Determine Whether You Need Commercial Insurance

The kinds of factors that will help you determine whether you need commercial insurance include:

• 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)

Of course, sometimes drawing the line between the need for a commercial policy and a private one can get tricky.

For example, if your business owns even just one vehicle that’s dedicated solely to helping your business provide goods or services, then you probably need commercial coverage. On the other hand, if you’re self-employed and have a vehicle you use just for business-related traveling, it’s likely you only need a private policy.

Consider the following situations. If any of them apply to you, it’s possible you need to purchase 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.

For further assistance determining whether you need a commercial policy or a private one, contact the Division of Motor Vehicles (DMV).

Determine the Required Amount of Coverage

As you begin looking for commercial insurance, potential 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

In some cases, you might only need to purchase the same amounts of liability coverage as you would purchase if you were covering a regular passenger vehicle:

• $30,000 of coverage for injuries or death involving one person in a single accident.

• $60,000 of coverage for injuries or deaths involving two or more people in a single accident.

• $25,000 of property damage coverage.

However, if your vehicle is part of the International Registration Plan (IRP)―regardless of it’s Fleet Type―you must have at least $750,000 of coverage. Please note that the state thoroughly outlines additional requirements each Fleet Type with the IRP must meet.

Before you purchase insurance for your commercial vehicle, it’s best to contact the DMV to make sure you understand the requirements you must meet. If your vehicle is part of the IRP, contact your local IRP office.

Purchase a Commercial Policy

Shopping around for commercial insurance is similar to shopping around for private insurance. Look for companies that offer or even specialize in commercial coverage, then compare the services and premiums against your needs and budget.

Proof of Insurance and Financial Responsibility

You can prove to the DMV you’ve met the financial responsibility requirements when you show:

• The Certificate of Insurance (FS-1) your carrier issues you.

• The policy number and name of insurance company.

Penalties for Failure to Maintain Financial Responsibility

If your coverage becomes canceled or you have no proof of insurance, you face an assortment of penalties and fees.

Your insurance carrier will notify the DMV when your coverage stops. The state will send you a Form FS 5-7, to which you must respond within 10 days. Responding generally means you’ll need to pay the fee listed on the form (if there was a gap in your coverage) and supplying your current insurance information.

If you can’t show proof of insurance―or you don’t respond to the notice at all―you face licenses suspension and fees that could total more than $200. Once you pay those fees and complete a Form FS-1, the DMV will reinstate your license.