Why is Commercial Auto Insurance So Expensive?

Commercial auto insurance provides essential protection for businesses that rely on vehicles, but it often comes with a hefty price tag. Commercial policies can cost significantly more than personal auto coverage.

If you’re considering commercial auto insurance for your business, you may be wondering why the rates are so high. Several key factors drive up the costs. Understanding these reasons can help you get the coverage you need at an affordable price.

Key Factors That Increase Commercial Auto Insurance Costs

1. Higher liability risks

The main reason commercial auto insurance is more expensive boils down to increased liability. When vehicles are used for business purposes, there’s greater risk involved. If an accident occurs, the claims and legal expenses will likely be higher than with personal auto insurance.

Commercial policies need higher liability limits to properly protect businesses from expensive lawsuits or settlements. The increased coverage results in higher premiums.

2. Business use of vehicles

How vehicles are used for work also affects insurance costs. For example, food delivery services and contractors hauling tools and materials have heightened risks. The cargo, frequency of stops, and driving conditions impact accident potential.

Insurers classify businesses into risk categories based on industry and vehicle use. More hazardous operations get rated for higher premiums.

3. More drivers

Rather than covering family members, commercial policies cover employees using company vehicles. The driving records and risk profiles of each driver contribute to the policy’s overall premium.

If you have multiple employees operating vehicles, insurance costs will rise accordingly. Especially if any drivers have citations, violations, or accidents on their records.

4. Type of vehicles

Larger vehicles like semi-trucks, box trucks, and vans bring increased liability and repair costs. Specialized vehicles also require specific commercial auto policy types. These factors boost premium prices over personal car insurance.

Business auto policies also cost more for newer model vehicles. Collision and comprehensive coverage are more expensive to cover luxury vehicles and those still carrying auto loan debt.

5. High value equipment

Contractors, landscapers, photographers, and other businesses often have expensive tools, gear, and equipment transported in their vehicles. Standard auto liability coverage doesn’t include these business assets.

Additional inland marine insurance is required to cover equipment against theft, vandalism, or damage in a collision. This increased coverage further adds to the insurance costs.

6. Miles driven

More time on the road means heightened accident risk. Commercial drivers often rack up high mileage going to job sites or making deliveries.

Insurers ask for annual mileage estimates to factor driving frequency into premium costs. The more miles driven, the more expensive the policy.

7. Company size

Large companies insuring multiple vehicles under one policy typically get better rate discounts than small businesses insuring just one vehicle. But in aggregate, large commercial accounts still pay more overall for auto coverage.

Insurance carriers also consider annual revenue when evaluating risks. The higher your company’s gross income, the higher the policy limits you’ll likely need. Again, pushing premium prices upward.

Getting Affordable Commercial Auto Insurance

While commercial auto insurance inevitably costs more than personal coverage, you can still take steps to control your premium expenses:

• Ask about discounts for safety features, driver training, loyalty, bundled policies, and low mileage usage.

• Increase your deductible amount to lower monthly premium costs.

• Compare quotes from multiple insurance providers. Rates can vary widely between insurers.

• Consider hired/non-owned auto coverage rather than a traditional commercial auto policy if employees use their own vehicles. This provides liability protection without insuring the vehicles themselves.

• Maintain good driving records and implement a fleet safety program. Insurers reward low-risk businesses.

• Choose a newer vehicle model with the latest safety technologies and anti-theft systems.

• Drop unnecessary optional coverages to pare down your policy.

The Bottom Line

Commercial auto insurance offers pivotal protection every business needs, though it comes at a steep price. Liability risks, business use of vehicles, and many other factors cause commercial policies to cost significantly more than personal auto insurance. Understanding why it’s expensive allows you to better manage costs while getting adequate coverage.

With some diligent comparison shopping and strategic decisions, you can secure an affordable commercial auto insurance policy tailored to meet your business needs. Investing in the right coverage provides peace of mind and financial protection for your business’s vital transportation needs.