How to ensure adequate liability coverage in commercial auto insurance

YTD Staff

YTD Staff

commercial auto insurance

Liability coverage in your commercial auto insurance protects your business from potential financial risks and liabilities. These could result from accidents involving your fleet. Insurance Navy says accidents involving your business vehicles can cause expensive damages, medical expenses, and legal claims.

This blog will guide you through the key points to ensure your commercial auto insurance policy has adequate liability coverage. By understanding these points and getting the required liability coverage, you can protect your business, drivers, and reputation down the line. 

Also, it will give you peace of mind so you can spend energy building and growing your business and not cry over spilled milk.

So, without further delay, let us understand the concept of liability coverage and learn how you can ensure to have enough in your commercial auto insurance policy.


Assess your business risks

Conducting a risk assessment is the first step in ensuring your business has sufficient liability coverage. You need to consider factors such as the nature of your business, the vehicles in your fleet, travel frequency, and distances they travel. Also, do not discount any industry-specific risks. 

Through this, you will learn your business’s potential liability exposures. Hence, be in a better place to determine adequate coverage levels.

Understanding the inherent dangers in your business operations enables you to tailor your liability coverage to your requirements. By evaluating these factors, you can take action to mitigate potential risks. Doing this ensures that your commercial auto insurance offers sufficient protection against liability claims.

Evaluate state and legal requirements

Commercial auto insurance offers monetary coverage if you or any employee is at fault in an accident involving your business vehicle and people are injured, or property is damaged. Every state has a minimum amount of commercial auto liability insurance required.

A few states also require uninsured/underinsured motorist coverage, which protects you when the driver at fault is not in a position to pay for the damages. So, you must find out what your state requires you to do.

Your insurance agent can help you comprehend how federal and state laws may apply to your situation. Understanding the legal requirements can help you stay compliant and avoid heavy penalties.

Sales manager giving advice application form document, considering mortgage loan offer for car and house insurance

Types of liability coverage

Liability coverage in commercial auto insurance is of two types, which are explained below:

●     Bodily injury liability

State requirements for bodily injury insurance coverage range from a low of $10,000 per person to a high of $20,000 for each accident. Common limits on Liability coverage in vehicle insurance plans are $300,000 per person and $500,000 per accident. 

You might be sued for a large sum of money if your commercial vehicle causes someone else injury.

If an accident occurs, you want to ensure that your Liability coverage is sufficient to safeguard your assets. According to some experts, you might need more than the recommended $100,000 or $300,000. 

Low-cost vehicle insurance is not an option here. Inadequate coverage from insurance might result in the loss of even a $1 million home in a lawsuit.

A Personal Umbrella or Personal Excess Liability policy can give you this additional layer of protection. Your liability insurance premiums should reflect the value of your assets since the greater the value is, the more you’d lose.

●     Property damage liability

Property damage liability coverage provides protection for damages to someone else’s property caused by your commercial vehicle. Although state requirements for liability coverage vary, the bare minimum in most areas is insufficient to cover the costs of a significant accident.

New cars often cost over $50,000, so if you hit someone and damage their vehicle, even the most straightforward repair cost will be pretty costly. Your insurance provider may insist that you carry more than the bare minimum to be eligible for a Personal Umbrella policy, which covers unexpected expenses.

Determine adequate coverage limits

Choosing the proper liability coverage limits is crucial to ensure you have sufficient protection. Coverage limits mean the maximum amount an insurance policy will pay when there is a claim. Evaluate the probable financial impact that accidents and liability claims can have on your business.

While it’s logical that you’d like to keep your insurance premiums low, the insurance that fails to cover you in the event of a lawsuit is the costliest. Judgments can easily reach thousands of dollars in today’s society. So, don’t cut corners when buying liability insurance.

Consider getting an umbrella liability policy if your firm needs more comprehensive coverage than existing auto insurance. Consult an insurance professional so you can select apt coverage limits that match your risk exposure.

Review and update your coverage

Your firm’s insurance needs can change with time, so reviewing and updating it regularly is essential. As your business grows, your fleet expands, or state laws are updated, talk to your insurance provider to change your coverage accordingly. 

Failing to do so will put you and your business at a higher risk because you will not be able to settle claims despite having commercial auto insurance.

This is also true in the case of an opposite scenario. Suppose your fleet reduces for any reason; you would not want to pay higher premiums for the coverage you do not need. So, it is crucial to review your coverage and adjust it with changes promptly.

Closing thoughts

When your livelihood depends on reliable transportation to reach clients, carry passengers, and haul equipment. Therefore, you must ensure having adequate coverage for any unforeseen event that can affect your business operations. 

This can be done by creating a commercial auto policy based on your needs and potential risks.

Your independent insurance agent can advise you on the type and amount of auto insurance coverage depending on your needs and the compliance laws of your state.

If you think the existing business auto liability insurance coverage amount is not adequate for your requirements, you can consider buying a business commercial umbrella policy. The umbrella policy starts the coverage from where your other liability coverage stops. 

This could be an affordable way to get more coverage against bodily injury and/or property damage.

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