Commercial auto liability insurance basics

What is commercial auto liability insurance?

Commercial automobile liability insurance is your company’s financial shield when business vehicles are involved in accidents that harm others or damage their property. Unlike personal auto insurance, commercial coverage is designed for vehicles used in business operations — whether that's a single company car or an entire fleet of delivery trucks.

What does commercial auto liability insurance cover?

Commercial auto liability insurance covers the damage your employees cause others while operating company vehicles and legal defense costs for covered incidents. At its core, a policy handles two areas, bodily injury and property damage, for which your business is legally responsible. Here’s how the two parts work together:

• Bodily injury liability covers the other person’s medical expenses, from emergency room visits to ongoing physical therapy. It also includes lost wages if they can't work because of their injuries, pain and suffering damages, and even funeral expenses in worst-case scenarios.
• Property damage liability covers damage to property caused by your work vehicle, like repair costs to fix another person's car, buildings, utility poles, fences and other property. 

If your employee backs the company truck into someone's fence or causes an accident that sends another driver to the hospital, commercial auto liability steps in to pay for those damages up to your policy limits.

What isn't covered by commercial auto liability insurance?

What commercial auto liability doesn't cover is just as important to understand. It won't pay to fix your own vehicle after an accident. It doesn't cover injuries to your drivers. And it won't help if your vehicles are damaged by theft, vandalism or natural disasters. Those protections require additional safeguards like collision, comprehensive and medical payments coverage.

Personal belongings and business property inside your vehicles are also not covered. You’ll need a tools and equipment policy to protect items like computers, hand tools and yard equipment, for example.

How does commercial auto liability fit into full coverage commercial auto insurance?

Business vehicle liability insurance is often a mandatory cornerstone of any commercial auto policy, but it only applies to damage you cause to others. It won't help when your own vehicles are damaged. Full coverage adds comprehensive and collision protection for your vehicles — collision for accidents and comprehensive for theft, vandalism, fire or such things as a tree falling on your company van. 

Commercial auto insurance can include medical payments coverage or personal injury protection (PIP) for medical bills if your drivers or passengers get hurt. 

Uninsured/underinsured motorist insurance is also standard. It protects you if your business vehicle is hit by someone who doesn’t have insurance (or not enough insurance).

Benefits of commercial auto liability insurance

The most immediate benefit of commercial auto liability coverage is financial protection — it can keep you in business if your delivery truck is in an accident, for example, or your employee clips a parked car while heading to a client meeting. 

Here’s why it matters so much:

• Protects your business finances: Pays for damage to other people's vehicles, property and medical expenses when your business vehicles cause accidents.
• Covers legal expenses: Provides lawyers and pays legal costs if someone sues your business after an accident involving your company vehicles.
• Keeps you legally compliant: Meets the insurance requirements that many states have when a business uses vehicles in any capacity.
• Helps you win contracts: Helps to satisfy insurance requirements in client contracts and agreements that specify businesses must have auto liability benefits.
• Covers various vehicle situations: Can extend to protect your business when employees use their own vehicles for work purposes (with the right policy additions).

Commercial auto liability coverage is essential protection that costs far less than dealing with even one uninsured accident.

Who needs commercial auto liability insurance?

You likely need commercial auto liability insurance coverage if you use vehicles for business operations. But the question isn't as simple as whether you own business vehicles — it's about how vehicles are used in connection with your work.

Your insurance agent will ask about the role vehicles play in your business, such as how they’re used, who drives them and whether you own, rent, or lease them to determine your specific policy needs.

How much is commercial auto liability insurance?

The average commercial auto insurance premium is $147 per month, according to data from small business insurance agency Insureon. 

How much you pay depends on the risk profile of your business. Your company’s location, the number and type of vehicles your company has, claims history, and policy details (deductible, limits, exclusions) are a few factors that insurers use to determine your rate.

Is business auto liability insurance required in most states?

Business automobile liability insurance is required for most vehicles in most states.

“Every state except New Hampshire requires some form of commercial auto insurance for business-owned vehicles,” Labat says. “It’s important to know that state laws regulate commercial auto insurance, so you need to know the requirements based on where your business is operating. Also, federal requirements come into play if you travel across state lines frequently for work.”

Even if it isn’t a legal requirement in your state, protection makes sense for business owners. Without it, one serious accident could force you to pay hundreds of thousands out of pocket — enough to put many small businesses under for good.

Is commercial auto liability coverage enough for my business?

Commercial auto liability coverage alone rarely provides complete protection for businesses that rely on vehicles. For instance, without comprehensive and collision insurance, you'll pay to repair or replace your company’s damaged vehicles. If your business uses rental vehicles or lets employees drive personal cars for work purposes, you may need hired and non-owned auto coverage for vehicles you don’t own.

Ultimately, it depends on your specific business operations, the value of your vehicles and your risk tolerance.

How much commercial auto liability coverage do I need?

Balancing the protection you need against the commercial automobile liability insurance premiums your business can afford doesn’t work the same for everyone. 

“When you are buying a new policy or reviewing your existing policy, make sure you and your business are meeting the state’s minimum coverage requirements for bodily injury liability and property damage liability,” Labat says.

Keep in mind that state minimum liability policies provide legal compliance, but they may not be enough protection. Many insurance professionals recommend businesses have a $1 million commercial auto insurance limit, with $500,000 as the absolute minimum for even the smallest operations, according to the Insurance Information Institute. 

The difference in cost between state minimums and these higher recommended limits is usually modest compared to the additional protection you get. For example, doubling your coverage limit rarely doubles your premium cost.

How to get commercial auto liability insurance

The path to commercial auto liability insurance coverage is straightforward. You’ll start by gathering information about your vehicles (vehicle identification numbers, makes, models) and employees (driver's license numbers).

You can shop online or work with an independent insurance agent who can shop multiple carriers for competitive quotes or contact commercial auto insurers directly. Be prepared to answer questions about how you use vehicles, typical driving radius and safety protocols.

Compare quotes based on policy limits and deductibles, not just price. The cheapest policy isn't always best if it leaves gaps. Once you select a policy, make your initial payment and provide any necessary documentation to activate your coverage.