Contractors face working conditions and challenges that are unique from those of many other professions. One of these challenges is travel. The role of a contractor requires traveling to customers in order to offer services such as plumbing, electrical work, construction, and other home services.
This means that contractors absolutely rely on the use of vehicles as a crucial part of their business model. Many require specialized vehicles that are able to carry bulky equipment to and from job sites.
As a contractor, you need to protect your vehicle (or fleet of vehicles) as an essential asset of your business. Even if you have personal auto insurance for a work vehicle, that likely isn’t enough to provide full protection.
With that in mind, here’s why every contractor needs commercial auto insurance.
What is Commercial Auto Insurance?
Commercial auto insurance is an insurance policy that protects business vehicles beyond the coverage offered by a personal auto insurance policy.
It protects vehicles against theft, damage, and liability (particularly third party liability), and it helps ensure you don’t suffer financial losses due to the theft of your vehicles or accidents damaging your fleet, employees, or other parties.
Some areas typically covered by business auto insurance include:
- Bodily injury liability, which covers injuries that you as a driver cause someone else.
- Personal injury protection (PIP), which covers medical care for the driver and passengers of your car; it may also cover lost wages and funeral costs.
- Comprehensive coverage, which covers damage or theft of the car itself that occurs because of something other than a vehicular accident (such as earthquakes, falling objects, etc.).
- Collision coverage, which pays for damage to your vehicle if it is damaged by another vehicle or rollover, whether you or the other driver is at fault.
- Guaranteed asset protection (GAP) coverage, which, in the case of an accident that totals your car, pays you the difference between the amount you owe and the cash value of the vehicle.
- Uninsured and underinsured motorist coverage, which pays for your injuries and damages if you are hit by an uninsured, underinsured, or unknown driver.
The Difference Between Business Auto Insurance and Personal Auto Insurance
Although many of the areas they cover are similar or the same, there are a few key differences between personal auto insurance and commercial auto insurance. The main difference is that personal auto insurance does not cover damages incurred while traveling for work, except during a commute. Commercial auto insurance for contractors covers all business activities, such as transporting commercial goods and equipment.
For small organizations, such as a one-person business where you may use your personal vehicle as work transportation too, the line between a “personal” and a “commercial” vehicle may become blurred. That’s why it’s important to note that each type of insurance doesn’t necessarily cover a specific vehicle, but rather the conditions the vehicle is being used under. Because of this, commercial auto insurance is essential for nearly every contractor, even those using a personal vehicle for transportation to jobs.
Businesses whose employees use their personal vehicles for work-related travel only occasionally may also want to consider a hired and non-owned auto insurance policy, which will pay legal bills from an accident, but does not cover vehicle damage.
What Other Types of Insurance Do Contractors Need?
Along with auto insurance, you need to have property insurance to protect the equipment your employees carry with them against theft, vandalism, or damage outside of normal wear and tear. It will cover tools, construction materials, and other equipment you travel with. In some cases, specific contractors’ tools and equipment insurance may be necessary.
These property items are not covered under an auto insurance policy, and you would need additional coverage to ensure they are protected.
Contactors also need general liability insurance. This type of insurance policy will protect you from paying for medical or property damage costs which occurred as a result of your work.
You may also want to get several of these types of coverage under one bundled business owner’s policy. Bethany Insurance can provide customized insurance packages to protect your business’s assets without overpaying for coverage you don’t need.
By using commercial auto insurance, as well as other protections such as property and general liability insurance, you will be able to keep your contractor business safer by protecting the vehicles and equipment you use daily and taking precautions against liabilities.
