There are businesses of all shapes and sizes operating in Ontario, many of which rely on mobility to continue growing their services. Whether it’s a family-run bakery beginning to offer delivery services, pop-up restaurants supplying delicious food to your door, or maybe your products are experiencing a surge of interest online. Providing a company car is a big step forward in your business plan, but what type of insurance do you need? To better understand why Commercial Auto insurance is so important, we will examine what it is and how this particular coverage can help protect you and your business.
What is Commercial Auto insurance?
Commercial auto insurance, also called commercial vehicle or business auto insurance, is a business insurance policy that applies to “autos owned by or used in your business.” It protects your business against liability for damages caused by accidents involving your business vehicles. It provides specific compensation to occupants of your business vehicles who are injured in said accidents. In Canada, any vehicle used to transport clients, materials, goods, tools, or equipment generally requires commercial coverage. It’s important to know that a personal automobile insurance policy usually does not cover vehicles used in the operation of your business. You must apply for IRCA (Individually Rated Commercial Auto insurance).
IRCA-eligible vehicles are non-fleet automobiles used for commercial purposes rather than personal use. They are rated based on the driver’s driving record, claims history, coverage, limits, and deductible.
How is Commercial Auto insurance helpful?
Commercial auto insurance adds another layer of protection to your business. Vehicles are a vital part of operations, and an accident, a stolen work vehicle, or an injury could put your business at risk. This type of insurance covers cars, trucks, pickups, vans, trailers, and fleets used for work purposes. It protects your business, drivers, and vehicles from exposure to threats.
Who needs Commercial Auto insurance?
Essentially, there are three main criteria to consider to help you determine if you need commercial auto coverage:
- Use of the vehicle: If visiting clients daily is the core of your services, or if you make deliveries, you should have a commercial auto insurance policy.
- Type of vehicle you drive: Large commercial vehicles often cause more damage in an accident, and your coverage will likely reflect that.
- Vehicle owner: If your vehicle is owned by the business and used for business purposes, you should have commercial auto insurance coverage. Your policy should also cover any employees who use the vehicle.
There are a few services that need a commercial auto insurance policy, such as:
- Contractors and construction
- Maintenance people (if they are carrying tools)
- Personal emergency equipment (i.e., tow truck)
- Any delivery service (Restaurant, take-out delivery)
- Providing driver education
- Sales visits and calls
- Employee use, even if you only use it occasionally
- Taxi-style hire services (i.e, Lyft or Uber)*
* If you use your vehicle as part of the Uber ride-sharing service in Quebec, Ontario, or Alberta, you’re automatically covered by Intact Insurance from when you make yourself available to accept a ride request to when you drop off the last passenger. This is regardless of which insurer your policy is with.
Did you know that commercial vehicles in Ontario use black letters and numbers on their license plates? A “Class” designation will appear on the plate in Alberta. In contrast, in Quebec, a licence plate with an “F” indicates that it is used for commercial purposes by a company or a self-employed individual.
Personal auto insurance vs. Commercial auto insurance
Both personal and commercial auto policies are essentially very similar – they provide you with protection against common threats. These policies offer financial security and provide resources to recover if you file an insurance claim. They differ in the type of threats, plan limits, and policies available. Personal auto insurance is geared towards individuals, while commercial auto policies are customized for various businesses and functions.
They both have in common that personal insurance will not cover you when driving for business use, and commercial insurance will not cover personal-use driving.
Your insurance company must know you are using your vehicle for business purposes. Should a collision occur, your claim will likely not be processed if you haven’t disclosed the usage of your private car to your insurance company. Cancellation of your policy altogether may occur as a result. However, if your business use covers your daily commute to work, you are covered.
Commercial auto insurance coverage
While types of insurance will vary by province, the primary coverages for provinces that do not have a government insurance plan (British Columbia, Manitoba, and Saskatchewan) are as follows:
1. Liability
This coverage protects you if someone else is killed, injured, or their property is damaged by your company vehicle. This coverage will pay for claims due to lawsuits against you up to the limit of your coverage, and will pay the cost of settling the claims. By law, you must carry a minimum limit for Third-Party Liability coverage (varies by province), but options exist to increase the minimum amount.
2. Accident benefits
If you’re injured in an automobile accident, this coverage gives you (or other insured persons) benefits, no matter who caused the accident. It helps cover rehabilitation treatment, income replacement, and other recovery-related services.
3. Loss or damage
This provides a selection of coverages for your automobile that covers you against direct and accidental loss of, or damage to, your automobile and its equipment.
There are four optional coverages:
- All Perils: Combines the Collision or Upset and Comprehensive coverages listed below.
- Collision/Upset: Pays for damage if your vehicle hits another object or vehicle, or tips over.
- Specified Perils: This policy covers your vehicle against loss or damage caused by specific perils, including fire, theft/attempted theft, lightning, windstorm, hail/rising water, or earthquake.
- Comprehensive: Covers your vehicle against loss or damage caused in addition to those covered by Specified Perils, falling or flying objects, missiles, or vandalism.
- Property Damage: Direct Compensation Property Damage (DCPD) became optional in Ontario, allowing businesses to opt out and potentially reduce premiums.
What are the three types of Commercial Auto insurance policies?
- Business use: For small businesses, a home-run business, or for individual entrepreneurs. Used for driving to various locations and meeting with clients. You can add “business use” to your auto insurance.
- Business use for multiple drivers: This allows you to add multiple drivers to your policy. Therefore, employees can utilize your vehicle, and the owner pays the insurance.
- Commercial auto use only: Vehicles used exclusively for work purposes. Daily use with added equipment and features to a vehicle (i.e., tool bed in the truck).
How much does Commercial Auto insurance cost?
From an insurance perspective, a commercial vehicle is riskier than a personal one. Insurers determine the average cost of your commercial auto insurance on a case-by-case basis. The number and type of vehicles, business type, number of drivers, the wide variety of risks, plan type, and limits all contribute to your rate calculation.
Commercial vehicles can be extensive and highly specialized, meaning they will cause a lot of damage if involved in a collision, and the parts will cost a lot to fix or replace. Even if your commercial vehicle is a normal-sized car, the insurance policy will cost more, mainly because the assumption is that commercial vehicles spend more time on the road and often during rush hour traffic. Plans could range from $100 to $300 per month or more.
How to save on Commercial Auto insurance
Although paying as little as possible for insurance is tempting, please ensure you are adequately covered with the right type of insurance for your business vehicles’ risks. Here are some ways to lower how much you will pay:
- Choose the right vehicles that make sense for your business.
- Good drivers: Safe drivers with good driving records will help lower the cost. Safe driving courses also help keep fees down and lessen the possibility of accidents and claims.
- Discounts: Check for insurance discounts and savings programs you may qualify for.
- Drive wisely: Look for ways to reduce your time behind the wheel. Telematics can help monitor and promote safe driving, reducing premiums.
- Safety and security: Install aftermarket security systems and anti-theft devices, and park in secure locations.
FAQs about Commercial Auto Insurance
What is the difference between commercial and regular auto insurance?
A personal auto policy usually covers one person driving their car, but a commercial policy covers an entire business. That could include multiple drivers, multiple vehicles, trucks, and employees with poor driving records.
Is commercial auto insurance more expensive?
Commercial auto coverage is typically more expensive because you risk higher liability and property damage claims when transporting people or goods for money. However, even if you are the only driver and your car is the only vehicle that needs coverage, commercial insurance can be worth the cost.
What is the difference between a commercial vehicle and a private vehicle?
The law prohibits using a private car for any business activity, transporting goods or commodities. The RTO registers these private vehicles under the LMV (Light Motor Vehicle) category. In contrast, commercial car insurance protects vehicles like taxis or cabs that transport paying passengers.
What is commercial fleet insurance?
Commercial fleet insurance is for companies with multiple vehicles. It is similar to standard insurance, but applies to many vehicles. Policies can be used for small and large fleets.
What happens if you get into a collision while using your vehicle for business?
If you get into an accident while driving for business (and your policy doesn’t specifically cover this use), your provider could deny your claim, and you would have to pay out-of-pocket for repairs. Also, your insurer could cancel your policy if you don’t notify them about how you use the vehicle. You’ll face higher premiums when looking for a new insurance policy due to your previous omission.
Let our isure commercial brokers help you find the best quote from the top insurance companies in Canada. We’ll ensure you have the right coverage to protect and grow your business.
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