When customers come in to review their commercial policies, business auto is often the coverage that gets the least attention. It’s simple in concept – a policy covering the vehicles your business owns and operates – and that simplicity sometimes leads owners, and frankly some agents, to treat the limits as a number to fill in rather than a number to think about. The result is that I regularly see businesses driving around with auto liability limits that haven’t been adjusted in five or ten years, even though the world around them has changed considerably.
The challenge is that auto liability claims have become significantly more expensive over the last decade, and the gap between an old comfortable limit and what an actual serious claim now costs has widened. Without consciously revisiting limits at each renewal, many businesses end up more exposed than they realize.
Business Auto Exposure is Different
Personal auto and business auto policies can look similar on paper, but the underlying exposure is meaningfully different.
When an employee is driving a company vehicle, that driver isn’t just behind the wheel as an individual – they are functioning as an extension of the business. The legal concept of vicarious liability attaches the employee’s actions back to the employer, which is why even a routine accident in a company truck can end up in a very different posture than the same accident in a personal vehicle. Plaintiffs’ attorneys are well aware of this. They know there are business assets, payroll, equipment, and often an umbrella or excess policy behind the driver, and they pursue accordingly.
Layer in the broader claims trends – rising medical costs, aggressive plaintiffs’ bars, and what the industry calls “social inflation,” where jury awards continue to climb – and verdicts that would have been considered large a decade ago are now routine. A serious-injury claim that would have settled at $250,000 a number of years back can easily exceed $500,000 today, and large-dollar verdicts are no longer rare events.
Reading the Limits on Your Own Policy
The first place to look is the declarations page. A commercial auto policy will display either a Combined Single Limit (CSL) or split limits, often something like 100/300/100 or 250/500/100. The CSL is one consolidated number for bodily injury and property damage; split limits separate bodily injury per person, bodily injury per accident, and property damage per accident.
Many small and mid-sized businesses are still carrying $300,000 or $500,000 CSL because that’s what was put in place when the policy was first written, and it has simply renewed at that level year after year. There is rarely a deliberate decision behind it.
Two questions are worth asking:
- If one of your drivers caused a serious accident tomorrow, would the current limits be enough to defend the business and pay damages without exposing your other assets?
- When was the last time these limits were actively revisited – not just renewed?
If the first answer is uncertain and the second is “I’m not sure,” that’s a good time to have the conversation.
The Premium Math is Often Surprising
The most common pushback I hear is that increasing limits is going to “cost a fortune.” In practice, the premium difference between the old standard limits and meaningfully higher limits is rarely as dramatic as owners assume.
The reason has to do with how auto premiums are built. The bulk of an auto premium pays for the first dollars of coverage, because that is where the high volume of small and moderate claims actually occurs – fender-benders, glass claims, minor injuries. Increasing the upper limits doesn’t add a proportional cost because the carrier is only being asked to take on the comparatively rare catastrophic exposure.
In many cases, moving from a lower limit to a more appropriate one adds a modest amount per vehicle annually. That number is worth weighing against the magnitude of what is being protected, which is essentially the entire business and, in many cases, the personal assets of the owner standing behind it.
Umbrella Coverage – the Companion Policy
The most cost-effective way to materially expand auto liability protection is typically a commercial umbrella policy. An umbrella sits over the primary auto, general liability, and (in most cases) employer’s liability coverages and provides an additional layer – commonly $1 million, $2 million, or more – for catastrophic claims that exceed the underlying limits.
A few points about umbrellas that often get missed:
The underlying limits matter. An umbrella requires the primary policies it sits over to carry certain minimum limits. If the underlying auto limit is too low, the umbrella may not attach correctly, which can leave a gap between where the auto stops responding and where the umbrella begins.
Coverage isn’t always identical across umbrellas. Some umbrella policies are true “follow-form” over the underlying coverages and pick up the same coverages and exclusions; others have their own set of exclusions and conditions. This matters when reviewing whether a particular exposure is actually being carried up into the umbrella layer.
Higher limits are more accessible than owners assume. For most small and mid-sized businesses, securing a $1 million umbrella is straightforward. Going to $2 million, $5 million, or beyond is also realistic, and the incremental cost typically drops as you climb the tower.
What “Right” Limits Actually Look Like
There isn’t a single correct number. Appropriate auto liability limits depend on several factors:
- The number of vehicles and drivers your operation puts on the road
- What those drivers are doing – local delivery, long-haul, hauling equipment, transporting passengers, or simply traveling between job sites
- The territory and traffic environment in which they operate
- The overall asset base of the business and the personal assets of the owners standing behind it
- Any contractual requirements imposed by customers, lenders, landlords, or municipalities
A two-vehicle service operation is in a very different posture than a contractor running a fleet of trucks across the region every day. The limits should reflect that reality, not simply default to whatever was put in place years ago.
A Worthwhile Annual Conversation
Business auto is one of those coverages that benefits from an actual review at each renewal—not because it changes dramatically year to year, but because the legal and economic environment around it does. Each renewal is an opportunity to ask whether the limits in place still fit the business, the drivers, and the realistic exposure.
If your current broker isn’t walking you through your auto liability limits, your underlying exposures, and the role an umbrella plays in the overall structure, that’s a conversation worth having. We work through this with our clients regularly at Mt. Franklin Insurance and are happy to provide a second set of eyes on whatever you currently have in place.
