Commercial Auto Insurance
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What is physical damage insurance?

Physical damage coverage insures your vehicles against a variety of damages such as collisions, vandalism, fire, and theft. Lenders typically require this type of auto insurance for leases and loans.

What are the types of physical damage coverage?

There are three types of physical damage coverage, and it’s important to know the differences when buying commercial auto insurance:

Collision coverage

This type of insurance provides financial protection against damage to a vehicle from physical contact with another vehicle or object, including animals, fences, rocks, trees, buildings, and other structures. It’s also known as collision insurance.

Comprehensive coverage

Comprehensive coverage insures against damage caused by something other than a collision. That includes fire, theft, vandalism, falling objects (like tree branches), and weather events. It doesn’t cover mechanical issues or maintenance and repairs.

Fire and theft with combined additional coverage (CAC)

This physical damage policy combines fire and theft protection with other specified risks for the policyholder. It's sometimes referred to as limited comprehensive insurance or specified perils insurance, as it only covers named perils.

How does physical damage coverage work?

Physical damage insurance is typically included in commercial auto insurance. It offers financial protection against costly repairs from collisions and other types of damage to your business vehicle.

Most states require auto liability insurance, which covers legal costs and other expenses in an accident that harms another person or damages their vehicle or other property. They don't usually require collision, comprehensive, or other types of physical damage insurance, which covers your own vehicles.

Many small business owners carry physical damage coverage because of the financial protection it offers. Additionally, you may need it to obtain a vehicle lease or loan.

Who needs physical damage coverage?

Every small business owner should consider physical damage coverage in their auto insurance policy to protect against unexpected repairs.

Even if you only have one or two vehicles, the cost of fixing or replacing a damaged car or truck could have a devastating impact on your business. Also consider the income you would lose if you didn't have a vehicle for a while.

Some industries are at higher risk of auto accidents than others, such as:

Construction and building contractors: Job sites can often be risky locations with multiple people and vehicles constantly moving about. This puts your vehicles at risk for damage while at a job site, picking up supplies, or hauling debris.

Trucking: Trucking and towing operators spend a lot of time on the road, putting them at risk of their own vehicle being damaged, vandalized, or stolen. Losing the use of your vehicle could temporarily sideline your business, in addition to hefty repair bills or even the cost of a new truck.

Landscaping: Tree service companies, lawn care businesses, and other landscapers face a variety of risks such as falling tree limbs, storms, and fires.

Retailers: Florists, grocery stores, and other retailers are likely to have at least one vehicle used for picking up supplies and making deliveries. A regular pickup or delivery route increases your risk of an accident, or lost income if your only vehicle is out of commission.

Customize auto coverage to fit your business

When buying company car insurance, you can choose the amount and type of coverage that matches your business risks.

If your business owns more than one vehicle, you can choose which ones have physical damage insurance coverage. You might insure vehicles individually with different types or amounts of coverage based on how much it would cost to repair or replace each vehicle.

Some business owners insure their newer vehicles against physical damages while self-insuring (setting aside money) for any older vehicles they own.

Another option is to insure your vehicles for specified perils, rather than comprehensive coverage, as a way to save money on premiums.

For example, if you do business in an area that’s prone to theft and vandalism, but you’re unlikely to see damage from fire or hail, you might insure your vehicles against theft and vandalism specifically to reduce your insurance premiums, compared to a comprehensive policy that covers a multitude of risks.

Keep in mind that with auto coverage you can insure for the actual cash value of your vehicles, or its replacement cost. Actual cash value covers the current, depreciated cost of a vehicle. Replacement cost would pay for buying the same type of vehicle new, minus your deductible.

You might also consider an insurance policy with a higher deductible as a way of saving money. This way you can still maintain your vehicle insurance coverage in case of a major event, while paying for any minor incidents out of pocket.

What does physical damage insurance not cover?

While physical damage coverage is important for any business that owns vehicles, it does have many exclusions for what’s covered in an accident. They include:

  • Medical bills for the injured
  • Damage to someone else’s vehicle or property
  • Legal expenses, judgments, and settlements

Commercial auto insurance typically covers all of the above as part of its auto liability coverage. If your vehicle gets into an accident and harms another person or their property, it'll pay for medical expenses for bodily injuries, property damage, and legal bills if your business is sued.

Compare insurance quotes from trusted carriers

Complete Insureon’s easy online application today to compare quotes for commercial auto insurance and other types of coverage from top-rated U.S. providers. You can also consult with an insurance agent on your business insurance needs. Once you find the right policy for your small business, you can begin coverage in less than 24 hours.

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Updated: February 21, 2024
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