How Many Types of Limits Are Found in a Commercial Auto Policy?

Businesses that rely on vehicles for daily operations need commercial auto insurance to protect against financial losses from accidents, damages, or liability claims. Unlike personal auto policies, commercial policies offer higher limits and additional coverage tailored to business risks.

Bodily Injury Coverage Limit

Bodily injury coverage sets the maximum amount an insurer will pay for medical expenses, lost wages, and legal fees if the policyholder is liable for injuries in an accident. This limit is typically expressed as two numbers, such as $500,000/$1,000,000, where the first figure represents the per-person limit and the second is the total available per accident. If multiple people are injured, the total payout cannot exceed the per-accident cap.

Choosing an appropriate limit is crucial, as medical costs and legal settlements can escalate quickly. A severe injury requiring surgery, rehabilitation, and long-term care can easily surpass $250,000 per person. If the policy limit is too low, the business may have to cover the remaining costs. This is especially concerning in states with high medical expenses or where juries award large settlements.

State laws set minimum bodily injury coverage requirements, but these amounts are often inadequate for businesses with significant assets. For example, California mandates a minimum of $15,000 per person and $30,000 per accident, while Florida requires only $10,000 per person. These limits may not even cover a single hospital stay, making higher coverage advisable.

Property Damage Coverage Limit

Property damage coverage pays for repairs or replacement costs when a business vehicle damages another person’s property, including vehicles, buildings, fences, and utility poles. Unlike bodily injury coverage, which has separate per-person and per-accident limits, property damage liability is a single limit per incident.

For example, if a commercial truck collides with multiple parked cars and a storefront, the insurer covers damages up to the policy’s stated amount. If costs exceed this limit, the business must pay the difference. Given the high expense of vehicle repairs and commercial property damage, many businesses opt for coverage limits between $100,000 and $500,000. Freight transportation companies may require even higher limits due to the potential for extensive damage.

State minimums often fall short for commercial operations. Texas mandates a minimum of $25,000, while New York requires only $10,000. These figures may barely cover the cost of a single new vehicle, let alone multiple damaged assets. Businesses in high-traffic urban areas or transporting heavy equipment should consider significantly higher limits.

Collision Coverage Limit

Collision coverage pays for repairs or replacement costs when a business vehicle is involved in an accident, regardless of fault. This is especially important for businesses with expensive fleets, as even minor accidents can lead to costly repairs.

Unlike liability coverage, which covers damages to others, collision insurance applies to the policyholder’s own vehicle. If a delivery van skids on an icy road and crashes into a barrier, this coverage would pay for repairs. If the vehicle is a total loss, the insurer typically reimburses the business for its actual cash value (ACV), factoring in depreciation. Some policies offer replacement cost coverage, which provides a higher payout to cover a brand-new vehicle, though this option comes with higher premiums.

Deductibles affect how much a business pays out of pocket. A policy with a $1,000 deductible means the business must cover the first $1,000 in repair costs before insurance applies. Choosing a higher deductible lowers premiums but increases financial responsibility in an accident. Businesses with multiple vehicles must weigh the trade-off between premium savings and potential repair costs when selecting deductibles.

Comprehensive Coverage Limit

Comprehensive coverage protects against non-collision-related losses, including theft, vandalism, fire, natural disasters, and damage from falling objects. Given the high replacement costs of specialized commercial vehicles, particularly those with custom modifications or expensive equipment, this coverage helps businesses avoid significant financial setbacks.

Certain industries face higher risks covered by comprehensive insurance. Construction companies often store vehicles on job sites where they may be exposed to theft or severe weather damage. Similarly, businesses with large fleets parked in open lots overnight face a greater likelihood of vandalism. Without adequate limits, recovering from such losses could strain cash flow or force businesses to replace vehicles at full cost.

Uninsured/Underinsured Motorist Coverage Limit

Accidents involving drivers with little or no insurance can create financial complications. Uninsured/underinsured motorist (UM/UIM) coverage ensures a company’s vehicles and employees are protected if an at-fault driver lacks sufficient insurance to cover damages. This is especially relevant in states where many drivers carry only the legal minimum or no insurance at all.

For example, if a company vehicle is struck by a driver with no insurance, UM coverage pays for medical expenses and vehicle repairs. Similarly, if the at-fault driver carries only $25,000 in liability coverage but the damages amount to $75,000, UIM coverage covers the $50,000 shortfall. Businesses operating in areas with high rates of uninsured drivers, such as Florida or Mississippi, often opt for higher limits to mitigate this risk.

Medical Payments Coverage Limit

Medical payments (MedPay) coverage helps pay for medical expenses incurred by the business’s own drivers and passengers, regardless of fault. This can be particularly beneficial for companies with employees who frequently travel for work, as even minor accidents can result in costly medical bills. Unlike workers’ compensation, which applies only to job-related injuries, MedPay covers medical costs regardless of whether the accident occurred during business operations or personal use of a company vehicle.

For instance, if an employee driving a company car is involved in a crash and requires emergency medical treatment, MedPay covers ambulance fees, hospital visits, and rehabilitation costs up to the policy limit. Coverage amounts typically range from $5,000 to $100,000 per person, depending on the policy. Since MedPay does not cover lost wages or long-term care, some businesses supplement it with other forms of coverage.

Umbrella or Excess Liability

Standard commercial auto policies have coverage limits, but severe accidents can result in damages that exceed these amounts. Umbrella or excess liability insurance provides additional financial protection by extending coverage beyond the primary policy’s limits. This is particularly important for businesses with significant assets, as a single high-cost claim could lead to financial hardship or legal action.

For example, if a company vehicle is involved in a multi-car pileup resulting in $2 million in damages, but the underlying policy only covers $1 million, an umbrella policy would cover the remaining $1 million. These policies typically start at $1 million in additional coverage and can extend into the tens of millions, depending on the business’s risk exposure. Industries such as freight transportation, construction, and passenger transport often carry high-limit umbrella policies due to the potential for catastrophic accidents.