What Is Commercial Auto Insurance and How Frederick Businesses Can Buy It Cheaper

If you are a Frederick Businessowner business that owns a vehicle, whether it's a single truck for deliveries or a fleet of cars for your sales team, you need commercial auto insurance. But what exactly what do you need, and how can you get the best coverage at the lowest price? In this article I’ll review what commercial auto insurance is, how it’s different from personal auto insurance, and how to buy in the most cost-effective way possible.

What Is Commercial Auto Insurance and how is it different from Personal Auto Insurance?

Commercial auto insurance is a policy designed to cover vehicles owned by the business and used for business purposes.  There are a few key differences between it and a personal auto insurance policy.

First, commercial vehicles will be owned in the name of the business.  There are some situations when a person with a small business owns their personal vehicle and uses it as a work truck.  This is fine.  The personal auto insurance policy will permit this.  The primary restriction for a personal auto policy is that you’re not allowed to transport people for a fee.  There are more constraints on what you can do on a commercial auto policy with a personal vehicle.

Commercial autos are used for business purposes.  If the business is a restoration contractor, the vehicle is a work truck used to drive to job sites. Underwriters get skiddish about private passenger vehicles owned by the business and furnished to business owners for private use.  The driving patterns of these vehicles are very different from commercial autos.

Lastly, there are big differences between who is a permitted driver.  Commercial auto insurance policies allow employees of the business to drive, and usually there are restrictions around those employees.  A personal auto insurance policy permits anyone in the household to drive.

Here is the big take away on the third concept – if you bought a vehicle in the business name for tax purposes, and your 16-year son with a speeding problem wrecks the car, it may not be covered if your son wasn’t submitted for underwriting review to the insurance company.

Most businesses use vehicles in one way or another.

What Does Commercial Auto Insurance Cover?

A standard commercial auto insurance policy includes several types of coverage:

1. Liability Coverage: Protects against bodily injury and property damage caused to others in an accident where your business vehicle is at fault. If you have a business that transports people, this can include people in the car. 

   1. Example – A driver in a company vehicle was backing up in a parking lot way of a grocery store way too fast and ran into a lady in a crosswalk.  The lady in the crosswalk and the people in the vehicle claimed damages.

2. Collision Coverage: Covers damages your business vehicle if it collides with another object or overturns.

   1. Example – A driver backs into a light pole in a grocery store parking lot. 

3. Comprehensive Coverage: Provides coverage for damages due to non-collision events such as theft, vandalism, fire, or natural disasters.

   1. Example – My car was hit by a deer once.  I was in the middle of eating a spicy chicken sandwich when I felt an impact on the side of my car and there was glass and fur all over my sandwich.  The damage from the deer to my car was covered by comprehensive insurance.  The sandwich was not.

4. Medical Payments Coverage: Covers medical expenses for the driver and passengers injured in an accident, regardless of fault.

   1. Example – A van with 3 passengers is in a fender-bender accident.  Medical Payment pays the out-of-pocket medical expenses for the 3 passengers to get checked out in the ambulance.  If those people later sue, that becomes liability insurance.

5. Uninsured/Underinsured Motorist Coverage: Protects your business if an uninsured or underinsured driver causes an accident with your vehicle.

   1. Example – My wife was a stop light once.  The car in front of her backed into her car, recognized they had caused damage, and sped away.  The damage was paid by uninsured motorist coverage.

6. Hired and Non-Owned Auto Insurance: Covers liability for vehicles your business rents or vehicles owned by employees but used for work purposes.

   1. Example 1 Hired Auto Insurance – The business rents a vehicle to replace another car that is in the shop for repairs.  Hired auto insurance protects that car for liability insurance.  You should doublecheck your policy to make sure physical damage is also covered.

   2. Example 2 Non-Owned Auto Insurance – A secretary is driving money to the bank in their personal vehicle and runs over an old lady in a crosswalk.  The secretary’s personal auto insurance will pay the first lump of money, the Non-Owned Auto insurance liability for the business will pay next.

   
   

Who Needs Commercial Auto Insurance?

Any business owns a vehicle and that uses vehicles for work-related activities should have commercial auto insurance. This includes:

• Retail businesses deliver their goods to their customers.

• Manufacturing Businesses who transport materials to their plants, or their end-product to wholesalers, distributors, or retailers. 

• Construction companies who use trucks and heavy machinery.  Make sure to take the time to distinguish which vehicles are for road usage, and which are considered pieces of equipment.

• Wholesaler and Distributor who moves product from one place to another.

• Auto repair shops that own a tow-truck to pick up damaged vehicles.

• Sales professionals and real estate agents who frequently travel for business purposes.

If your vehicle is titled under your business name or is used primarily for work-related activities, you need commercial auto insurance to stay compliant and protected.

How to Buy Commercial Auto Insurance Cheaper

Auto insurance can be a real pain point for a business owner.  I’m writing this in 2025, and the years leading up to this have seen numerous rate increases across industries.  The answers I’m going to write here will be timeless. 

1. Pick a Good Agent to Run Your Procurement Process

You have the option to buy this insurance from multiple sources.  You can buy directly from insurance companies like Progressive or Geico.  You can buy from a captive or semi-captive agent like Erie or Federated.  Or you can buy from an Independent Agent with access to 40 companies.  In all these situations, if your agent does a poor job presenting you to the marketplace, you’ll get poor results.

1b. More than 80% of small businesses work with an independent agent

There is a reason for this.  Commercial insurance is more about negotiating and creating leverage between companies.  When you go directly to the insurance company, the price is the price.  An independent can help you create leverage between multiple insurance companies.

2. Make a compelling story to the underwriter they should want you.

A lot of business owners try to negotiate by withholding information or lines of business.  They won’t divulge premium information; they’ll refuse to allow the carrier to quote on multiple lines of business.  This creates disinterest on behalf of the insurance company, which is the opposite of what you want.

Be as compelling as possible – share everything, premium, bundle your policies, explain what will make you switch, and use that to get numerous underwriters engaged in the process.  When underwriters compete, you win.

3. Maintain a good relationship in the marketplace

Explain to all the underwriters that participated who you chose and why you chose them.  Thank them for their work.  Then stay out of the marketplace for 3-5 years.

4. Screen your drivers

Bad drivers have accidents.  They do silly things like running into parked police cars.  Have a documented process for running MVRs on your drivers and strict rules on who can drive.

5. Train your drivers.

Good Drivers still should be taught how to use your vehicles.  Box trucks drive differently from sedans.  Create a documented training process and use it.

6. Choose Vehicles Wisely and Maintain them.

Certain vehicle types cost more to insure due to their risk level, size, or repair costs. Opt for safer, more affordable vehicles with high safety ratings and lower repair costs.

7. Install Safety Features

One of my customers called me into their office to show me the dashcams on one of their accidents.  A woman pulled out in front of his driver, then that woman tried to claim the businesses’ driver was at fault.  When the claims adjuster said, “it’s your word against hers”, my client sent him the dash cam video.

Dash cams help negotiate settlement.  GPS Units help monitor driver behavior.  This type of proactive management helps negotiate settlements when you have a claim and prevent claims from happening.  And when you make the insurance companies money, you pay less for your insurance. 

Conclusion

Commercial auto insurance is essential for businesses that use vehicles for operations. It protects against liability, accidents, theft, and other risks. While premiums can be costly, applying the strategies in this article will help you run a good operation and negotiate your insurance costs. 

By taking the time to research and implement cost-saving measures, your business can enjoy financial protection without overpaying. Stay proactive, review your policy regularly, and ensure that your commercial auto insurance aligns with your business needs.