What is automobile liability insurance?


When you own vehicles that are used for business purposes, you run the risk of road incidents that can lead to serious liability. If you don’t have the right insurance, your business may have to take on these responsibilities. This is why you need a commercial automobile liability insurance policy. This company insurance policy helps absorb the financial impact of at-fault accidents involving your company vehicles.

What is corporate liability insurance?

Commercial auto liability insurance is a component of an auto insurance policy that pays up to a policy limit for bodily injury and property damage in the event of an at-fault accident. Commercial auto liability insurance covers the same types of liability as personal liability auto insurance, except that the policy is rated for commercial vehicle risk.

For example, let’s say a florist has a delivery truck that they use to deliver bouquets to recipients. This means that the delivery truck is used for business purposes and needs commercial auto liability insurance, not personal auto liability insurance. If the delivery driver backs up another car at a red light, commercial liability policy will pay for damage to the other vehicle and injuries to the driver and passengers of the other vehicle. Payments will not exceed policy limits.

Did you know? A general liability insurance policy does not cover damage and injury caused by a commercial vehicle accident. Liability insurance covers claims from injured third parties in your business premises.

Is Commercial Automobile Liability Insurance Required by Law?

Liability insurance is required by law in most states. If your vehicle is intended for commercial use, it must have commercial liability auto insurance. However, there are some exceptions. For example, if you use your personal vehicle for certain business activities, as realtors often do, your personal automobile policy may allow a special “for business” designation that will cover you when the car is used for business.

If you live or do business in one of the few states that doesn’t require vehicle liability insurance, such as New Hampshire and Virginia, it’s important to know that drivers or business owners are always responsible for damage caused by an accident. If the accident was serious enough, a person or business could become financially devastated in trying to cover the costs.

Final resultConclusion: Most states require liability insurance on all commercial vehicles. Even if your state does not require commercial auto liability insurance, you should seriously consider it, as a claim could put you into bankruptcy.

What is covered by commercial auto insurance?

When you buy commercial automobile insurance, you are first and foremost purchasing liability insurance. Liability coverage amounts required may vary from state to state, with many insurers setting minimum policy amounts. For example, Nationwide requires a minimum of $ 100,000 in commercial auto liability insurance per vehicle.

If your coverage was $ 100,000 / $ 300,000 / $ 100,000, your coverage would look like this:

  • The first $ 100,000 is the limit for injuries sustained by a single person in the accident.
  • The $ 300,000 is the maximum paid for everyone involved in the accident.
  • The last $ 100,000 is the maximum that the police would pay for property damage in the event of an accident.

Let’s take a look at an example with these sample limits. Suppose three people are injured in an accident, with the cost of the injury costing $ 110,000, $ 90,000 and $ 100,000. The total amount of injuries is $ 300,000, so it is covered by the cap. However, the limit per person is $ 100,000, which means the first person is not covered for the additional $ 10,000 – and they could sue you for the difference.

This is why Nationwide and other insurance companies recommend having coverage of at least $ 500,000 and going for up to $ 1 million on commercial auto insurance policies.

Here are some other coverages you should consider including in your commercial auto insurance policy:

  • Collision coverage: This covers damage to your work vehicle when you are involved in a at-fault accident. He can repair or replace the vehicle, depending on the extent of the damage.
  • Full coverage: This pays for damage to your work vehicle in an incident other than a collision. Incidents covered include theft, vandalism, fire, hail and a falling tree branch on the vehicle.
  • Coverage for uninsured / underinsured motorists: When you are struck by another vehicle that does not have enough – or no – collision coverage, you will be covered for your medical expenses as well as damage to your vehicle up to the limits of the coverage.
  • Rental Car Coverage: When your work vehicle is out of service due to an accident or covered loss, rental car coverage will help cover the costs of renting a vehicle until your primary vehicle is serviced.

What is not covered by commercial auto insurance?

While a commercial auto insurance policy can be very strong, it doesn’t cover everything. The following coverages are not included in commercial auto insurance.

  • Medical fees: This can vary from state to state, but most policies do not cover medical expenses for passengers or the driver of the vehicle. Workers’ compensation generally covers medical costs if the injured parties are employees.
  • Contents: The contents of your vehicle, such as deliverables and inventory, are not covered by commercial auto insurance. For this you will need domestic marine insurance.
  • Vehicles not owned: Commercial auto insurance will not cover employee vehicles used for business purposes. For this type of coverage, look for an auto insurance policy that is not owned by your owner.
  • Rental repairs: If you are involved in an accident in the rental vehicle, you are not covered for the cost of repairing that vehicle.

adviceAdvice: To find the best liability insurance provider for your business, get some quotes to compare prices and coverage.

Does a commercial automobile insurance policy include liability insurance?

The main purpose of a commercial auto insurance policy is to provide liability insurance. As such, every commercial auto insurance policy will have some level of liability coverage. Other types of coverage are optional.

However, the minimum coverage amounts may not be sufficient to absorb the financial ramifications of accidents. Business owners should consider increasing limits or adding a commercial insurance policy to their insurance portfolio.

What coverage do you need?

It is difficult to assess the coverage that a business will need. While most insurance companies have minimum amounts, the minimum may not be enough for all business owners. When determining the amount of liability coverage you need, consider the following.

  • Vehicle size: Large vehicles can do more damage even in minor accidents. It is wise to increase the liability limits on larger and heavier vehicles to ensure you have sufficient protection.
  • Annual income: The more money you make, the more your business will be the target of an accident lawsuit. As your business grows, the amount of liability coverage you maintain should increase.
  • Large pool of pilots: While you need to screen all the drivers in your business to get good driving records, the more drivers you have, the greater the risk of an accident.

Commercial Automobile Liability and Out of State Travel

The travel needs of your business are a critical consideration when choosing business insurance.

When you buy commercial auto insurance, you buy it in the state in which your vehicle is registered. This is where the DMV will verify that you meet the minimum insurance requirements. But many vehicles cross state borders during the work. In these cases, the territory of coverage of the insurance policy comes into effect.

Most insurance companies will extend coverage across the United States so that you have the same coverage limits wherever you go. However, some carriers may limit coverage out of state, so it’s best to check with your provider to see how coverage works with your policy.

Some operators may also extend coverage to Canada and Mexico. If so, you won’t need to get international coverage for cross-border travel. Again, these shades of coverage are carrier specific and you should check with your provider if you think you need this type of coverage.

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