Commercial auto insurance:
Why you might need it, but not even know it
By Leana Schwartz, Independent Commercial Insurance Agent
Commercial auto insurance is needed to cover any vehicle used in the operation of a business, regardless of the size or type of business. Commercial auto insurance is similar to personal auto insurance with one major exception: virtually all personal auto policies explicitly exclude claims which arise from driving the vehicle for business purposes. In contrast, a commercial auto policy is intended specifically to protect vehicles used for business.
What does commercial auto insurance cover?
Similar to personal auto insurance, commercial auto insurance provides several types of protection:
- Medical payments
- Uninsured/underinsured motorist coverage
What businesses might need commercial auto insurance?
- Any business that directly owns or leases cars or light trucks.
- Any business which provides “company cars” as a form of compensation to employees.
- Any business that requires employees to use their own cars to do their jobs and reimburses mileage or vehicle expenses.
Two situations where you might need commercial auto insurance without realizing it
1. Ride-sharing or renting out a vehicle
Given the explosive growth of ride-sharing services like Uber and Lyft, as well as the opportunity to rent out one’s vehicle through web sites like Turo or Relay Rides, the importance of commercial auto insurance has increased rapidly.
Most of these services provide some type of commercial insurance protection for vehicle owners to supplement their personal auto insurance. But anyone participating in such services should carefully review the insurance protection provided by both the service’s and their own policies, and make an informed decision about the potential need for commercial vehicle insurance coverage. A knowledgeable and experienced commercial insurance agent can assist in this analysis.
For example, some of these ride-share and rental companies promote the fact that they cover drivers with a $1 million excess liability policy. But most drivers are not aware that excess liability does not cover damage to their own vehicle and/or injuries. Instead, it provides protection only for damage and injuries to passengers and other vehicles if the driver-for-hire is at fault.
If an accident is another driver’s fault and they have minimal or no insurance, then the ride-share driver may be out-of-pocket for some or all of their own vehicle repairs and/or medical bills.
2. Casual business use of a vehicle
Putting a magnetic sign on your car door to advertise your store or picking up a part-time job delivering pizza may not seem like commercial operation of a vehicle, but your personal auto insurance carrier may and probably will disagree. If you are involved in an accident in such circumstances, your claims could potentially be denied.
Better safe than sorry
Operating a vehicle for business without a commercial auto policy may subject you to some or all of the following:
- Being dropped by your insurance company.
- Increased insurance rates.
- Reduced or denied coverage, resulting in having to pay for damage and liability out of your own pocket.
These consequences underscore the necessity of being fully informed of the responsibilities which result from using a personal vehicle for business purposes. Discussing your needs with a knowledgeable and experienced commercial insurance agent will go a long ways in protecting yourself against all risks.
Do you have questions about commercial auto insurance? Contact Long Beach independent insurance agency NHC Insurance Services. NHC serves clients in Long Beach and the greater South Bay area of Los Angeles, including Signal Hill, San Pedro, Wilmington, Lomita, Torrance, and surrounding communities.
Photo courtesy Elvert Barnes