What is commercial auto insurance?
Commercial auto insurance is a type of car insurance designed to protect vehicles driven for business purposes. Businesses of all sizes across all industries can purchase commercial auto insurance policies. In addition, commercial auto insurance is for businesses with any size fleet of vehicles whether your business has one single delivery van or a fleet of hundreds of vehicles. When an individual policy is purchased (e.g., if you operate a small business that only uses one commercial vehicle or have multiple cars but want to insure each one separately), it is referred to as commercial auto insurance. However, if your business has multiple company cars and you wish to insure them together under one policy, you may be eligible for fleet insurance.
Who needs a commercial auto insurance policy?
If you own or operate a business in Canada that uses a vehicle for any commercial or business purpose, you should purchase a commercial auto insurance policy. If you don’t have a commercial auto policy, and you are using your vehicle for business purposes, you may be at risk of having coverage and claims denied.
Commercial auto insurance offers many of the same benefits as a personal insurance policy. It provides coverage for drivers, passengers, and vehicles to protect owners from financial losses in the event of an incident. Therefore, this type of insurance is suited to all kinds of businesses, from delivery companies to warehouses, retail stores and food trucks. Your business does not have to be involved in the transport industry to benefit from commercial auto insurance. If you can’t do your job without your vehicle (excluding your commute), you should talk to your broker about a commercial auto policy. This will help protect you and your business from financial losses that may result from any accident or incident involving your vehicle.
Commercial auto insurance coverage types
The coverage included with commercial auto insurance policies varies depending on where you operate and your business’s unique needs. First and foremost, all commercial auto insurance policies must comply with provincial law, just like personal car insurance. Each Canadian province has its own regulations for auto insurance, including certain types of coverage that are mandatory. For example, in Ontario, all commercial auto insurance policies must include the following four types of coverage: third party liability coverage, direct compensation-property damage coverage, accident benefits coverage, and uninsured automobile coverage. Additional considerations for required coverage include attached equipment or vehicle modifications, and commercial trailer coverage. Beyond the mandatory coverage, businesses can choose to take out additional coverage to protect their business vehicles, such as collision or comprehensive coverage. Learn more about each type of commercial auto insurance coverage below.
Third party liability coverage
Third party liability coverage protects your business if an employee gets into a car accident that injures another person or causes damage to another person’s property. Under this portion of your policy, your insurance company will compensate the third party on your behalf for medical expenses associated with bodily injuries or repairs of a damaged car, as well as any legal fees or court fees up to the coverage limit. In Canada, all commercial auto insurance policies must include a minimum of $200,000 in third party liability coverage. However, it is highly recommended to carry a minimum of $2,000,000 in third party liability coverage.
Direct compensation - property damage coverage
Direct compensation - property damage coverage protects a commercial car and its contents from the costs of property damage. This type of coverage only applies if the driver is not at fault for the collision that caused the damage. This type of coverage gets its name from the fact that the insurer typically provides direct payment for the damage caused (such as to repair or replace a vehicle). To receive compensation under the direct compensation portion of your commercial auto insurance policy in Ontario, the incident must meet the following criteria: it happened in Ontario, it involved multiple cars, and it involved at least one car that participates in the province’s car insurance program.
Uninsured automobile coverage
Uninsured automobile coverage protects you and any passengers in your business vehicle if you get into an accident with an at-fault driver who is uninsured or underinsured. This type of coverage also protects company cars against hit-and-runs. Uninsured automobile coverage covers medical expenses relating to injuries, car repairs due to damage, lost wages, and more.
Accident benefits coverage
Next, commercial auto insurance coverage must include accident benefits coverage. If you, a passenger, or a pedestrian requires medical attention following a collision, accident benefits coverage can help. Protection is offered regardless of who was at fault for the accident and can help pay for loss of income, medical expenses, and more.
Modifications and attached equipment
Many commercial vehicles will have attached equipment or modifications to their vehicles, such as winches, fuel tanks, and toolboxes. If you have made any modifications to your vehicle, it is important to make sure these changes are included on your policy. If you fail to disclose these changes to your insurance company, you may not receive the full value of your vehicle in a claim. In some cases, a claim may even be denied due to non-disclosure of something that materially changes the vehicle.
Commercial trailer coverage
Commercial trailer coverage provides protection for trailers that are used for business purposes. This coverage typically will include coverage for physical damage to the trailer, as well as liability coverage if the trailer causes damage or injury to others. For trailers you do not own, you can add them to your policy as a non-owned trailer to make sure you are covered for the liability.
Collision coverage, which is optional, protects your business if an insured employee gets into an accident with another vehicle or object on the road, no matter who is responsible for the accident. Under the collision coverage section of your policy, your business can receive compensation to help pay for any property damage that resulted from the collision, such as car repairs.
Comprehensive coverage is one final type of optional commercial auto insurance coverage. It protects your business vehicles against several risks not covered by standard car insurance. For example, if you purchase comprehensive coverage, you can be protected against perils like theft, vandalism, fire, water damage, and falling objects.
How much does commercial auto insurance cost?
Commercial auto insurance varies in price depending on the insurance provider, as well as the coverage types and limits chosen. When calculating commercial auto insurance premiums, insurers take several factors into account. Understanding which business-related and vehicle factors come into play might help Canadian business owners find the right coverage for them. The following are some of the key factors insurance companies use to determine the cost of commercial auto insurance:
- The industry your business operates in
- Your business procedures
- The location your business operates in (including the specific details of where the vehicles are typically parked)
- Your employees’ or drivers’ driving records and level of experience
- The ages and genders of your business’s employees or drivers
- The number of kilometres each business vehicle logs annually
- The year, make, model, and value of each vehicle operated by your business
- Insurance claims history
- Types and value of goods transported (if applicable)
- Percentage of travel to the U.S.
- Coverage limits, types, and deductibles you choose
Tips for saving money on commercial auto insurance
Commercial auto insurance can be expensive, but there are ways to make it cheaper. BrokerLink’s expert advisors have put together a list of tips on how to save money on a commercial car insurance policy in Canada.
1. Implement a driver risk management program
Implementing business procedures relating to driver risk management can save you money on commercial auto insurance. For example, your risk management program could include hiring only vetted and well-trained drivers, laying out clear and detailed policies and procedures, drafting documents on preventative maintenance, and ensuring all company cars are in full compliance with motor vehicle regulations can reduce your premium.
2. Invest in vehicle safety features
Insurance companies calculate commercial auto insurance premiums according to risk. Therefore, equipping your business vehicles with a variety of safety features can save you money. When purchasing a new vehicle for your business, consider one with modern risk management technologies, such as lane assist or emergency braking. These features can reduce the odds of you getting into an accident and may also lower your premium.
3. Install winter tires on commercial vehicles
Another way to reduce how much you pay for commercial auto insurance is to install winter tires on your business vehicles. Winters in Canada make driving more challenging, but if you make the proactive choice to outfit your commercial vehicles with winter tires, your insurance company may reward you by lowering your premium. This is because snow tires are proven to have better traction, increasing your safety on the road and decreasing your odds of getting into an accident.
Get in touch to learn more about insuring your commercial vehicles
BrokerLink can help you find an auto insurance policy that meets the specific needs and budget of your Canadian business. As experts in all kinds of car insurance, we can help you find a policy in no time. Contact your local branch today to get a quote!
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