In most states, it’s legally required that you have auto insurance if you’re going to drive on the road.

The reality is that driving poses risks. Even the safest, most careful driver can suffer an accident due to circumstances outside their control. By having an auto insurance policy in place, it protects the driver—and other drivers—from the financial harm caused by an accident.

Commercial auto insurance offers the same protection—just for vehicles that are owned by a business and specifically used for work. This guide will help you understand what commercial auto insurance is, when you need it, and what (and who) it covers.

Commercial auto insurance is protection for your small business against the many risks associated with vehicles owned, operated, or involved in your business’ practices. This type of insurance coverage accounts for various scenarios, including but not limited to:

  • A 10-car pile-up with your delivery driver’s compact car in the middle
  • Damage from a tree falling onto a van you rented
  • Theft of inventory from a truck moving your inventory

It’s like personal auto insurance, but for businesses. Thus, there’s no question about if you need it, but there is a question of….

Generally speaking, you need commercial auto coverage any time you find yourself in charge of a business that involves vehicles. But specifically, your overall need for auto insurance stems from two main sources of risk that anyone owning or operating a vehicle inherently faces:

  • Physical damage
  • Liability

Let’s break down what each of these entails.

Physical damage coverage

Physical damage coverage in commercial auto insurance protects you from damage to a covered vehicle owned, leased, rented, or borrowed by your business.

There are two major kinds of damages it covers:

  • Collision – Damage to the vehicle resulting from collisions, overturns, or other accidents involving operation
  • Comprehensive – Damage to the vehicle from sources or causes besides collisions. Things like vandalism, natural disasters, theft, etc.

Unlike third-party liability coverage, physical damage coverage doesn’t cover claims or property owned by other individuals or companies (if they were involved in the same accident, for instance).

Liability coverage

Liability coverage protects your business against third-party claims related to accidents involving vehicles owned or operated by your business. Specifically, it protects against two major kinds of insurance policy claims:

  • Bodily injury
  • Property damage

Importantly, liability claims involve a specific set of covered vehicles and insureds.

As noted above, physical damage claims are only covered for owned vehicles. But for claims related to commercial auto liability, coverage depends on a few key factors. To be covered, an accident must be caused by a vehicle that is covered, and the claim must be filed against an insured.

Let’s go over what those terms mean in practice.

What autos are covered?

The vehicles that commercial auto insurance covers fall into a variety of classes, such as “owned” or “not owned,” that determine coverage. What kinds of autos your plan covers comes down to a system of symbols you see on your policy.

Here is a breakdown of the various symbols and corresponding auto types covered by commercial auto policies:

Symbol 1 – Any auto. This symbol, used only for liability coverage (not physical damage), generally means every auto involved with your business, including those:

  • Owned (by you)
  • Leased, rented, borrowed (by you)
  • Non-owned (by you)

Symbols 2, 3, 4 – Owned autos. These symbols refer to autos you own, with certain distinctions:

Symbol 2: All owned vehicles

Symbol 3: Owned private passenger vehicles only

Symbol 4: Owned commercial vehicles only

Symbols 5, 6 – State-specific coverages. These symbols refer to certain coverages required by law in some cases and states:

  • Symbol 5: No-fault coverage
  • Symbol 6: Uninsured motorist coverage

Symbol 7 – Declared autos. This refers to autos specifically designated for coverage in the policy.

Symbol 8 – Hired autos. This refers to vehicles you rent, lease, or borrow for business use.

Symbol 9 – Non-owned autos. This refers to vehicles that your business uses but that are not owned by you or your business, such as:

  • Autos owned by employees, partners, etc. and used for business
  • Autos rented, leased, or borrowed by employees, partners, etc.

And… Symbol 19 – Mobile equipment. This refers to devices, such as machinery, that are installed on vehicles.

Now that you know what cars are covered, what about the people who are insured?

Who’s an Insured?

Just like there are classifications for which cars are covered, there are also specifications in place for who is insured when operating the vehicle (in the event of an accident). The three main designations are:

The Named Insure – The party declared as owner, lessee, renter, etc. of a vehicle. (In other words, you, the business owner.)

  • Importantly, your coverage applies to any covered auto your business owns where you or the business is the Named Insured.
  • As a Named Insured, you may be liable for your employees’ or others’ actions too. So, you’re covered whether you are actually operating the work vehicle or not.

Permissive users – This is anyone that you, the Named Insured, grant permission to use the vehicle owned by the business. This might include employees, partners, or other individuals.

  • Unlike for the Named Insured, this coverage may only apply for select covered vehicles and for specific drivers.

And omnibus Insureds – Any person who’s liable (legally responsible) for the actions of the Named Insured or a permissive user.

Special clauses on your particular policy might add to, subtract from, or modify these Insureds, so it’s important to be aware of all special amendments, additions, exclusions, and overall specifications of your plan.

Covering all your needs

The web of coverage and insureds in commercial auto insurance can vary from plan to plan. While it might seem confusing at first, the mechanics are relatively simple. Here at Thimble, we believe in keeping insurance simple and hassle-free.

We’re on a mission to make insurance easy and accessible for every small business owner.

Of the various insurance coverages your small business needs, commercial auto is one of the most important. Just like you protect your own automobile and livelihood while you’re on the road, you want to do the same for your business purposes.

By getting the right type of coverage, you protect yourself in the case of any mishap, accident, or mistake. This is just one more safeguard that helps protect your business, and one more pillar you can lean on to work—and drive—with the confidence you deserve.


Our editorial content is intended for informational purposes only and is not written by a licensed insurance agent. Terms and conditions for rate and coverage may vary by class of business and state.