How to choose the right commercial auto policy for your small business

Step-by-step guide to selecting commercial auto insurance 

There are steps you can take to ensure you get the commercial auto insurance policy that best fits your business, including assessing your needs, identifying your coverage needs, comparing insurers, and considering ways to save. 

1. Assess your business needs 

Every business is unique, as are the risks you and your drivers face while using your vehicles for company purposes. High-risk industries typically need higher liability limits and may need optional coverage to protect the company fully.  

For instance, insurers find real estate agents are a lower risk because they primarily use vehicles for client meetings and to complete transitions. By contrast, taxi or rideshare drivers have a higher liability exposure because they transport passengers. Construction and delivery are also high-risk industries due to frequent trips and carrying heavy loads that can cause catastrophic damage in an accident. 

Specific assessments of your business to make include: 

• Count the number and types of vehicles you have. The size, value, and function of your vehicles directly affect your premium and coverage options. A work truck outfitted with heavy-duty gear faces different risks and insurance costs than a standard sedan used only for driving to appointments. Likewise, a fleet of vehicles would cost more to insure than a single company vehicle. 
• Evaluate your vehicles' usage. Are your vehicles used for deliveries, transporting equipment or driving to job sites? The more time you or your employees spend on the road or in highly trafficked locations, the more likely you are to get into an accident and the more coverage you may need.  
• Be aware of your employees’ driving records. The driving history of each employee will factor into your company’s risk profile and final premium. Choosing experienced, safe drivers with clean records will usually result in lower premiums than drivers with little experience or a history of tickets or accidents. 

2.  Understand state requirements 

Each state has minimum insurance coverage requirements for personal and commercial vehicles. Make sure you’re compliant, but also consider whether the minimum is enough coverage for your business risk. Higher limits are normally a good idea. 

“Choosing the wrong car insurance policy for your business can leave you vulnerable at a time when you need protection most, particularly after an accident. You could potentially be on the hook in a lawsuit, which can stir up an array of complications,” says Amanda Demanda, a personal injury attorney in Miami.  

“Being underinsured is another huge concern since your claims might be denied, or you may have huge out-of-pocket costs that can threaten the livelihood of your small business,” she says. 

State-mandated coverage 

Your policy coverage should reflect the real-world risks your business faces. All states require liability coverage when you buy auto insurance, but other coverage may also be required depending on your location. Here are common coverage types that states may mandate be part of your policy: 

• Bodily injury liability: Pays for medical bills of others who sustain injuries when your driver is responsible for an accident, such as the driver and passenger of another car.  Pays up to your limits. Does not cover your driver’s injuries. 
• Property damage liability: Pays for the repairs to others’ property, such as a car, fence or building, when your driver is responsible for damaging it. Pays up to your limits. Does not cover your vehicle.
• Uninsured/underinsured motorist coverage. Covers injuries of your driver and passengers if your company’s vehicle is hit by someone who doesn’t have insurance or enough liability coverage to pay for the medical bills. In some states, your vehicle’s damage may also be covered by uninsured motorist property damage coverage. 
• Medical payments coverage (MedPay): Reimburses medical bills for your driver and passengers injured in an accident, regardless of fault. Pays up to your limits. 
• Personal injury protection (PIP): Regardless of fault, reimburses medical expenses for your driver and passengers injured in an accident, such as medical bills, lost income, funeral expenses and services for tasks you’re unable to do, such as childcare. Pays up to your limits. 

3. Identify additional coverage options  

State-required coverage may make your business vehicles road-ready, but it doesn’t mean you have all the protection your company needs.  

If you lease or finance company vehicles, your lender will require comprehensive and collision coverage, so the vehicles have protection. Here is what each coverage covers: 

• Collision coverage: Pays for damage to your business vehicle from a collision with another car or object, or a single-vehicle rollover, no matter who’s at fault. Normally pays up to the vehicle’s value. 
• Comprehensive coverage: Pays for damage caused by other events, such as wind, hail, flooding, falling objects, fire, theft, or vandalism. Normally pays up to the value of the vehicle. 

Insurers offer a variety of policy add-ons that can provide additional protection. Based on the nature of your business, decide which of these options to include in your policy: 

• Gap insurance. Covers the difference between your vehicle’s actual cash value (ACV) and your loan balance if it’s totaled in a covered incident (like an accident or fire if you have collision and comprehensive coverage) and you owe more than it’s worth. 
• Hired and non-owned auto insurance (HNOA). Provides liability coverage to your employees’ personal vehicles if they use them to complete work tasks. 
• Motor truck cargo insurance. Provides coverage for lost or damaged goods in transit. 
• Rental reimbursement. Covers the cost of a temporary replacement while your commercial vehicle is being fixed from a covered loss. 
• Roadside assistance. Provides services such as towing, winching, and battery jump-start if one of your business vehicles breaks down on the road. 

4. Determine limits and deductibles 

Once you have determined the coverage options that you want as part of your commercial auto policy, it’s time to make sure your policy limits and deductibles are realistic and match your budget and risk tolerance. 

Most insurance experts recommend at least $1 million combined single limit (CSL) liability coverage for commercial vehicles. Combined liability single limit means it covers both bodily injury and property damage. A $1 million CSL may sound excessive, but if one of your drivers causes a serious accident, medical and legal expenses can easily exceed state minimum limits. 

If your company has more assets, you may need even higher limits to reduce your risk exposure. You might also need to meet requirements for Department of Transportation compliance and Federal Motor Carrier Safety Administration (FMCSA) regulations if you drive across state lines, have heavy trucks or transport people. 

Deductibles 

A deductible is the amount your claim payout is reduced by, and both collision and comprehensive come with a deductible. If you select a $1,000 deductible and have a collision claim for $15,000, your insurer will only pay $14,000.  

Higher deductibles can lower your premium to align with your budget but require more out of pocket when you file a claim. Consider how much you can afford to pay and the savings you’ll receive by taking on more financial responsibility when picking your deductibles. 

5. Compare insurance companies and policies 

Once you’ve properly assessed your coverage needs and selected your limits and deductibles, it’s time to start shopping for a policy.  

The price of your commercial auto insurance policy is important, but it’s not the only thing to focus on when getting commercial auto quotes. Insurance policy coverages, exclusions and limitations vary by company, so it’s a good idea to get at least three quotes from different providers to compare.  Our list of the top 10 commercial auto insurance companies is a good place to find insurers to shop with. 

Working with an experienced insurance agent or brokerage can ensure you’re partnered with a company that specializes in your industry and understands the risks your business may face. 

Kelly Lau, product general manager of Roamly, a digital insurance company specializing in RV and commercial fleet insurance, recommends checking third-party reviews from companies like Trustpilot to gauge an insurer’s reputation and customer satisfaction. 

“Equally important is choosing a company with experience and expertise in your specific industry — whether you’re a contractor, a repair shop, or managing a car-sharing fleet — since your insurance should function as a tailored risk management tool,” Lau says.  

When do you need commercial auto insurance? 

You need commercial auto insurance if: 

• You use vehicles to transport tools, equipment or people 
• Your company owns, leases or rents vehicles for business use 
• Employees drive company or personal vehicles for work 

Even if it’s a part-time gig, like a handyman business or ridesharing, commercial auto coverage can help protect you from financial losses that personal insurance may not cover. 

Essential questions to ask when choosing a commercial auto policy 

Asking the right questions before signing on the dotted line can help you identify any potential gaps in the policy that could leave you at risk. Here are some questions to ask your insurance agent before buying commercial auto insurance: 

• Does this policy cover all drivers and vehicle users? 
• What happens if one of our employees uses their personal vehicle for work purposes? 
• Is my type of business or vehicle use excluded from this policy? 
• What happens if I add or remove vehicles or drivers mid-term? 
• How are claims handled and how quickly are they processed and paid? 
• Is there 24/7 customer and claims support? 
• How easy is it to file and track claims? 

The more you understand up front, the easier it is to find the right policy for your business and the fewer surprises down the road. 

Common pitfalls to avoid when buying commercial auto insurance 

To make sure you get the right policy, you should avoid: 

• Choosing the lowest premium without comparing coverage and customer satisfaction 
• Buying state minimum liability to save money 
• Failing to list all drivers on your policy or reviewing their driving record before allowing them to drive for you 
• Assuming a personal auto policy will cover your business vehicles 
• Forgetting to update your insurer when your business operations, drivers or vehicles change 
• Skipping optional coverage to save money  

“One of the biggest and most common mistakes that small business owners make is that they only rely on their personal auto coverage for business driving,” Demanda says. “When you need to make a claim in that situation, you’ll most likely be denied.” 

Other mistakes include not regularly reviewing your policy to ensure it still provides adequate protection for you, your employees, and your fleet, and not making adjustments as necessary to stay properly covered, Lau says. 

“By taking these steps, you can avoid costly gaps in coverage and ensure your business is protected as it develops and grows,” Lau says. 

What our expert says

What insurance mistakes do small business owners often make?

Amanda Demanda A personal injury attorney in Miami

"One of the biggest and most common mistakes that small business owners make is that they only rely on their personal auto coverage for business driving. When you need to make a claim in that situation, you’ll most likely be denied."