Different types of vehicles are used for commercial purposes. The size and purpose of the vehicle help determine the premium amount.
Vehicle Insurance
Commercial vehicle insurance covers the losses and damages caused to someone else’s vehicle or property by your vehicle during an accident. It also covers you financially during unfortunate events like theft or loss of the insured vehicle. You can avail yourself of this safety shield for your commercial vehicle by paying an affordable monthly premium.
However, the premium amount may differ for all commercial vehicles. Several factors like the vehicle type, size, usage, purpose, etc., affect the premium amount.
Read on to learn more about it!
How Does the Type of Vehicle Influence the Premium of Commercial Vehicle Insurance?
Different types of vehicles are used for commercial purposes. The size and purpose of the vehicle help determine the premium amount. Here are the types of commercial vehicles and how they affect your insurance premium:
1. Goods Carrying Vehicles
Commercial vehicles are mostly used to transport goods from one place to another. These are heavy goods vehicles like trucks, lorries, tempos, etc., which are larger than passenger vehicles. Moreover, they carry heavy loads and run long distances.
Therefore, accidents caused by or involving these vehicles usually lead to severe damage, making them high-risk profile automobiles. As a result, the premiums for insurance policies for these vehicles are high.
2. Passenger Carrying Vehicles
Buses, autorickshaws, taxis, and other commercial vehicles are also utilised for passenger transportation. Though the risks involved in running these vehicles are less, they must be insured with the right commercial vehicle insurance. For instance, a three-wheeler or auto rickshaw insurance safeguards passenger vehicles with three wheels.
Due to their size, capacity, and area of operation, the premium for these vehicles is lower than that of heavy goods vehicles and other passenger vehicles like buses.
3. Other Vehicles
Some special vehicles, such as tractors, excavators, forklifts, etc., are used for special commercial purposes like agriculture, lifting goods, etc. The premium for these vehicles is usually less than that of heavy goods vehicles, as goods-carrying vehicles are prone to higher risks of accidents and damage.
What Other Factors Impact the Premium of Your Commercial Vehicle Insurance?
Apart from the type of vehicle, several other crucial aspects affect your commercial vehicle insurance premium. They are as follows:
1. Insured Declared Value (IDV)
The IDV represents your vehicle's present market value. A higher IDV means a higher premium, as the insurer’s potential liability increases.
2. Engine Capacity
Vehicles with larger engines are more expensive to insure due to their higher replacement and repair costs and increased accident risk.
3. Geographical Location
The area where the vehicle operates affects the premium. Vehicles registered or operating in accident-prone or high-theft regions face higher premiums.
4. Vehicle Usage
The nature of business use, such as long-haul transport versus local deliveries, also affects risk exposure and, consequently, the premium.
5. Driver’s Record
The driving history of those operating the vehicle is critical. Clean record drivers help lower premiums, while a history of accidents or violations increases costs.
6. Claims History
Businesses with a history of frequent or high-value claims are considered higher risk, leading to increased premiums.
7. Policy Deductible
Opting for a higher deductible reduces the premium but increases out-of-pocket expenses in the event of a claim.
8. Add-On Covers
Additional coverage options, such as zero depreciation, roadside assistance, or coverage for accessories, increase the premium but enhance protection.
What Add-ons Can You Purchase with a Comprehensive Commercial Insurance Policy?
Several valuable add-ons can enhance coverage and provide broader protection when insuring your commercial vehicle. Here are some of them:
Consumable Cover
It takes care of small but essential parts, like nuts, bolts, engine oil, and grease, that are often excluded from regular claims, ensuring you’re not left with unexpected expenses after an accident.
Zero Depreciation Cover
It is another helpful option, as it ensures you receive the full cost of replaced parts without any deduction for wear and tear, which is especially beneficial for newer vehicles or when replacing expensive components.
Roadside Assistance
If your vehicle breaks down on the road, breakdown assistance or roadside help is available around the clock. It offers support for issues such as flat tyres or battery failures, so you’re never stranded.
Loss of Revenue
Businesses that rely on their vehicles for income can opt for loss of revenue coverage, compensating for lost income while the vehicle is being repaired.
Additional Towing Expenses
Add-ons also cover the expenses of additional towing if your vehicle needs to be moved to a garage after an accident.
EMI Protection Cover
For vehicles purchased on loan, EMI protection ensures that your monthly payments remain covered even if the vehicle is out of service due to damage.
Return to Invoice
In case of total loss or theft, this add-on pays the difference between your insurance payout and the vehicle’s original invoice value. It helps you replace your vehicle without financial strain.
Key and Lock Replacement
It covers replacing your vehicle’s locks or keys if lost or damaged. Some insurers offer highly relevant add-ons such as engine protection and zero depreciation, particularly useful for commercial operators covering long distances or running older fleets.
Why is It Necessary to Insure Your Commercial Vehicle?
Insuring your commercial vehicle is legally required in many jurisdictions, including India. Here’s why commercial vehicle insurance is essential:
Legal Compliance
In India, the Motor Vehicles Act of 1988 mandates at least third-party liability insurance for all vehicles, including commercial ones. Operating without insurance can lead to penalties or vehicle seizure.
Financial Protection
Commercial vehicle insurance shields businesses from substantial financial losses arising from accidents, theft, natural disasters, or vandalism. It covers repair or replacement costs, medical expenses, and third-party liabilities.
Business Continuity
An uninsured loss can disrupt services and revenue for businesses that depend on vehicles for daily operations. Insurance ensures quick recovery and minimal downtime.
Third-Party Liability Coverage
Accidents involving commercial vehicles can result in significant third-party damages or injuries. Insurance covers these liabilities, protecting the business from potentially crippling legal and financial consequences.
Comprehensive Coverage
Beyond mandatory third-party coverage, comprehensive policies protect against a wide range of risks, including vehicle damage, personal accident cover for drivers, and protection against natural or man-made disasters.
Reputation and Customer Assurance
Insured commercial vehicles, such as auto rickshaws, signal responsibility and reliability to customers and clients, enhancing business reputation.
The type of vehicle you operate, be it a three-wheeler auto rickshaw, truck, or delivery van, significantly influences your commercial vehicle insurance premium. This occurs due to differences in risk, usage, and coverage needs. However, other factors such as vehicle value, engine size, location, driver history, and policy features also play crucial roles in determining the final premium.
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