How does business car insurance work?

If you’re a business owner and own a car for business purposes — or maybe a fleet of vehicles — you already know how important it is to protect your 4-wheeled assets. But did you know that using personal car insurance for your business vehicles could expose you to significant financial risk? 

Personal car insurance policies almost always exclude business use. That means that other than commuting to work, an employee’s car insurance policy will not cover them if they have an accident while driving for work. 

While personal car insurance only covers vehicles for personal use, business car insurance is specifically designed to protect a company’s vehicles and drivers while handling work-related activities, such as transporting goods or moving employees from one location to another. 

Let’s explore why you may need business car insurance for your fleet, how it works, and the benefits it provides.

What Is Business Car Insurance?

By definition, a vehicle owned by a business and used for business purposes must be covered by business car insurance — also called commercial vehicle insurance.

This type of insurance covers vehicles used to transport employees, goods, or services, and it’s essential for any company that uses vehicles as part of its operations. Business car insurance protects against accidents, theft, and other potential risks that could limit your ability to do business if put out of commission. 

Commercial auto insurance covers vehicles used for business and those driving them. Suppose the authorized driver of your business vehicle causes an accident that injures another person or damages their property. In that case, the injured party can file a claim on your policy and bring a lawsuit against you or the driver. 

Your liability insurance will cover costs to pay damages on the claim up to the policy limit. However, the business will be responsible for any damages above the limit. And if there is an accident-related lawsuit, your liability insurance will also cover the costs to defend you or the driver, separate from the policy limit.

What Coverages Are Available With Business Car Insurance?

Business auto insurance policies generally have the same coverage and limits as personal policies, with bodily injury and property damage as the minimum required coverage, but there are some distinct differences, mainly in the types of vehicles covered and the work they do. We’ll get to that in a bit. First, let’s look at the coverages you should be considering.

Business car insurance policies typically offer the following eight coverages, although whether they are mandatory or optional can vary from state to state). 

  1. Liability Coverage is required by law in most states. It helps pay for property damages or bodily injuries that your company may be legally responsible for if one of your drivers causes an accident. It can also cover legal expenses if there is a resulting lawsuit.
  2. Collision Coverage helps pay for repairs or replacement of an insured business vehicle if it’s damaged in a collision.
  3. Comprehensive coverage pays for damages to your business vehicle that are not caused by a collision, such as theft, fire, vandalism, or weather.
  4. Medical Payments Coverage pays for accident-related medical or funeral expenses for vehicle occupants, regardless of fault. 
  5. Personal Injury Protection (PIP) Coverage helps pay for medical expenses and lost wages if you or your passengers are injured in an accident while conducting business, regardless of who is at fault.
  6. Uninsured/Underinsured Motorist Coverage helps pay for injury of — or property damages suffered by — a driver or passenger in your business vehicle if the accident was caused by a driver who does not have enough insurance to cover these costs.
  7. Rental Reimbursement pays for temporarily leasing a vehicle for business after accident-caused damage to your insured vehicle.
  8. Hired and Non-Owned Coverage protects vehicles used for business purposes but not owned by your business. This can include employee-owned vehicles, rental cars, and vendor-owned vehicles used to perform work on behalf of your business.

What Kind Of Vehicles Are Covered?

Business auto insurance covers a broader range of vehicle types and uses than personal car insurance policies — and they’re categorized according to the work they perform. Some examples are: 

Service vehicles transport employees and equipment to and from a job site. An example of this could be a fleet of vans that bring house cleaners from one client to another throughout the day. A taxi company would also be in this category, as would someone driving for a service like Uber. 

Retail vehicles are used to deliver products to customers – think of the army of Amazon vehicles, UPS trucks, or a bakery’s minivan that delivers wedding cakes.

Commercial vehicles are designed to perform work, like a mechanic’s tow truck or a dump truck that removes construction debris from a job site. Because of their heavy use and high-risk potential, they usually require specialized insurance coverage. 

How Are Business Car Insurance Rates Determined?

The cost of commercial auto insurance can vary depending on the unique needs of your business. It all depends on the specific needs of your business. For example, a small business with only a couple of people using a company car would typically have a lower premium than a larger business running 24/7 with a fleet of vehicles and many drivers. 

Additionally, some businesses may require specialized coverage for specific types of vehicles or activities, such as commercial trucking or delivery services.

The cost of business car insurance depends on various factors, including:

  • The type, cost, and number of vehicles in your fleet
  • The nature of the business, the kind of work performed by the vehicle, and the size and type of equipment it carries
  • The typical distance of travel and how frequently the vehicles are driven
  • Employee driving records, including the age of the drivers
  • The type of coverage chosen and policy limits
  • The location of the business
  • Your industry risks and auto insurance claims history

By considering these factors, you’ll be able to get a better idea of how much your business car insurance will cost and make informed decisions about your coverage needs.

How To Save Money On Business Car Insurance

In addition to selecting the right type and amount of coverage, it’s important to promote safe driving habits among your employees. This can help reduce the risk of accidents and minimize the need for insurance claims.

Here are tips on how your company can save money on business car insurance:

  • Choose the right coverage: Make sure it aligns with your business requirements.
  • Avoid over-insuring or under-insuring your vehicles. This can help you avoid paying for unnecessary coverage or being left without sufficient protection.
  • Consider a higher deductible. Opting for a higher deductible can lower your monthly premium.
  • Hire employees with good driving records. This can reduce the risk of accidents and lower your insurance premiums.
  • Encourage safe driving practices among your drivers. Create a culture of safety and ensure that your drivers are not under pressure to drive recklessly to be more productive.
  • Have a policy for using cell phones, texting, and hands-free devices while driving.
  • Consider annual driver refresher courses. These courses can help drivers stay up-to-date with safety regulations and best practices.
  • Keep your vehicles well-maintained. Regular maintenance can prevent breakdowns and accidents.
  • Bundle your commercial auto insurance with other policies. This can save you money on premiums and simplify your insurance management.
  • Pay your insurance bill in full. Many insurers offer discounts for skipping monthly invoices and paying premiums in full.
  • Keep your vehicles well-maintained and secure. Parking in secure areas can reduce the risk of theft and vandalism.
  • Look for business experience discounts. Some insurers offer discounts for businesses that have been in operation for three years or more.

By following these tips, you can save money on your business car insurance while ensuring that you have adequate coverage for your needs.

Why Shopping Around For Insurance Is Your Best Bet

If you want to save money on your business car insurance, shopping around and comparing rates from different companies is the easiest way. That’s where we come in!

At Guided Solutions, we can help you do the leg work to find the best deal and understand what’s included in each policy.

Even if you stick with your current provider, checking out the competition can give you more leverage when negotiating rates. So let Guided Solutions help you save money and get the coverage you need for your business vehicles.


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