Most contractors and construction business that own or lease vehicles are required to carry commercial auto insurance. This type of insurance covers your financial responsibilities if you or one of your employees causes an accident while driving a work vehicle.
Commercial auto insurance provides liability and physical damage coverage for company-owned vehicles and other cars, trucks and vans used for business purposes. A basic business auto policy includes bodily injury and property damage liability to pay for injuries or damage you or your drivers cause to others during an accident. But you can add to that coverage with comprehensive and collision insurance. Comprehensive covers non-collision events, like fire, theft, natural disasters, vandalism, broken glass and animal damage. Collision covers accidents and collisions with another vehicle or object.
But what a contractors and construction business pays for liability, comprehensive, and collision insurance depends on several factors, such as the age of the drivers and their driving records, the types of vehicles you own, what those vehicle are used for, the coverage you choose and other criteria, says Kristin Thelen, director of account management for Insureon, a small business insurance agency.
“When shopping for insurance, it’s also important for business owners to understand the differences between their personal liability auto insurance, commercial auto insurance and hired and non-owned auto insurance,” Thelen says.
Your personal car insurance doesn’t cover you when driving for work purposes nor does it cover vehicles not owned by the business that may be used for work – that’s where what’s known as a hired and non-owned auto insurance policy becomes necessary.
For cars, trucks or vans owned by the business, you need commercial auto insurance.
In this guide, we’ll share the average cost of commercial auto insurance for contractors and construction business and explain how insurance companies calculate premiums. We’ll also share some tips for saving money on your commercial car insurance policy.
- Commercial auto insurance is a legal requirement in most states for businesses that own or lease vehicles or trucks.
- Commercial vehicle insurance premiums depend on factors such as industry, location, fleet size, claim history, policy limits and deductible.
- There are many ways to save on commercial auto insurance, including bundling your policies, raising your deductible, looking for discounts and comparing quotes.
- Most commercial insurance companies, including Berkshire Hathaway, The Hartford, Old Republic and W.R. Berkley, offer vehicle insurance for contractors and construction business.
- The average cost of commercial vehicle insurance for contractors and construction business is $2,075 per year, or about $173 per month.
How much is commercial auto insurance for contractors and construction business?
The average cost of commercial vehicle insurance for construction businesses is $2,075 per year, or about $173 per month, according to Insureon. However, the actual amount your business will pay depends on various rating criteria and industry-specific risks.
How are commercial auto insurance rates determined for contractors and construction business?
When you apply for a commercial auto insurance policy, the insurance company uses different criteria to determine the risk of insuring your construction business. The riskier your business is to insure, the higher your insurance premium will be.
Your location is one of the biggest factors affecting commercial auto premiums for construction businesses. Rates differ by state, city and ZIP code. For example, if your business operates in a state that experiences severe weather, or if you garage your construction vehicles in a neighborhood with high crime, you can expect to pay a higher insurance premium.
Vehicle usage is another thing that determines your business auto insurance cost. If your construction business has a large fleet of vehicles driving long distances to job sites, you can expect to pay more than a smaller fleet for shorter trips. The types of vehicles you own can also impact your premium.
What factors affect commercial vehicle insurance rates?
Commercial auto insurance isn’t a one-size-fits-all. Premiums are personalized for each business depending on a number of different rating factors. Here are some of the most notable factors that insurance companies consider when calculating your premium:
- Business type
- Number of vehicles
- Claim history
- Type of vehicles
- Employee driving records
- Frequency of use
- Endorsements
- Policy limits
How commercial auto insurance works
Commercial auto insurance covers your financial responsibilities when you cause an accident in a work vehicle that results in another person’s injuries or property damage. Your insurance policy will cover the other driver’s losses and your legal fees, up to your policy’s limit. If you add employees as insured drivers, they are also covered if they cause an accident.
If you choose a full coverage policy, your commercial auto insurance will also cover the cost of repairing a business vehicle or replacing a vehicle that gets totaled in a covered loss. Full coverage also includes comprehensive insurance, which covers non-collision damage, such as theft, vandalism, hail, falling objects and floods.
Insurance in the real world
Here’s an example of how commercial auto insurance works:
Dana W. owns a cleaning and facilities services business in Raleigh, North Carolina, with eight employees and five commercial vans. One of Dana’s employees is driving to a job site and accidentally rear-ends another car at a stop sign. The work van is fine, but the other car sustains $5,000 in damage. In this case, Dana’s commercial auto insurance policy would pay to repair the other car after her deductible.
Do policy limits affect commercial auto insurance premiums?
Commercial auto insurance policy limits have a direct effect on premiums. The higher your coverage limit, the more expensive your rate will be. When you’re purchasing commercial auto insurance, it’s important to choose the right amount of coverage.
Nearly every state requires small businesses to carry a minimum amount of commercial auto insurance. Most states require liability insurance, but others have additional requirements, like uninsured/underinsured motorist insurance and personal injury protection (PIP).
Insurance experts typically recommend purchasing more coverage than what the state requires. There’s no guarantee that a state minimum coverage policy will be enough to cover your full financial responsibilities if you or an employee causes an accident in a business vehicle.
Additionally, liability-only commercial auto insurance doesn’t provide any protection for your work vehicles. Many small businesses can benefit from a full coverage policy that includes collision and comprehensive insurance that provides physical damage coverage
While a state minimum coverage policy is the cheapest commercial auto insurance you can legally have, paying a higher premium for a full coverage policy will provide much more financial protection in case of an accident or other covered loss.
Even though policy limits affect commercial auto insurance premiums, cost is not the only factor you should consider when shopping for a policy.
“Understanding your coverage needs is crucial to ensuring that your commercial vehicles and business exposures are correctly and adequately covered. Consulting with a knowledgeable insurance agent can help you tailor coverage to your business’s unique needs and identify any potential gaps,” Thelen says.
How to get accurate commercial auto insurance quotes for contractors and construction business
If you’re shopping for commercial auto insurance, it’s a good idea to get multiple quotes for your business. Comparison shopping will help you find the most affordable commercial auto insurance for your industry, fleet size and other factors.
Here are some tips for getting the most accurate commercial auto insurance quotes for cleaning business:
- Gather driver information: First, gather information for all the drivers you want to insure on the policy. This might include all your employees or select employees, but you should insure anyone who drives work vehicles on a regular basis. You’ll need to submit drivers’ names, addresses and driver’s license numbers when you get a quote. Some insurers might also ask for their Social Security numbers.
- Figure out what coverages you need: Decide what commercial auto insurance coverages you need. If you want physical damage coverage for your work vehicles, you should consider a full coverage policy with collision and comprehensive insurance. Many insurers also offer endorsements, like roadside assistance and rental car coverage. You’ll pay extra for these coverages, but they fill gaps in your standard policy.
- Choose your policy limits: Before you get commercial auto insurance quotes, you should consider the policy limits you need. If your business operates in a high-risk industry, like trucking, you might need more coverage than a business that’s less risky, like retail. Similarly, you might need higher coverage limits if you drive business vehicles long distances, or drive in congested areas, where an accident might be more likely.
- Select a deductible: Commercial auto insurance policies require a deductible for comprehensive and collision coverage. This is the portion of a claim you’re responsible for paying out of pocket. Choosing a higher deductible will result in a lower monthly premium, while a lower deductible will have a higher premium. Choose a deductible that you can comfortably afford in case of a claim.
How cleaning business can save on commercial auto insurance
Commercial auto insurance premiums are different for every business type. Premiums can be expensive depending on your location, fleet size, employee driving records, claim history and other factors. However, there are ways to save on business vehicle insurance.
Here are some ways that you can reduce your commercial auto insurance costs:
- Look for discounts: Many commercial auto insurance companies offer discounts that can lower business auto premiums. When you purchase an insurance policy, ask an agent about the discounts available and how you can qualify.
- Bundle your policies: You can usually save money on commercial auto insurance by bundling your policy with another product, like general liability insurance or commercial property insurance.
- Pay in full: Most insurers will give you a discount on commercial car insurance if you pay your annual premium upfront and in full, rather than in monthly installments. Some insurers also provide a discount if you sign up for automatic payments.
- Enroll in a telematics program: Some insurance companies offer a telematics-based savings program. These programs track driving behaviors and trip patterns. If your employees drive safely, you could get a discounted premium.
- Review your coverages regularly: It’s a good idea to review your commercial car insurance coverages regularly. If you’re able to reduce your coverage or remove insured employees, for example, it could lower your overall insurance costs.
- Choose a higher deductible: To save money on commercial auto insurance, consider choosing a higher deductible. Raising your deductible will lower your monthly premium. However, choose a deductible you can afford in the event of a claim.
- Shop around: One of the best ways to save money on commercial auto insurance is to shop around and compare quotes from multiple companies. Comparison shopping makes it easy to see which insurer offers the lowest rate for the coverage you want.
Frequently asked questions
Does your industry affect the cost of commercial auto insurance?
Yes, the industry your business operates in impacts your commercial car insurance premium. In general, businesses in high-risk industries, like trucking and manufacturing, pay higher premiums than lower-risk industries, such as professional services. However, other factors also affect your premium, like your location, fleet size, vehicle types and policy limits.
What are the top commercial auto insurance companies?
There are many reputable insurance companies that sell commercial auto insurance. Some of the top companies are Progressive, Travelers, Old Republic, Liberty Mutual and Berkshire Hathaway. Insurance.com has also posted a list of the top 10 commercial auto insurers. To find the best commercial car insurance company for your situation, it’s a good idea to research and compare several different insurers.
What insurance companies offer commercial auto insurance for construction?
Most commercial insurance companies sell vehicle insurance for construction businesses. Here are some companies you might consider if you’re shopping for this type of insurance:
- Berkshire Hathaway
- The Hartford
- Old Republic
- W.R. Berkley
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