Commercial Car Insurance: What It Is and How It Works

Help protect your business vehicles

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If you run a business that uses vehicles for its operation, you may need to have a commercial car insurance policy. Also, if you use your personal car for business purposes—reasons beyond commuting to work, running errands, or taking road trips—then commercial coverage may be in order.

Key Takeaways

What Is Commercial Car Insurance?

While commercial car insurance is similar to personal car insurance in many ways, it's designed specifically for vehicles used by or for a business. This can include vehicles that you buy for a business you own and personal vehicles you use for business.

For example, commercial car insurance can cover:

Commercial car insurance can offer both liability coverage and collision coverage for business vehicles and their drivers. The former helps pay for repairs and/or medical costs for the other driver if you're involved in an accident. The latter pays for repairs or medical costs that you incur for yourself or your vehicle if you're involved in an accident.

One upside of having commercial car insurance for your business is that your premiums are typically tax deductible. You can write them off as a business expense, potentially reducing what you owe in taxes for the year. Personal car insurance premiums generally aren't tax deductible unless you're using the vehicle for business purposes. Even then, you may not be able to write off the full premium amount paid.

How Commercial Car Insurance Works

Commercial car insurance is designed for scenarios that are specific to a business and its needs. For example, you may need to have non-owned vehicle coverage as part of your policy if you have employees who drive company cars or trucks. If you're self-employed and drive your vehicle exclusively for business, then you'd need a commercial policy that covers it.

Again, commercial car insurance can include coverage for both liability and collision damage. Your liability coverage limits may be higher than what you'd typically get with a personal insurance policy. That's a good thing if you're worried about your business being sued because of an accident involving yourself or one of your employees.

Aside from liability and collision benefits, commercial car insurance can also include coverage for things such as:

Note

Your policy may also cover items inside business vehicles as well. For example, say you run a contracting business and transport tools or supplies in your work vans. If the contents of the van are stolen, that may be covered under your commercial car insurance policy.

Who Needs Commercial Car Insurance?

If you run a business that relies on business vehicles to operate, then you likely need to have commercial car insurance to cover them. However, determining whether you need commercial coverage if you’re self-employed or run a business as a sole proprietor can be a bit trickier.

When weighing a commercial policy as a sole proprietor, consider the following:

If you have personal car insurance already and are unsure about whether you need commercial coverage, an insurance agent should be able to help you. Just be prepared to explain how you use the vehicle for business and how often, so the agent can accurately assess what you need for coverage.

How Much Does Commercial Car Insurance Cost?

Commercial car insurance costs can vary based on several factors, including the amount of coverage you have, the number of vehicles covered, and the type of vehicles your business operates. According to the business insurance advice website Insureon.com, the median cost for commercial car insurance is $147 per month or $1,762 per year, assuming a $1 million policy limit.

That, however, is a median figure, and your costs could be higher or lower, depending on your industry's risk profile, who's driving the vehicles, and what's included in your policy. For example, if you operate a high-risk business, your premium costs could be higher as a result. On the other hand, if your business is lower risk, then you may pay well below the median for commercial coverage.

When comparing costs for commercial car insurance, be sure to ask the insurance company if there are any discounts available. For example, if you're insuring a fleet of 10 vehicles, the insurance company may be willing to cut you a break on premiums, which could help save your business money.

How to Compare Commercial Car Insurance Providers

If commercial car insurance is something your business needs, take time to research different policy options before buying.

When comparing policies, consider things such as:

If you already have personal car insurance, you may start with your current insurance company to see if it also offers commercial policies. As an existing customer, you may be able to negotiate a discount on commercial coverage. And it may be easier to have your policies in one place versus working with multiple insurers when you’re busy managing day-to-day business operations.

Your insurance needs may vary based on the types of vehicles you use in your business. For instance, there may be a few additional factors to consider when searching for a commercial truck insurance policy. Commercial trucks generally require higher coverage limits to account for heavier and more valuable vehicles, as well as the cargo they haul.

What Is the Difference Between Commercial and Business Auto Insurance?

The difference between commercial and business auto insurance is what the vehicle is used for. Business auto insurance covers cars used through normal traffic for business purposes. Commercial auto insurance is used for vehicles that have specific commercial purposes, such as a food truck or a dump truck.

How Many Types of Limits Are Found in Commercial Auto Policies?

The types of insurance/limits found in a commercial auto policy include bodily injury and property damage if the policy is a split policy. Combined single-limit policies have one limit for both bodily and property coverage.

How Much of Your Car Can You Write Off for Business

If you use your car entirely for business purposes, you can write off all the costs. If you use it for both business and personal, you have to calculate the costs incurred associated for business. For example, if you spend $150 a month on gas, and $50 of that is for business use and $100 is for personal use, you can only include the $50 in tax deductions.

The Bottom Line

Commercial car insurance can be a beneficial expense for peace of mind while running a business. Given it's a business expense, it can also become a tax write-off. Make sure to compare different insurers if you decide to purchase this type of insurance. Don't forget to consider all your business needs as you research and what kind of coverage you could rely on from your personal insurance.

GEICO. "Commercial Auto Insurance."

Internal Revenue Service. "Topic No. 510, Business Use of Car."

Internal Revenue Service. "Deducting Business Expenses."

Insureon. "Commercial Auto Insurance."

Progressive. "New York Commercial Auto Insurance."

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