Definition of Commercial Auto Insurance in Business Insurance

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Commercial Auto Insurance

There are two types of auto insurance. Most drivers know about a personal policy, which covers liability and physical damage to a vehicle you own or one that you were involved in an accident. The other type focuses on vehicles that are utilized by businesses. This is known as commercial auto insurance.

When Is Commercial Auto Insurance Required?

This form of policy is needed if the vehicle is utilized as a part of an occupation or business. For instance, someone who uses their car for a drive-through pet-grooming company would probably need a commercial policy. On the other hand, someone who drove their car to work and left it in the parking lot would be insured through personal car insurance.

What Types of Vehicles Are Covered?

This form of insurance covers more than standard passenger cars. It also insures commercial vans used for the transportation of passengers or materials. Furthermore, it covers different types of trucks utilized in daily operations such as box, food, and service trucks.

Who Is Covered?

A commercial auto insurance policy covers individuals who drive these vehicles on behalf of a business. Unlike a personal auto policy, they don’t own the cars, vans, or trucks they drive. They are simply the operator.

However, not anyone can drive these vehicles. Similar to personal auto insurance, those who are designated to operate the cars, vans, and trucks need to be named in the policy.

What Is Covered?

Here are some of the items that are covered in a commercial auto insurance policy:

  • Comprehensive physical damage pays for damage related to theft, fire, vandalism, or natural circumstances like floods.

  • Bodily injury deals with payment for harm or death that results from an accident that’s your fault. This form of liability coverage normally provides the defendant with legal counsel.

  • Combined Single Limit (CSL) combines maximum limits to claims for both bodily injury and property damage.

  • The policy will help cover medical payments for those individuals involved in an accident. This includes the driver and passengers.

  • Property liability handles payments if a vehicle damages another person’s property. This too provides a defendant with legal services.

  • Collision coverage pays out when your commercial vehicle strikes or is hit by another object.

How Are Premiums Calculated?

Commercial auto insurance premiums are calculated through a variety of factors. One is the past driving history of those who need to be insured. The business' track record when it comes to previous claims can also play a role.

An additional factor is the amount and types of vehicles the business uses. Rates can be lower if these are small or mid-sized passenger cars or vans. The premiums can increase if the fleet consists of larger service trucks.

On top of this, should the insurance company handle other types of policies with the business, they might be combined with a commercial auto policy. As a result, the calculations could result in an overall lower premium.