Commercial Auto Insurance explained

A person in a high-visibility safety vest exiting a van

In Canada, Commercial Auto Insurance is required for all automobiles used for commercial purposes. It provides coverage for vehicles, trailers, and even recreational vehicles registered under a business in the event of damages caused by accidents or other incidents.

Even if the business owner or operator has a Personal Auto Insurance policy, they must have a separate Commercial Auto Insurance plan for work vehicles as the former doesn’t usually cover vehicles used for these purposes. In this article, we’ll cover Commercial Auto Insurance basics so you’re well-informed even before you see your first Commercial Auto Insurance quote.

What is Commercial Auto Insurance?

Commercial Auto Insurance, also known as Commercial Vehicle Insurance, is a type of insurance policy that covers vehicles that are used for business purposes.

To determine if you need Commercial Auto Insurance, you must consider three factors: the type of vehicle, the use of the vehicle, and the owner of the vehicle. Commercial vehicles are usually trucks (light or heavy), tool vehicles, delivery vans, etc. They generally serve specific business-related purposes, such as delivery or transport, and are registered under a company.

The following services generally need a Commercial Auto Insurance policy:

  • Contractors and construction
  • Maintenance services
  • Personal emergency equipment (such as tow trucks)
  • Delivery services
  • Taxi services (including ride-sharing services like Lyft or Uber)
  • Company cars

It’s also important to know the difference between Commercial Auto and Business Auto Insurance. The former typically covers vehicles used for specific jobs (like an eighteen-wheeler that does city to city deliveries), while the latter covers cars used by businesses in regular traffic (like company vehicles used for sales visits).

Why do I need Commercial Auto Insurance?

Commercial Auto Insurance is an essential protection for any business that uses vehicles in their day-to-day operations. Here are some reasons why you should have Commercial Auto Insurance:

It’s mandatory in Canada

Auto Insurance is mandatory in Canada, and this rule extends to commercial use vehicles. Any automobile registered under a company and used for work must be covered under a Commercial Auto Insurance policy.

Personal Auto Insurance isn’t enough

Many people assume that their Personal Auto Insurance also covers vehicles they own under their business, but this isn’t the case. Not only does Personal Auto Insurance not cover commercial automobiles, but it also doesn’t have enough protections for these types of vehicles.

It protects your business, people, and vehicles

Commercial Auto Insurance is designed to protect not just your business, but all the resources you’ve invested into it. For example, it doesn’t just cover your drivers and your fleet of vehicles; it also safeguards people who may be affected by the use of your work cars, whether they’re part of your company or not.

What is covered by Commercial Auto Insurance?

Commercial Auto Insurance includes two mandatory coverages: Third-Party Liability and Accident Benefits*. You can also add more coverages for extra protection based on your business needs. Let’s break down each of these:

Third-Party Liability

Third-Party Liability coverage protects your business if it’s at fault for an accident, for example, if your employed driver causes an incident on the road that damages another vehicle or injures a person.

Accident Benefits*

Accident Benefits cover medical and rehabilitation bills of those injured during an incident involving one of your vehicles, whether your company is at fault or not.

Other coverages

Additional coverages that you can add to your Commercial Auto Insurance policy include increased Third-Party Liability, Collision or Upset coverage, Comprehensive coverages, Direct Compensation-Property Damage, and all or Specified Perils coverage.

What Commercial Auto Insurance should I choose?

There are generally three types of Commercial Auto Insurance to choose from: Individually Rated Commercial Auto (IRCA) Insurance, Fleet Insurance, and Garage Insurance.

IRCA Insurance is for businesses with at least one commercial-rated vehicle. Policies can include personal use and recreation vehicles, with each one being rated individually.

Fleet Insurance is for businesses with five or more commercial or business rated power units with Liability coverage. This type of policy assesses the included automobiles as a whole, which results in more competitive pricing.

Garage Insurance covers vehicles that are in the care, custody, and control of the insured.

Getting the right Commercial Auto Insurance for your business

When you’re ready to explore your options for Commercial Auto Insurance, seek help from the pros. Talking to a broker who works with a reputable insurance provider is the best way to find the policy that’s best for your company.


*This section does not apply to Quebec residents. All Québec drivers are covered by Québec's public automobile insurance plan which includes no-fault coverage for bodily injury or death as a result of an accident and is administered by the Société de l'assurance automobile du Québec (SAAQ). The premium for bodily injury coverage is included in the cost of the Quebec driver's licence.

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