If your business is looking to expand its operations by adding a commercial auto policy, then firstly - congratulations! This can be an exciting time to watch your business grow!
But secondly, it can be important for business owners to understand more about what they can expect from their new auto policy, including how it differs from a personal auto policy.
At Berry Insurance, we’ve worked with numerous business owners to help them acquire auto coverage for their operations. Many of these owners can be surprised to learn of just how many differences there can be between a commercial and personal auto policy - especially when it comes to price.
In general, your commercial auto policy will have more expensive rates when compared to personal policies, but what exactly causes this increase? In this article we will cover the top factors that contribute to the price of commercial auto policies, so you can know what to expect from your businesses own auto policy.
What factors cause commercial insurance to be more expensive?
The following factors will contribute to the higher rates a business will receive on their auto policy:
Higher risk & liability:
Rates for a commercial auto policy tend to be more expensive than personal policies due to businesses being at risk of higher liability and property damage claims while transporting/delivering people, goods, or supplies.
Because of this, commercial auto policies will have greater liability limits when compared to a personal policy. This is done to ensure your business will have enough coverage to protect it in the event you are hit with an expensive claim.
Driving & claims history:
The driving history of who will be behind the wheel of your business vehicles can play a significant role in determining commercial auto rates. Insurance companies will charge higher rates for drivers they deem to be high-risk. This can include drivers with any traffic violations, accidents, suspensions, and other infractions found on record.
While personal policies usually only cover a household’s drivers operating their car, a commercial auto policy may be covering multiple employees driving company vehicles. This makes the driving record of each of your employees who will be operating a vehicle an important factor in determining the rates on your business’s policy. Any high-risk drivers can raise a business’s rates or be excluded from coverage entirely.
It’s also important to note that the claims history of a business and its drivers will also play a role in determining your premium. If you have recently filed multiple claims on your policy, you, your business, or your employees may be seen as a higher risk to insurance providers.
The type & number of vehicles:
The rates of your commercial auto policy can be affected depending on the cost, size, amount, weight, and how the vehicles are garaged when they’re not being used.
Vehicles such as dump trucks, commercial trailers, tow trucks, vans, and other vehicles larger/heavier than a normal sized pickup or SUV can require greater limits or specialized coverages. This is due to their cost and the greater amount of damage they are able to cause in the event they are involved in an accident.
The age of your company vehicles will also impact your rates, as drivers looking to insure older vehicles may find a steeper cost of insurance. To learn more about how the age of your vehicle affects price, read up on the 3 reasons why the cost of your auto insurance can increase as your car gets older.
Business operations:
The price of the premium on your can also vary greatly depending on how your business intends to utilize the vehicles. Businesses that are seen by insurers as inherently riskier, such as construction or delivery services, will likely have higher premiums due to the added risk of their operations.
When looking to acquire a commercial auto policy, you will have to provide your insurance agency or provider details about what industry you work in, how the vehicle will be used, and where the vehicle will generally be traveling.
If you intend to supply employees of your business with a company-owned vehicle, it can be important to know how they are covered on and off work hours. For more information about how your policy will cover company-owned vehicles for employees, check out this article: What You Need to Know When Supplying a Company-Owned Vehicle to an Employee.
Breaking down the cost of coverage
Now that you know more about what goes into determining the price of a commercial auto policy, you can have a better idea about how your own business policy will be written.
Unfortunately we cannot give an exact price range for commercial auto policies, as each company will write a policy with limits that best reflects their own operations. A small business with only 1-2 drivers would have lower limits than, lets say, a large company with a whole fleet of vehicles and multiple drivers.
When looking to acquire an auto policy for your business, it is key to work with an insurance carrier you can trust. To learn about our recommendations on the best carriers you can choose from, read our guide on the 5 best commercial auto carriers in Massachusetts.
