business auto coverage choices
Beyond those basics, the type of vehicle you need to insure, and how that vehicle is used, determines the coverage you need.
Type and weight of vehicle
The heavier the vehicle, the greater the damage it can cause in an accident. For example, the recommended liability coverage will be higher for a truck than a car.
How the vehicle is used
If a vehicle is driven all day, every day and in all kinds of weather, the recommended commercial auto liability coverage will be higher than for a vehicle that’s parked in the lot most of the time.
The number of vehicles insured
Businesses that own multiple vehicles in a fleet have an increased probability of loss and usually require more commercial auto coverage.
The estimated worth of the business
The greater the value of your business, the higher the recommended coverage for your commercial auto policy.
The bottom line of commercial auto coverage
The amount of business auto coverage you need is based on a combination of factors: state required liability coverage, the type of vehicle you need to insure, and how that vehicle is used and driving experience.
Contact a Nationwide agent today for a free business auto quote that is customized to your company’s needs.
Liability: An important part of any commercial auto policy.
Learn more about liability, comprehensive, and umbrella coverage for your company vehicles.
