Commercial Auto Insurance Minimum Requirements in Alabama
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Alabama doesn’t differentiate between private passenger vehicles and commercial vehicles when it comes to financial responsibility. In other words, you must prove you’re financially responsibly―you’re financially able to cover damages in the event of an accident―for your commercial vehicle.
Ways to Establish Financial Responsibility
When establishing financial responsibility, purchasing liability coverage from a company licensed in Alabama to sell auto insurance for commercial vehicles is the way to go for most people. However, the state does offer two other options. You can:
- File a Motor Vehicle Liability Bond for no less than $50,000.
- File a Certificate of Cash Bond for no less than $50,000.
If you’re interested in filing either of the bonds, contact the Motor Vehicle Division’s (MVD) Liability Insurance Department at (334) 242-3000 to make sure it’s an option for your specific situation.
As you’re trying to determine whether you need commercial insurance for your vehicle(s), it might help to think about:
- How many and what kind of vehicle(s) you need to insure
- How the vehicle(s) is being used
- Who drives the vehicle(s)
- Who owns the vehicle(s)
You should also keep in mind that not every vehicle you use for commercial purposes needs commercial insurance. For example, businesses that own vehicles used for business-related matters like picking up and delivering goods or people generally need to purchase commercial insurance; however, a sole proprietor who owns one vehicle set aside just for his business-related matters might only need a private policy.
Consider the following situations. If any of them apply to you, you might need commercial insurance:
- Your business equipment cannot be removed from the vehicle(s).
- You or your business picks up and delivers goods and/or people.
- You have multiple vehicles used by craftsmen or skilled workers (aka artisan use).
- The coverage limits on a personal auto policy are not high enough.
- You need to protect your employees when they use your company vehicle(s) or their own vehicles on company time.
If you still have questions about whether your vehicle(s) need commercial insurance, contact the MVD or give the Liability Insurance Department a call at (334) 242-3000.
If you’ve decided to purchase liability coverage rather than file a liability or cash bond, potential insurance providers will want to discuss with you the following:
- Who owns the vehicle(s)
- Weight of the vehicle(s)
- Usage of the vehicle(s)
- Liability limits requirements
Generally, you must purchase at least the same amount of liability coverage for your commercial vehicle as the state requires for regular passenger vehicles:
- $25,000 injury liability for one person
- $50,000 for all injuries in one accident
- $25,000 property damage in one accident
The MVD might determine some insurance requirements on a case-by-case basis, so it’s best to contact the MVD to confirm these amounts―or get news ones―before you purchase any coverage.
Make sure you shop around and talk with several providers before you purchase a commercial insurance policy. The goal is to choose a provider that offers the coverage you need at a price your budget needs. Some auto insurance providers do handle commercial coverage, but you might want to talk with providers who specialize in commercial insurance, too.
If you purchase commercial coverage from an insurance company, the company might provide the following as proofs of insurance:
- An insurance card or certificate of liability policy.
- A premium receipt.
- An insurance binder.
- The declarations page.
- A copy of the actual insurance policy.
If you file a liability or cash bond, you’ll need to show:
- A copy of your Motor Vehicle Liability Bond.
- A copy of your Certificate of Cash Bond.
In most cases, whenever you purchase your liability coverage or file a liability or cash bond, your insurance agent or MVD representative will make sure you understand what will and what won’t suffice as proof of coverage.
If you have no proof of insurance or fail to maintain financial responsibility for your commercial vehicle, the penalties might include a suspended tag registration and hefty reinstatement fees:
- First Offense: You’ll need to obtain and provide proof of liability commercial insurance and pay a reinstatement fee of $100.
- Second Offense: Your registration will stay suspended for four months, and you’ll need to obtain and provide proof of liability commercial insurance and pay a reinstatement fee of $200 before it’s reinstated.
There’s always a possibility the penalties could be much more severe depending on your employer, who’s responsible for making sure the vehicle is insured, and the number of vehicles that are uninsured.
For details specific to your commercial vehicle(s), please contact the MVD or call the Liability Insurance Department at (334) 242-3000.
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