Insurance Basics: Why Your Contractor Should Have Commercial Auto Insurance

Most private car insurance policies are not designed to pay for damage related to a business vehicle. Learn more about commercial auto insurance and why you should have it.

If you don’t have commercial auto insurance that protects the vehicle you use for work, you may be surprised (and I’m sorry) to learn that your personal auto insurance doesn’t cover damage or loss to your pickup truck when you get into an accident.

Because most private car insurance policies are not designed to pay for damage in connection with a professionally used vehicle. Even if your personal automobile policy provides some level of coverage for commuting between job sites, it probably won’t be adequate if you are involved in a collision or if your vehicle is stolen or vandalized. That leaves you on the hook to pay the bill.

Commercial auto insurance, also known as commercial vehicle or business auto insurance, provides coverage for your company’s vehicles, including cars, vans, trucks, and trailers — essentially any vehicle used for business purposes to transport people, materials, equipment, or packaged goods goods are used.

What does commercial car insurance include?

In general, a standard or basic commercial vehicle policy provides the same coverage as personal automobile insurance. However, it comes with higher coverage limits, and insurance providers are less likely to deny a commercial auto claim than a personal auto insurance claim for a vehicle you use for your work.

Although coverage may vary by province, if you live in a province like Ontario that allows private insurance companies to sell auto insurance, a standard or basic policy will include four mandatory types of coverage:

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1. Liability to Third Parties

Liability insurance provides financial support if you are at fault for an accident that results in property damage, personal injury, or death. It pays for their medical expenses, repairs to their vehicle, and damage to their property.

As in Ontario, most provinces require you to carry at least $200,000 in liability insurance. However, you can increase this limit to $500,000, $1 million, or $2 million because the cost of an injured person’s medical bills can easily exceed the minimum amount.

2. Accident Benefits

Accident insurance pays for your medical and rehabilitation costs after an accident that are not covered by your provincial health insurance plan.

You have the option to increase your mandatory accident insurance coverage limit of $200,000. Note, however, that increasing the coverage limit will also increase the cost of your annual premium.

3. Uninsured car

All drivers in Canada must be insured to legally drive. However, it is estimated that two percent of all drivers drive without insurance. If you are involved in a collision with an uninsured motorist who is held responsible for the accident, an unidentified motorist, or a hit-and-run, uninsured motor insurance will pay for damage to your vehicle, injury, or funeral expenses.

4. Direct Compensation for Property Damage (DCPD).

DCPD is offered in provinces with no-fault insurance systems, including Alberta, Nova Scotia, New Brunswick, Newfoundland and Labrador, Ontario, PEI, and Quebec. It pays you compensation if your vehicle or property is damaged in an accident that is not your fault. DCPD expedites the process of recovering the damage you have suffered by allowing you to file a claim with your insurance company.

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In addition, there are optional coverages that you can add to your policy to increase your protection. The most popular include:

Collision or breakdown insurance.
Collision insurance covers the cost of damage to your vehicle if you are involved in an accident involving another car or an object, e.g. B. a street lamp, are to blame. It pays for the repair or replacement of your vehicle (in the event of a total loss) minus a deductible. comprehensive insurance.
This type of coverage pays for damage or loss to your vehicle resulting from natural disasters and severe weather, fire or explosion, vandalism and theft, falling objects and damage resulting from a collision or collision with animals, less an excess. comprehensive insurance.
All Risks Insurance covers all causes of damage except those listed directly as exclusions in your policy. It combines collision and comprehensive insurance into one and includes additional features such as covering your vehicle if it is damaged by an additional driver or someone in your household. It is considered the best option.

Here is an example of a Censurance client who is a general contractor on the value of a commercial automobile policy. Our client purchased commercial auto insurance and added collision and collision damage waiver to their policy for their pickup truck. Unfortunately, while driving to a construction site in snow and ice in November, he veered off the road and crashed into a tree. Luckily, he was unhurt, but his vehicle was a total loss.

Because he had collision insurance under his policy and was responsible for the collision with the tree, his insurance provider paid to provide him with funds to rent a vehicle while his claim was being processed. In the end, the total settlement he received from his insurance provider for his wrecked pickup truck was $20,000. Had he not had a commercial auto policy with collision protection, the insurer might have denied his claim.

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Commercial auto insurance vs commercial fleet insurance. what is the difference?

Suppose you own a small construction company with a fleet of vehicles. In this case, it is better to purchase commercial fleet insurance.

While a commercial auto policy is designed for individuals or organizations with fewer than five vehicles, fleet insurance provides coverage for businesses that operate five or more vehicles.

It too is designed to protect your pickups, cars or SUVs from the risk of personal injury to third parties, property damage or other unexpected events such as theft or vandalism.

Commercial fleet insurance is usually cheaper than buying multiple individual policies.

Aharshan Thangarasa is a licensed broker and team leader, contractor at Censurance, Canada’s leading source for small business insurance. Request a free quote for your insurance needs by visiting