Commercial Auto Insurance in Texas

Commercial auto insurance in Texas is mandatory and regulated by the Texas Department of Insurance (TDI). It was created to protect vehicles owned or used by businesses in the state. Commercial auto insurance protects businesses against damages caused by accidents involving their vehicles. It also provides several types of insurance coverage policies like auto liability, medical payments, collision coverage, comprehensive coverage, and uninsured motorist coverage. Commercial auto policy is incredibly important for any business that heavily relies on vehicles for its day-to-day transactions.

What is Considered Commercial Auto Insurance?

Commercial auto insurance is a policy that covers the physical damage to and liability of vehicles used for commercial purposes. Regular (private) auto insurance does not offer sufficient coverage for company cars or commercial vehicles; it only covers personal vehicles that are not used for commercial activities. Hence, commercial auto insurance protects all automobiles used for business purposes, such as company cars, commercial trucks, buses, and vans.

What is Commercial Auto Insurance for?

Commercial auto insurance is a policy that is necessary for companies that use vehicles to transact business. This insurance policy covers the cost of repairing or replacing company vehicles based on the terms of the insuring contract and the limits of the coverage. Commercial auto insurance was purposely created to financially protect businesses from perilous possible events, like accidents, vandalism, theft, or any form of auto damage caused to their vehicles. This policy covers vehicles the business owns and leases. It also covers employees injured in the event of an accident involving the company vehicle.

What are the Types of Commercial Auto Insurance?

There are seven basic coverages under commercial auto insurance in Texas, including:

LIABILITY COVERAGE: It covers the insured business in the event of a covered accident caused by the company-owned vehicle. It also covers the cost of damage repairs caused by the accident and the medical bills from the resulting injuries. Some items listed under property and bodily injury liability coverage are:

• Bodily Injuries (BI): Suppose an employee of an insured business causes an accident resulting in bodily harm or injury to a third party. In that case, commercial auto liability will cover all the financial damages involving bodily injuries incurred in the accident, including legal fees, medical bills, loss of income, funeral costs, and more.

• Property Damage Liability: This covers the cost of any claim or lawsuit related to third-party property damage. Common property damage costs covered by the insurance policy include legal fees, loss of income, repairing or replacing vehicle parts, repairing or replacing damages to fences or buildings.

• Pollution Clean-up: If the business’ employee is responsible for an accident in a covered vehicle that causes bodily injury or property damage, commercial auto insurance will cover the costs of cleaning up the accident’s site.

COLLISION COVERAGE: This coverage covers the costs of repairing or replacing a business vehicle in accidents with other vehicles and collisions with objects such as fences, animals, or trees. This coverage is primarily meant for the situations when the covered vehicle is at fault, but ultimately it will cover the cost regardless of whose fault it is.

COMPREHENSIVE COVERAGE: This coverage helps cover the cost of damage to your business vehicle when the damage doesn’t result from a collision. It covers losses like theft, vandalism, flood, and even fire. Comprehensive coverage is optional, and it has no limit. The highest the insurance company will pay in the event of a non-collision situation is the vehicle's cash value (CV). Comprehensive coverage covers the damages caused by vandalism, theft, glass breakage, and collisions with deers, which is a common occurrence in Texas. However, this coverage will not cover damages caused by hitting an object or another vehicle. It will also not cover the wear and tear of the vehicle.

MEDICAL PAYMENTS COVERAGE: This coverage is also known as no-fault insurance. It covers the medical expenses resulting from an accident involving a business vehicle. It covers the medical expenses of the policyholder and the passengers in the vehicle. In addition to covering the medical bill, this coverage provides payment for lost income and funeral expenses related to the accident.

UNINSURED MOTORIST PROTECTION COVERAGE: This coverage is to protect the insured business in the event of an accident involving an at-fault uninsured/underinsured driver with a business-owned vehicle. In other words, a driver that doesn’t carry liability insurance or a driver that doesn’t carry sufficient liability insurance. Underinsured coverage is divided into two coverage types: bodily injury and property damage.

• Uninsured/Underinsured Motorist Bodily Injury Coverage: This covers the business and the passengers in the business vehicle by paying their medical bills and lost income if they are involved in an accident with an uninsured/underinsured driver.

• Uninsured/Underinsured Motorist Property Damage: This covers the cost of repairing a business vehicle damaged by an underinsured/uninsured driver.

GUARANTEED AUTO PROTECTION (GAP) COVERAGE: If a business purchases a vehicle through a loan and the vehicle is totaled in an accident, the insurance company will pay the difference between what the primary auto insurance pays for the vehicle and the unpaid balance. For example, if a business vehicle is worth $100,000 at the time it gets totaled, and $125,000 is still owed to the bank, the insurance company will pay the GAP: the remaining $25,000.

HIRED AND NOT OWNED LIABILITY COVERAGE: If a business relies on vehicles that do not belong to them, and one of the drivers is involved in an accident, Hired and Not-Owned (also known as Non-Owner coverage) pays for the medical expenses and third-party damages.

Do you Need Commercial Auto Insurance in Texas?

Yes. You need commercial auto insurance in Texas if you have a vehicle that you use to carry out business activities. You need commercial auto insurance whether you have just one business vehicle or a fleet of business vehicles, although your coverage needs will vary. For instance, someone who has just one vehicle that they use to deliver their products, or someone who leased a vehicle for their daily use under their company name, may not need as much coverage as someone who owns a logistics business that has many vehicles.

If you have personal auto insurance, it will protect your personal vehicle when you use it for normal day-to-day commuting from one point to another that is not business-related. However, as soon as the vehicle is registered with a business as an owner, or if you use your car to transport work equipment, make deliveries, run business errands, or pick supplies, you will need to purchase commercial auto insurance. Commercial auto insurance is also necessary if the vehicle carries a large quantity of equipment, conveys goods, or people from one point to another for a fee, or if their vehicle is used to conduct a certain commercial service.

Speak to a knowledgeable state-licensed commercial insurance agent with access to multiple insurers. A Texas insurance agent can assess your business insurance needs and advise on the most cost-effective solutions.

Why Do you Need Commercial Auto Insurance?

You need commercial auto insurance in Texas because it helps protect you from bearing unplanned financial burdens that may arise from damage to your company vehicle. Without commercial auto insurance in Texas, your business could be in financial trouble in the event of peril like an accident that ruins the company’s vehicle and damages other people and their property.

If a business-owned vehicle is at fault in an accident, the business is the liable entity for the resulting costs. If the vehicle is insured under commercial auto insurance coverage, the insurance company will cover all costs up to the policy limits. The business vehicle owner’s commercial auto insurance will cover medical expenses, lost wages, court fees, and other related costs if the need arises. In a situation where the vehicle does not have commercial auto insurance coverage, the business may also be fined.

How Much Commercial Auto Insurance Do you Need in Texas?

When deciding how much commercial auto insurance to get, consider the repair or replacement value of your car in the event of a peril. Specifically, the amount of auto insurance you need in Texas, depends on various factors like:

The Value of the Vehicle

The vehicle's purchase price is used as the basis for loss settlement. When commercial auto insurance is purchased, the policyholder decides which loss settlement is most preferred if the vehicle is totaled in an accident. The policyholder may receive an actual cash value or a replacement cost (the policyholder will get the amount required to purchase the same type of car and quality today).

• Actual Cash Value (ACV) - The actual cash value is how much the used item is worth. The insurer determines the actual cash value by looking at the current market cost, and then factoring in the depreciation value.

• Replacement Cost Value (RCV) - Replacement cost is the amount it would cost to replace a damaged vehicle at the same or equal value.

Mileage

Commercial auto insurance (like all insurance) is based on risks. A vehicle which drives more miles per year is more likely to be involved in an accident due to spending more time on the road. The higher the annual mileage, the higher the premium is likely to cost.

Cargo

A vehicle that hauls cargo will require a more extensive coverage, which means that their policy will cost more because their insurer may have to cover the cargo in their vehicle in the event of an accident.

Cargo shipped on land (usually by trucks), is insured using Inland Marine Insurance.

Location of the Business

The claim rate in the business’ location or the areas the vehicle visits can also greatly affect how much commercial auto insurance is needed. The higher the likelihood of theft, the more coverage you need.

An experienced commercial insurance agent licensed in Texas can help you figure out how much auto insurance your business really needs.

What Commercial Auto Insurance Coverage Do you Need?

There are various coverages under commercial auto insurance in Texas. Some coverages are more necessary than others, depending on your type of business and your insurance needs. For example, a food truck either remains in the same location or is moved from place to place daily, but it hardly moves for long distances. Therefore, where the truck is parked every night may vary; hence it is advisable to purchase comprehensive coverage so that if the truck is vandalised or stolen, your insurance company will compensate the business for the loss.

It is also important for a logistics company to purchase liability insurance coverage and collision coverage. This will ensure that any auto accident caused by the employees of the dispatch company will be covered without crashing the company financially. Likewise, it is a good idea for people who use their vehicles for cabs to purchase property damage and bodily injury liability coverage because they are on the road almost every day, and you never know when an accident can occur. Listed below are different commercial auto insurance coverages and their uses:

Liability Insurance

Liability insurance covers payments for property damage and bodily injuries caused by the employees of the business to someone else in an accident. It is mandatory to purchase the minimum amount of liability insurance required by the State of Texas. However, the minimum amount might not be sufficient. A serious auto accident may result in a lawsuit, so it is necessary for a policyholder to assess their vehicles to see whether they are adequately protected.

Collision Coverage

This coverage pays for the repair or replacement of the business-owned vehicle in the event of an accident. The State of Texas does not mandate collision coverage, but if the vehicle is on a lease or if it was purchased through a loan, the lender may require it. Even though collision coverage is not required, it is a good idea to purchase it, especially if the vehicle is new. If the vehicle is involved in a major collision, paying out of pocket could drain the business savings. e

Comprehensive Coverage

This coverage takes care of the cost of repairing or replacing a vehicle damaged from perils other than collision (except for a collision with a deer - which may be covered under the comprehensive policy). Comprehensive coverage is not compulsory in Texas unless the vehicle is on a lease or is purchased through a loan. In this case, comprehensive coverage may be required by the lender.

Personal Injury Protection (PIP) Coverage

This coverage pays for the medical expenses of the business employee and the passengers in the vehicle at the time of the accident. Personal injury coverage is mandatory in Texas as part of liability insurance, but it can be opted out of by signing a waiver declining the coverage. If you already have a good health insurance package, you may not need to buy beyond the required minimum coverage.

Uninsured/Underinsured Motorist Protection Coverage

This coverage is not mandatory in the State of Texas. 20% of Texans are uninsured or underinsured, while many other drivers have insurance coverage, but not enough to cover the costs of a major accident/collision. This coverage covers the policyholder if injured, or involved in an accident that was caused by an uninsured/underinsured driver. Although this coverage is not required, it’s a good idea to purchase it, especially if the policyholder isn’t financially buoyant to pay the bills if the vehicle is involved in a major accident.

Is Commercial Auto Insurance Required by Law?

Yes, Texas law requires commercial auto insurance for vehicles used for commercial purposes and vehicles owned by businesses. According to the law, Bodily injury and Property liability coverage are the two minimum coverages that every commercial auto insurance policyholder must purchase in Texas. Other commercial auto insurance coverages are necessary but are not required by law.

Consult with a state-licensed commercial insurance agent about commercial auto insurance needs.

How Does Commercial Auto Insurance Work in Texas?

Commercial auto insurance is important for Texas businesses that use vehicles for their daily transactions, such as delivering goods and services, hauling supplies, or driving to worksites to meet clients/customers. Different businesses require different coverage types, and a business owner should speak with a knowledgeable commercial insurance agent, who can professionally assess the business needs and recommend the most optimal and cost-effective solutions for them.

What Does Commercial Auto Insurance Cover?

Commercial auto insurance provides a wide range of protection for business vehicles. It provides coverage for medical expenses, legal fees, repairs, or replacement of property(e.g., mailbox, fence, wall). Commercial auto insurance covers damages resulting from flood, fire, and even vandalism. Commercial auto insurance doesn’t just cover damage impacts on business vehicles alone, but also the passengers in the vehicle.

What is Commercial Auto Insurance Good for?

Commercial auto insurance is good for business-owned vehicles because it protects against perils not covered by personal auto insurance. With commercial auto insurance business owners will not have to bother about paying out of pocket for covered perils, such as their vehicle getting involved in an accident while making a delivery to a customer or transporting work equipment to a worksite.

What Does Commercial Auto Insurance Include?

Commercial auto insurance covers several expenses under different coverages, including:

Bodily Damage Liability Insurance

• Medical expenses

• Lost wages

• Pain and suffering expenses

• Clean-up costs

• Vehicle damage

Property Damage Liability Insurance

• Replacing vehicle parts

• Legal fees

• Repairing or replacing damages to property

• Loss of income

Collision Coverage

• Damaged vehicle or object involved in the collision

Comprehensive Coverage

• Windshields and glass damage

• Car theft

• Natural disasters, such as hail, hurricane, tornado, and storm

• Third-party liability cover

Personal Injury Coverage

• Medical expenses

• Lost wages

• Funeral costs

Uninsured/Underinsured Protection Coverage

• Medical expenses

• Loss of income

• Funeral costs

• Property damage

• Bodily injury

Does Commercial Auto Insurance Cover - FAQ

Does Commercial Auto Insurance Cover Personal Use?

Commercial auto insurance covers personal use. It can cover damage costs of an insured business vehicle, even if it was used for personal use, outside of its primary business use.

Does Commercial Auto Insurance Cover Rental Cars?

The answer to this question is yes. The coverage for commercial auto insurance extends to rental cars, even if the individual is using the rental car for personal purposes.

Does Commercial Auto Insurance Cover Trailers?

Yes. The commercial auto insurance covers the vehicle towing the trailer, and this coverage extends to the trailer.

Does Commercial Auto Insurance Cover Theft?

Yes. Commercial auto insurance covers theft, vandalism, and a few other kinds of vehicle damages.

Does Commercial Auto Insurance Cover Cargo?

Commercial auto insurance covers cargo that is damaged or destroyed in a collision or fire.Under commercial coverage cargo can be protected from the moment it is picked up by the business’ employee in the insured vehicle, until the cargo is placed in its new place, upon delivery.

Does Commercial Auto Insurance Cover Employees?

Employees are covered while driving vehicles owned by the business under the commercial auto insurance contract.

Who is Covered by Commercial Auto Insurance?

Commercial auto insurance only covers the policyholder and the employees that handle the business-owned vehicles if they are listed on the policy.

What is not Covered by Commercial Auto Insurance?

Commercial auto insurance does not cover personal vehicles or personal vehicles used for businesses. Commercial auto insurance has broad coverage. However, not all claims are covered. Most of these excluded risks are usually covered by other policies.

What Does Commercial Auto Insurance Typically Exclude?

Although commercial auto insurance has a wide coverage, there are some exclusions to this policy. Let’s talk about risks that are excluded from commercial auto insurance:

Intended Injury

This exclusion applies to property damage or bodily injury done intentionally by the policyholder. If the policyholder intentionally causes bodily harm to another individual or damages their property, commercial auto insurance will not cover the damages incurred. For example, suppose an employee for a dispatch company was en route to make a delivery in a company owned-vehicle, and another driver brushes against the company vehicle. Enraged, the employee intentionally rear-ends the other driver, causing an accident. The insurance company will not cover the claim.

Workers Compensation

Commercial auto insurance policy will not cover benefits the policyholder is obligated to pay under a workers compensation, unemployment, and disability compensation law. That is covered by a dedicated Workers Compensation insurance.

Employer’s Liability

Commercial auto insurance excludes claims by employees against the business for injuries sustained while working. These claims are excluded because they are already covered by the employer’s liability section of the worker's compensation policy. However, there are two exceptions to this exclusion. Commercial auto insurance provides coverage for employees who are not eligible for workers compensation benefits. The second exception is that coverage is provided for the liability the policyholder has assumed under an insured contract for claims arising from injuries to the employees. Employer’s liability insurance takes care of that for the business.

Fellow Employee Injuries

Commercial auto insurance will not cover an injury claim by one employee against another for a sustained injury.

Care, Custody, or Control

This eliminates coverage for damage to property or vehicles that are leased/rented under the policyholder's care. For example, if the policyholder leased a vehicle for business and had an accident with the vehicle, the insurance company will not cover it.

Handling Property

This exclusion eliminates coverage for any accident that occurs before loading property onto a vehicle and immediately after offloading property from a vehicle. Commercial auto policies normally provide coverage for bodily injury while the property is being loaded or offloaded from a vehicle. For example, if an employee falls over and gets injured while offloading items from a vehicle, the insurance company will not cover it.

Contractual Liability

Commercial auto insurance excludes the liability you assume under an insured contract for claims arising from employee injuries.

Movement of Property

Commercial auto insurance will not cover any injury or damage caused by the movement of a property by a mechanical device (unless the device is attached to a vehicle covered by the policy). For instance, an employee of the policyholder carries bags of sand meant for a project using a forklift and injures a clueless bystander. If the bystander sues the company for bodily injury, the policy will not cover the claim. This is because the forklift is not attached to a covered vehicle, but if the bag of sand was picked up by a removable crane attached to a covered vehicle, the claim may be covered.

Operation of Mobile Equipment

Commercial auto insurance in Texas does not provide coverage for claims that arise from mobile equipment (such as cranes, loaders, diggers, steam rollers, and other similar equipment). Mobile equipment is covered by Mobile Equipment Insurance, which covers mobile equipment that doesn't meet the definition of a motor vehicle.

War

Auto insurance in Texas does not cover claims that arise out of war activities. War is generally not covered by any conventional-type of insurance.

Do I Need Commercial Auto Insurance - FAQ

Do I Need Commercial Auto Insurance if I Don’t Drive?

Yes. Commercial auto insurance is not meant for the policyholder alone; it covers the employees who carry out their duties using your company vehicles.

Do I Need Commercial Auto Insurance if I Have One Car?

Yes. Commercial auto insurance is necessary if the vehicle is registered with a business listed as the owner, or used for commercial purposes by other employees.

Do I Need Commercial Auto Insurance if I Have Health Insurance?

Yes. Health insurance does not provide any protection for a commercial vehicle. In the event of an accident or damage to the vehicle, the insured business will have to pay out of pocket for the vehicle's repair or replacement, which can be very expensive.

Do I Need Commercial Auto Insurance if I Have Auto Insurance?

Yes. Private auto insurance only covers accidents that happen while using the vehicle for personal use. It may not cover any damage incurred while the vehicle is being used for business activities like transporting work equipment and making deliveries.

Is There a Waiting Period for Commercial Auto Insurance?

There is no waiting period for commercial auto insurance in Texas as it takes effect immediately. In Texas, anyone who purchases a new vehicle and registers it under a business, can only drive the vehicle for thirty days before having to purchase commercial auto insurance coverage.

Who Can Get Commercial Auto Insurance in Texas?

Any business owner who uses a vehicle to carry out business-related activities can purchase a commercial auto insurance policy.

Who Needs Commercial Auto Insurance?

There are several types of businesses that need commercial auto insurance; a few are listed below:

• Delivery trucks businesses

• Food truck business

• Service utility businesses

• Courier services

• Car rental services, etc.

Who Should Get Commercial Auto Insurance?

You should get commercial auto insurance if your business owns vehicles or you use your personal vehicle to run business errands. Consider getting commercial auto insurance if:

• Your vehicle is used for transporting products,

• Your vehicle is regularly used for business needs, i.e., transporting work equipment, making a delivery, or driving clients around,

• Your employees drive your business vehicle or may drive each other’s vehicles as part of the business activities.

It is essential to contact an experienced and knowledgeable licensed insurance agent in Texas before purchasing commercial auto insurance. An agent will find the right coverage that suits the nature of your business.

PROs and CONs of Commercial Auto Insurance in Texas

PROs of Commercial Auto Insurance

• It covers legal expenses brought against the insured business

• It provides car repair coverage in the event of an accident

• It covers third-party penalty claims

• If there are no claims during the policy period, a no-claim bonus is usually awarded during renewals

• It gives room for extension of coverage to someone else driving the vehicle

• It is more flexible and offers more protections options (especially when bundled), compared to private auto insurance

CONs of Commercial Auto Insurance

While commercial auto insurance has multiple benefits, it comes with a major con:

• It costs more than private auto insurance

Speak to a knowledgeable state-licensed commercial insurance agent with access to multiple insurers, who can provide comparative strategies to meet insurance needs of your business.

Is Commercial Auto Insurance Worth Buying in Texas?

Commercial auto insurance is a business-friendly investment, and it is definitely worth buying if you need it. An automobile crisis may arise at any time, and fixing damages or replacing a vehicle used for business may take a toll on the business. Commercial auto insurance also covers medical expenses, legal fees, and it covers other people apart from the insured. Commercial auto insurance safeguards the business cash flows and unnecessary stress in the event of an accident, and even if no claims are made, a no-claim bonus is awarded.

What Happens if you Don’t Have Commercial Auto Insurance?

Commercial auto insurance is mandatory for any company-owned vehicle in Texas, any business owner caught with a vehicle that has no commercial auto insurance will face legal consequences such as jail time and administrative fines. Also, not having commercial auto insurance will mean paying out of pocket for perils involving the vehicle, which may be devastating to the business, depending on how deep its pockets are.

Why is Commercial Auto Insurance Important?

Commercial auto insurance doesn’t just provide coverage to vehicles damaged by accidents, it also provides coverage for medical expenses, legal fees, losses related to vandalism, theft, or flood. Commercial auto insurance ensures that people and property are protected from any unforeseen mishaps that could happen while on the road. Commercial auto insurance also gives peace of mind, ensuring you do not have to worry about your business vehicle getting into a crash or being stolen, because in the event of a covered peril you will be duly compensated.

What Happens When your Commercial Auto Insurance Lapses?

Various reasons can lead to commercial auto insurance lapses. For example, if an insurance company requests underwriting but does not get a response, it could lead to cancellation. In another instance, the policyholder may forget to do a renewal. Regardless of the cause, driving with lapsed insurance can cause serious problems. A lapsed insurance means you have had no active insurance plan for 30-60 days. If the vehicle was purchased with a loan, the vehicle could be repossessed if there is an insurance lapse. Also, if anything happens to the vehicle during the lapse, your insurer will not cover it, and you could face jail time.

It is best to speak with your commercial insurance agent to discuss how you can reduce the price of your insurance policy before it lapses. If your insurance has already lapsed, talk to your agent to know your options.