Commercial Auto Insurance Coverage Requirements in Texas

Texas · Commercial Auto · Liability & Requirements

Commercial auto insurance coverage requirements in Texas come from three different places at once, and that is why so many business owners find them confusing. The first is the set of state rules that say every vehicle on a Texas road must be backed by a minimum amount of liability insurance (the state calls this “financial responsibility”). The second is the set of insurance requirements written into your contracts by customers, landlords and general contractors who hire you. The third, which applies only when your business hauls goods or passengers in a way that federal law regulates (for example, as a trucking company that hauls freight for others across state lines), is the set of federal rules enforced by FMCSA, which can require proof of insurance on file and a special federal endorsement on your policy. This guide walks through each of those three sources in plain language. It explains how a small service fleet of pickups and vans is different from a trucking operation, explains what hired and non-owned auto coverage is and why it matters, and stays careful with numbers: we use the well-known Texas personal auto minimums only as a reference point for the legal floor, and we describe federal trucking limits as depending on the type of operation, without making up registration numbers or pretending that every work van needs the same federal filing as a tractor-trailer that crosses state lines. If you want to go straight to our coverage pages, see Texas commercial auto insurance · Texas commercial truck insurance.

Honest limits note: ” The minimum coverage amounts and required filings for any business change based on how heavy the vehicle is, what it carries, whether it crosses state lines or stays inside Texas, and how many passengers it is built to carry. Before you buy, confirm the current guidance from the Texas Department of Insurance, the Texas Department of Motor Vehicles and the Federal Motor Carrier Safety Administration for your own situation.

1. What Texas law requires compared with what businesses actually buy

Texas sets minimum amounts of liability insurance (the state’s “financial responsibility” requirement) that a vehicle must carry before it can legally be driven. The figure most people have heard of is the personal auto minimum, often written as 30/60/25. Written out, that means $30,000 of coverage for injuries to any one person, $60,000 of coverage for all injuries in a single accident, and $25,000 of coverage for damage to other people’s property. That figure is a useful reference point for what the law treats as the bare minimum, but it is a poor target for almost any business that uses vehicles to do its work. Businesses usually buy much more than that minimum for several reasons:

• Job contracts and the certificates of insurance your customers ask for very often require $500,000 or $1,000,000 of liability coverage written as a single combined limit (one amount that covers both injuries and property damage from the same accident), and some contracts require even more.
• One serious crash that involves several vehicles, or one claim in which a person is badly hurt, can quickly cost far more than the personal auto minimums, and anything above your limit can become a debt the business owes.
• Lenders who finance your vehicles, companies that lease you a fleet, and landlords or general contractors who ask to be named as additional insureds on your policy will often push your limits higher no matter what the state minimum says.

The best way to think about the 30/60/25 figure is as the starting point for a conversation about the legal floor for many personal passenger vehicles, not as a sign that a business vehicle is properly insured. The coverage summary page of your policy (the declarations page) and the certificates you hand to customers should reflect what the business actually owes under its contracts and the real risk it takes on every time its vehicles are on the road.

2. Federal trucking rules and the federal Motor Carrier Act endorsement (a careful, high-level overview)

If your business operates as a motor carrier in interstate commerce, meaning it moves goods or passengers across state lines either for paying customers or for its own business, and in some cases even when the trip stays inside Texas but still falls under federal rules, then the financial responsibility rules of the Federal Motor Carrier Safety Administration may apply to you. Those rules can also require the federal Motor Carrier Act endorsement (form MCS-90) to be attached to your liability policy. In plain language, here is what that means:

• Limits depend on the type of operation — The amount of liability coverage federal rules require changes with what you haul (for example, ordinary freight compared with certain hazardous materials) and with the type of vehicle and operation involved. There is not one single dollar figure that applies to every truck in Texas, no matter what an online article might suggest.
• Filings and forms — Motor carriers may need to keep proof of their insurance on file with the government. The federal Motor Carrier Act endorsement (form MCS-90) is a federal form that attaches to the liability policy of carriers who qualify, and it guarantees that the public can be paid for certain injuries and damage even in situations the policy might not otherwise cover. Your agent and your insurance company handle the paperwork for this endorsement.
• Federal registration numbers and operating authority — Whether you need a United States Department of Transportation number, or a separate motor carrier operating authority number to haul goods for hire, depends on the specific facts of your operation. We will not make up a registration number for you, and we will not tell you that every contractor’s pickup truck “needs a motor carrier number.” Confirm whether these registrations apply to your operation by using the official tools from the Federal Motor Carrier Safety Administration and the Texas Department of Motor Vehicles.

Service vans compared with trucking: A plumber’s pickup truck and a for-hire hotshot rig or tractor-trailer are treated very differently, both by the insurance companies that decide whether and how to cover them and by the government agencies that regulate them. When the conversation is being driven by how heavy the vehicle is, whether you haul goods for paying customers, whether drivers need a commercial driver’s license, or what kind of goods you carry, see the Texas commercial truck page.

3. Trucking operations compared with service and light commercial vehicles

4. Hired and non-owned auto coverage — the gap many Texas businesses miss

A general liability policy, which covers many of the everyday accidents a business can be blamed for, almost always excludes accidents involving vehicles. That means that if an employee picks up parts in their own car and causes a crash, or if you rent a cargo van for a one-week job and something goes wrong, your general liability policy will usually not help. Adding hired and non-owned auto coverage to a commercial auto policy, or to a package policy that allows it, is how many businesses close that gap. It is important to understand that hired and non-owned auto coverage does not replace insurance on the vehicles your business owns and lists on its policy. Instead, it adds to that coverage by protecting the business when it uses vehicles it rents or borrows and when employees use their own vehicles for work.

5. Shopping checklist for Texas commercial auto requirements

1. Make a list of every vehicle the business uses, including its vehicle identification number, its weight class (based on the manufacturer’s gross vehicle weight rating), the postal code where it is parked overnight, how far from home it usually travels, and what it is used for (service calls, deliveries, or hauling for paying customers).
2. Make a list of every person who will drive for the business, get a recent copy of each driver’s motor vehicle record (their official driving history), and be honest about any past accidents or insurance claims.
3. Gather the insurance sections of your contracts and note exactly what they require, such as the single combined liability limit, whether the customer must be named as an additional insured, and whether you must give up your insurance company’s right to recover claim costs from the customer (called a waiver of subrogation).
4. Decide whether you need hired and non-owned auto coverage because employees drive their own vehicles for work or because the business sometimes rents vehicles for short periods.
5. If your business hauls goods for others, crosses state lines, or carries hazardous materials, confirm with your agent which federal financial responsibility category applies before you buy the policy, rather than guessing at what federal registration you need.
6. Compare policies based on how they define which vehicles are covered (for example, “any auto” compared with only the vehicles listed on the policy), whether they include hired and non-owned auto coverage, and what deductibles apply to physical damage, rather than comparing on price alone.

Frequently asked questions