Commercial Auto Insurance

When evaluating commercial auto insurance, consider these factors:

• What vehicles and how many – Are you covering a single van, a fleet of trucks, heavy haulers, trailers?

• What are the vehicles used for – Deliveries, transporting people, hauling equipment, moving goods? Usage affects risk and coverage needs.

• Who drives them – Are drivers employees? Contractors? Do you allow personal use?

• What limits are needed – Some businesses are required by contract or law to carry high liability limits; evaluate defending cost of big claims.

• Physical damage exposures – Think about the value of vehicles, location (theft/hail risk), use in harsh environments, overnight parking, etc.

• Hired & non-owned exposures – If employees use their own vehicles or you rent vehicles, ensure the policy covers those exposures.

• State regulations – Each state sets minimums and rules for business/commercial auto insurance. Ensure compliance for where you operate.

Here are the main coverages and features you’ll find in a commercial auto policy (or want to discuss with your broker/agent):

• Liability coverage – covers bodily injury and property damage to others when your vehicle causes an accident. 

• Physical damage coverage – collision (vehicle hits another object or overturns) and comprehensive / specified perils (theft, vandalism, fire, weather, etc.).

• Uninsured/underinsured motorist (UM/UIM) / medical payments / personal injury protection (PIP) – depending on the state and business use.

• Hired & non-owned auto coverage – covers vehicles your business uses but does not own (rented, borrowed, employee-owned) when used for business tasks. 

• Policy limits and form distinctions – Many insurers use the “Business Auto Coverage Form (BACF)”.

• Vehicle scheduling and usage definitions – Which vehicles are covered, how they’re used (delivery, transporting clients, hauling equipment) will affect eligibility, limits, and premium.

It is important to ensure that the limit per vehicle—which is the maximum amount the insurance company will pay for each vehicle in the event of a loss—is high enough to avoid excessive loss in the event of a claim. The standard per-vehicle limit on the policy may be much lower than the value of each of your vehicles, so be sure to examine this value to ensure it is appropriate. Similarly, the in-transit limit may be too low if you have a portion of your inventory off site. Even when 100 percent of the value of the inventory is covered, the limit per vehicle applies.

Even with correct total inventory valuation, your policy must also include:

• A high limit per vehicle, so the insurer’s maximum payout per unit is sufficient.

• Adequate in-transit limits, since some of your vehicles may move off-site (e.g., between lots, auctions, service centers).

• Coverage for vehicles stored at other locations or off-premises — these exposures often require separate limits or endorsements.

In recent years many carriers have dealt with catastrophic losses from floods and hurricanes, so they closely control coverage.  Work with your AutoRisk representative to go over Specified Causes coverage and ensure you have the coverage you need.

One of the biggest pitfalls in open lot policies is coinsurance. In many policies, you must insure 100% of the value of your inventory. If you insure less, the insurer will only pay a proportional share of your loss.

Example:
Inventory is valued at $500,000, but you only insure $300,000. If a covered loss occurs for $100,000, your insurer may pay only (300,000 ÷ 500,000) = 60% of the claim, less your deductible.

To help prevent this:

• Use monthly reporting to declare the precise inventory value. Failure to report on time can trigger steep penalties (e.g. paying 75% of a loss after a missed report).

• If using non-reporting (steady value) methods, pick a conservative estimate of your peak inventory — underrating your inventory exposes you to coinsurance penalties.

Commercial auto insurance isn’t necessarily limited only to your vehicles.  If your employee uses his or her own car on a task for your business and get into an accident, your business could be held liable.  The correct commercial auto coverage will ensure that you are still protected even in these circumstances.