How much does Commercial Auto Insurance cost, and why?

Commercial Auto insurance cost

So, you’re either in the market for commercial auto insurance, or you’ve just gotten your insurance bill and you’re a bit shocked.

I get it, commercial auto rates are rising and have been for the last few years and you’re looking for alternatives, ideas, or options.

Unfortunately, it’s pretty much impossible to ballpark or throws out premium estimates here because there are so many rating factors that determine the actual costs of business auto insurance.

But, I’m going to go over all of those factors to better understand how premiums are developed.

I’m also going to give you some ideas for cost reductions so you’re better prepared now and in the future to get the best rates possible.

So let’s start with the factors that determine how much commercial auto insurance costs.

The basic rating factors, as you would expect include the vehicle year, make and model.

The cost new of the vehicle, and the gross vehicle weight – if it’s a truck being rated.

The secondary rating factors include:

The vehicle usage – again, assuming this is a truck or fleet of trucks.

Are they used for deliveries, staying at a job site most of the day, long-distance travel, etc?

If these are construction vehicles then other secondary factors include whether is there dumping operations, is the vehicle towing trailers and equipment, whether is it a tractor, etc.

The next level of rating factors involves more qualified underwriting factors – things like the driving records of your drivers, your company’s claim history over the past 5 years, the number of vehicles being insured, and then obvious things like the limits of liability coverage and deductibles on comp and collision.

Finally is geography – a vehicle garaged in Manhattan is going to be more expensive to insure than one that is garaged in the suburbs.

Commercial vs. Personal Auto Insurance. What do you really need?

I often come across small contractors that have a pickup truck or van, owned and registered in their personal name and insured on a personal auto policy – but it’s used in their business.

It’s done this way because it’s cheaper, but what many contractors don’t know is that their personal auto policy excludes business use of the vehicle.

That means, get into an accident while using the truck or van while on business and your policy won’t respond.

Now in these situations the contractors I’ve worked with, I’ll explain this exclusion and in most cases, they didn’t know that.

In some cases, they only considered that damage to their vehicles was excluded, but what they didn’t consider was potential liability lawsuits and this is scary.

Imagine being in a situation like this and racking up a million dollars of defense and settlement costs and having your insurer deny coverage.

You’re beyond being screwed.

All your assets are going to be liquidated to pay for those costs and any future wages or assets are going to be garnered to pay that claim out of pocket.


Now on the reverse side of this equation are companies that insure private passenger autos on their business auto policy.

This can be expensive, and if you’re not using the vehicle for business purposes – meaning other than going on appointments and such, I recommend insuring it on a personal auto policy.

Some personal auto insurers will permit business-owned or leased vehicles to be insured personally on a personal auto policy.

There are some points that need to be finessed, so working with a smart broker on your home and auto insurance will help here.

Having high limits of protection on your personal auto and umbrella policies is still important as is making sure you coordinate protection properly on your business auto policy with the right rating symbols and endorsements.

For your business auto policy, I recommend a minimum of $1,000,000 of liability protection plus a commercial umbrella as well at $1M.

So, how do you get the best deal on commercial auto insurance? Here are my suggestions:

  1. Work with a skilled insurance broker who represents multiple insurance companies and can shop the market for you. Going to multiple brokers to get quotes is an invitation to disaster and usually never ends well. Work with a single broker you like and trust that has a broad representation of the market to do that shopping for you.
  2. Prior to going to market, make sure you have the right risk control plans in place so that you have leverage in the negotiating process. For example, if you have a large fleet, have you installed telematics in your vehicles? Do you have a driver selection process? Do you run MVRs every year so drivers need to re-qualify annually? Do you have an accident investigation process? All of these types of controls give you an advantage over your peer group that doesn’t have risk controls in place.
  3. Some insurers offer package discounts if you insure other lines of business with them, which often makes sense.
  4. If you have “problem” drivers with less than stellar MVRs, you may need to evaluate the cost of keeping them on staff and possibly finding drivers with better records. I know this is difficult, especially in a challenging labor market, but the emphasis is on controlling risk. Underwriters will not offer their best pricing to accounts that have drivers with poor records. In fact, it may trigger an automatic decline.
  5. Lastly, consider increasing your deductibles on the vehicles with comprehensive and collision is another idea to save on premium. In fact, it may make sense to remove comp and collision from older vehicles. What you want to do is find out what higher deductibles will save you.Going from a $5,000 to a $25,000 deductible may not make sense because the premium savings may be marginal so why accept all that extra risk? Here again, a skilled broker can help you with these decisions.

Here’s the bottom line on commercial auto insurance cost

Commercial auto insurance is expensive. There’s no doubt about that and frankly, I see the costs continuing to rise from a variety of factors – record high claim levels, claims to be extremely expensive to settle, distracted driving, and the cost of replacement parts all drive rates up.

The more attention you give to controlling risk in commercial auto the better off you’ll be in the marketplace.

I realize that if you’re a small firm with one or two trucks having telematics and a lot of risk control processes is unrealistic but a skilled broker can help you with some of the basics – like documenting the driver selection practice.

If you’re a larger firm with dozens of trucks on the road, then you should be investing in safety and risk control.

Not only to get lower rates but also to reduce the risk of costly accidents for yourself.

That is my overview of commercial auto insurance costs and facts. If you’re looking for commercial auto insurance, or have a question or issue you’d like to discuss, let’s connect.

I am that skilled broker you should be working with.

We have the tools, resources, and knowledge to help you get the right protection at the right price.

We represent the top commercial insurers looking for good commercial auto clients so I hope you’ll consider contacting me.


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