Commercial Auto Insurance Terms & Definitions to Know
There are over seven million small businesses in the U.S., ranging from construction firms to grocery stores and home-based businesses, notes the Insurance Information Institute (III). Many of these businesses and their owners couldn't function without the peace of mind that comes with a commercial auto insurance policy.
But if you're one of these business owners or managers, you probably don't have time to learn auto insurance lingo. You've got more important things on your mind, like scheduling your employees, taking care of payroll, and keeping your customers happy! That's why Direct Auto & Life Insurance is here to help. From words like "temporary substitute auto" to "permissive use" and "Fire & Theft CAC," follow along as we break down commercial auto insurance terminology with easy to understand definitions and examples.(And then get back to your awesome customers in no time!)
When you're getting a quote for commercial auto insurance…
These are terms you may encounter when you're getting a quote for commercial auto insurance, whether you're getting a price over the phone or at one of our many stores.
Underwriting: The process by which the commercial auto insurance company determines whether it will approve your application for insurance. During the underwriting process, an underwriter looks at the risks associated with insuring your business's vehicles. The underwriting process may also help determine your premium amount.
Named Insured: The name of the business or person who owns the insurance policy.
Permissive User: Anyone who is driving a covered auto and has been given your permission to do so. If a permissive user is involved in an auto accident while driving, your insurance may provide the same coverage as if you were behind the wheel, but the level of coverage will depend on your state.
Fleet: Fleet vehicles are rated differently than non-fleet vehicles. This definition may vary depending on your state and insurance company, but in general, you may be considered to have a "fleet" if you have at least three passenger type vehicles. Some companies require you to have at least five vehicles, and others, only two. Delivery services, construction companies, and taxi services are a few examples of industries that may contain a fleet of vehicles.
Policy Term: The length of time your policy is active. With Direct Auto, commercial policy terms are available for 6 and 12 months.
Combined Single Limits (CSLs): Unlike most personal car insurance policies that have individual limits for bodily injury and property damage liability, a commercial policy will generally have a combined single limit. The result is higher limits for both bodily injury and property damage coverages. The most common commercial auto CSLs for small businesses, according to the III, are $500,000 and $1,000,000.
Fire and Theft CAC: The "CAC" part of this type of coverage stands for, "combined additional coverages." Fire and theft CAC applies to physical damage or loss that occurs as a result of events like fire, lightning, explosion, theft, hail, earthquakes, floods, vandalism, collision with an animal, or damage that occurs while being transported by a third party.
Garaging Location: The place where the insured vehicle is primarily parked when you're not using it. This is typically your business address, but not always. For instance, you may park your flower delivery vans in a gated parking lot a few blocks away from your the shop where you do business.
Gross Vehicle Weight (GVW): Some states have specific insurance requirements for business vehicles of a certain weight and type, which is why your insurance agent may ask you for the gross weight of your business vehicles. The GVW is the total weight capacity of a fully loaded vehicle. The easiest way to find it is in the manufacturer's general info for the vehicle. Or, you can calculate it by adding the weight of the vehicle to the max weight of a load that could be carried by the vehicle.
Temporary Substitute Auto: A temporary substitute auto is any auto used by the insured or an employee, with the permission of the owner, as a substitute for an insured auto that is unavailable for normal use because of servicing, repairs, or loss.
Once you've been approved for a commercial auto policy…
You received your quote, discussed your coverages and limits with your agent, and you're ready for your policy! These are terms you may come across when reading through your commercial policy documents, chatting with your agent, or scanning email communications from your insurance company, that may seem foreign or need some explanation.
Declarations Page: This page is also sometimes called an auto insurance coverage summary. It is provided by your commercial auto insurance company and covers important information about your unique policy, including the types of coverage you've elected, the limit and cost for each coverage, your vehicles' information, and coverage related to specific vehicles on the policy. Endorsement: An endorsement is a policy change. It is an amendment or rider to a policy that adjusts the coverage or otherwise changes the general contract terms. For instance, let's say you decided to add Medical Payments coverage to your commercial policy after it was already bound. You would call or visit your insurance agent to request this change and they would make an endorsement to your policy.
Cancellation Request: The insured has the right to request cancellation of the commercial auto policy he owns. Typical reasons for requesting cancellation of a commercial auto policy are: if the listed vehicles are destroyed, their titles have been transferred, or the insured has purchased another policy for all of the listed vehicles. Cancellation requests are usually required to be made in writing and include the policy number and insured's signature. After the initial underwriting period, an insurance company typically can only cancel a commercial auto policy for specific reasons described in state statutes.
Buying Commercial Auto Insurance
When you choose Direct Auto & Life, you don't have to be an insurance expert to understand what you're paying for. Our friendly agents are standing by to walk you through every step of the quoting and purchasing process. Give us a call at 1-877-GO-DIRECT (1-877-463-4732) or visit your neighborhood Direct Auto & Life location for a commercial auto insurance quote today!
Learn More About Commercial Auto Insurance
*Commercial auto insurance produced by Right Choice Insurance Agency, Inc. and Direct General Insurance Agency, Inc. d/b/a Direct Auto & Life Insurance as agents for other commercial underwriters. Not available in all stores. Pay plans, discounts and coverages subject to terms and conditions.