Understanding commercial auto policies

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

Commercial auto insurance definition

Commercial auto insurance provides a variety of coverages for cars, trucks, vans and other vehicles used by your business. There are three basic parts of every commercial auto insurance policy:

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

What does commercial auto insurance cover?

Collision insurance

Pays for damage to your vehicle if you hit another vehicle, another vehicle hits you or your vehicle rolls over, regardless of who is at fault. Collision coverage may be required if your vehicle is financed or leased

Comprehensive insurance

Pays for damage to your vehicle from causes other than an accident. Such causes 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 if you’re hit by an uninsured driver or, in some states, an unidentified driver

Underinsured motorist coverage

Protects you if the at-fault driver doesn’t 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

Options & add-ons

Beyond these basic components, you can customize your business auto policy with the following coverages (also called endorsements):

Roadside Assistance

Protects you when problems arise that are not typically handled under your commercial auto policy. This could include being locked out of your car, dead batteries and flat tires

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 any other 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 beyond what’s covered by 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 your health care insurance – or your passengers’ – doesn’t cover the costs