As with private cars, commercial vehicle insurance is a must; there’s no better whatsoever. You see, motor vehicle insurance —whether it's for your personal car you use for daily commuting or your delivery van that supports your business operations—is a must, at least for third-party liability. CTPL, along with optional coverage plans, offers financial protection and peace of mind.
Also Read: Why every truck business needs Comprehensive Truck Insurance in the Philippines
When it comes to commercial vehicle insurance, the right coverage is essential, as it protects you from potential losses from accidents, natural disasters, theft, etc. However, whether you operate a delivery van, truck, taxi, or bus, one common concern for every commercial vehicle owner is insurance costs.
Did you know that commercial vehicle insurance costs vary significantly? This happens because of the different factors that come into play when an insurer determines the premium rate.
In this article, we’ll be breaking down major factors that influence commercial vehicle insurance premiums. Make sure you give it a thorough read, as this knowledge will help you get the best possible coverage at an affordable price.
So, without any delay, let’s begin …
Commercial vehicles insurance & premiums: Why is there a variation
It is pretty basic: insurance providers calculate premiums based on risk assessment; i.e., the higher the perceived risk, the higher the cost. The provider calculates the client's likelihood of filing a claim based on the type of vehicle, usage, location, and the number of authorised drivers.
Only by understanding these criteria can vehicle owners make informed decisions and better manage risk.
Photo from FreepikFactors influencing the premium
Let us now check out several factors that influence insurance cost for commercial vehicles -
Factor 1: Vehicle type & usage
Did you know that insurance companies distinguish commercial vehicles by their usage—goods transportation, passenger movement, or specialised service? For example, a van used for occasional business trips is less prone to accidents than a delivery truck that operates daily in heavy traffic. Further, vehicles carrying passengers, like taxis, have greater liability—passenger, driver, and third-party.
Apart from usage, different types of commercial vehicles—basic, light, medium, and heavy —also affect premium pricing. For example, a light commercial vehicle, such as a delivery bike or van, costs less to insure than a heavy-duty truck that often carries goods and is on the road for long periods.
Factor 2: Driver’s history & profile
Driver’s age and experience play a significant role in determining insurance costs. For instance, while a well-trained, experienced driver with a clean record is not seen as a threat by the insurance company, this results in lower premiums. On the contrary, a young driver with limited experience is statistically more likely to be involved in accidents and pays a higher premium.
Moving on to the driver’s history of violations and accidents. As expected, drivers with several violations on their record are put under the radar and are perceived as a risk by the provider. Similarly, fewer or no past claims can reduce the premium at renewal.
Factor 3: Vehicle’s age and value
As discussed above, newer vehicles are more expensive to repair or replace, which generally results in a higher premium. However, as a vehicle’s age increases, depreciation reduces its fair market value and insurance costs.
Furthermore, the vehicle’s brand, model, and make influence the insurance cost. For example, high-end brands and imported units with costly parts and special repair requirements are charged a high premium for obvious reasons.
Factor 4: Coverage and add-ons
Compulsory Third Party Liability (CTPL) insurance is legally required, and its coverage is limited to injury or death to a third party. Comes with the highly recommended comprehensive insurance that covers damage to your car, passengers, and the driver. As for cost, naturally, a comprehensive plan is more expensive than CTPL, but you get broader protection.
As for add-ons, they upgrade your coverage plan with their customised protection. Some popular ones include Acts of Nature coverage, Personal Accident protection, and Roadside Assistance. Given their dedicated protection, they surely add to the premium.
Factor 5: Location & operation area
Insurance providers also assess the risk for a particular unit based on its operational region. For example, if a commercial vehicle operates in areas with high traffic, such as Metro Manila, the premium would be higher than in a quieter provincial region due to greater exposure to accident risk.
Furthermore, regions with high theft rates, traffic density, and poor road conditions force the provider to adjust the premium accordingly.
Also Read: Does commercial vehicle insurance cover cargo loss or theft?
Other factors influencing the premium rate
No Claim Bonus: Policyholders with a good claim record who renew their policy with the same provider become eligible for No Claim Bonus, which reduces the premium substantially.
Vehicle maintenance: A well-maintained vehicle with documented service records is considered low-risk, enabling policyholders to negotiate a better deal.
Image from FreepikImportance of investing in the right insurance plan
Long-term financial & legal protection: With the right insurance plan, you shield your business against financial and legal risks that could arise after an accident or collision.
Smooth business operations: By taking on all your financial liabilities, the right plan will allow you to continue your daily operations.
Peace of mind: Knowing your vehicle, goods, and drivers are protected at all times allows you to focus on growth.
Tips to reduce your commercial vehicle premium
Here are some innovative and practical tips to get affordable coverage -
- Opt for higher deductibles to lower your premium
- Compare quotes from multiple insurers
- Train your driver in defensive driving
- Install your units with safety and anti-theft devices
Bottom line
As a business owner, you must make smart insurance decisions for your fleet, and therefore, it is essential to understand the factors that affect commercial vehicle insurance premiums. Via this information, you’ll be able to make informed, cost-effective decisions that will not only ensure compliance with the law but also protect your investment.
Remember, to ensure smooth business operations, regardless of the road you travel, it is essential to balance affordability with optimal protection. For this to happen, make sure to follow safe & defensive driving practices, choose the right coverage, and compare policies before finalising the deal.
Also Read: Top 7 risks covered by truck and commercial vehicle insurance
FAQs
Q1. What is commercial vehicle insurance? Is it mandatory?
Ans. It is a contract between the provider and the commercial vehicle owner, under which the latter pays the former for coverage protecting the vehicle, the driver, and third parties. As required by law, all commercial vehicles must have CTPL (Compulsory Third Party Liability) insurance that covers third-party bodily injury or death.
Q2. Is it possible to reduce the premium without compromising on the coverage?
Ans. Yes, you can minimise the premium by maintaining a clean driving record, bundling the policies, and installing safety devices in the vehicle.
Q3. Do all commercial vehicles get charged the same premium?
Ans. No, the premiums vary depending on the commercial vehicle type, usage, and value.
Q4. Do locations affect commercial vehicle insurance cost?
Ans. Yes. Commercial vehicles operating in high-traffic, accident-prone areas face higher insurance costs.
Q5. Does having multiple drivers affect insurance cost?
Ans. Yes, insurance providers consider each driver’s driving experience and record.
Q6. What are some common add-ons for commercial vehicles?
Ans. Some common add-ons recommended for commercial vehicles include - Acts of Nature, Personal Accident, and Roadside Assistance.
Q7. What is the average premium for a delivery van?
Ans. Rates may vary depending on the coverage and insurer.
Q8. Does a vehicle's age impact insurance cost?
Ans. Yes, new vehicles usually have a high IDV (Insured Declared Value) and are therefore costly to insure.
Q9. Is personal insurance different from commercial insurance?
Ans. Yes, while personal insurance covers private vehicles only, commercial insurance covers cars used for business purposes.
Q10. Can I pay the monthly premium?
Ans. Some insurance providers offer flexible payment options—monthly, quarterly, and annually.
Q11. Who regulates commercial vehicle insurance in the Philippines?
Ans. The Insurance Commission oversees and enforces insurance law in the country. It also resolves grievances in the event of a dispute between the insured and the insurer.
Q12. What documents are required for commercial vehicle insurance renewal?
Ans. Usually, the following documents are needed: the commercial vehicle’s OR/CR, driver’s license, a duly accomplished claim form, and the previous insurance policy.
Q13. Can I transfer my commercial vehicle insurance to a new owner?
Ans. Usually, the new owner needs to get a new policy.
Q14. How to verify the legitimacy of an insurance provider?
Ans. You can verify a provider’s legitimacy by checking if the provider is listed on the Insurance Commission’s website.
Q15. Why should I compare commercial insurance providers before locking in a policy?
Ans. Each provider uses a different rating system, so comparing plans ensures you get the best protection at the best cost.
Also Read: Truck/Commercial Vehicle Insurance 101: What Filipino business owners need to know
