Editor's Note: This is the second article in a three-part series about commercial auto insurance. To read the previous article, click here. To read the next article in the series, click here.

As a business owner you're likely used to taking some risks, but taking risks with the insurance that covers your business vehicles is never a good idea.

Last month, we learned about the first step in buying the right insurance policy for your business: deciding what company to buy from, and how.

This month, we will decode the second step in the process-how to determine what coverages are right for you and your business.  This decision, when made correctly with the proper guidance, can mean real savings in time and money for business owners who depend on these vehicles to keep business moving forward.

Tractor-trailer and dump truck drivers may require higher liability limits because of state or federal regulations. Tractor-trailers may require cargo coverage.   Plumbers, electricians, HVAC technicians or roofers, however, likely drive light trucks that may be okay with lower liability limits depending on assets of the business and requirements of who they are contracting with.

Before going into specifics, though, let's start with the basics that all business owners-no matter what industry-should be aware of and familiar with before purchasing an insurance policy.

Here's what you need to know:

Coverages vary by state-a standard commercial auto policy generally includes those that provide coverage for injury or damage that you cause to someone else (referred to as bodily injury and property damage liability (BI/PD)), your injuries, injuries and damages caused by uninsured or underinsured drivers and damage to or theft of your vehicle(s).

Coverage for BI/PD

  • Generally covers legal liability, up to the limit of liability selected, for an accident in which there is damage or injury to someone else.
  • Generally pays for the cost to replace or repair damaged property, the medical bills and wage loss incurred by an injured person, and other damages you are legally obligated to pay as a result of an accident. If your insurance carrier covers an accident for which you are sued, they should also pay for a lawyer to defend you.
  • Does not cover your injuries, if you are the driver of your vehicle, or damage to your vehicle.
  • Subject to a "limit of liability" that you select. 100/300/50 means your carrier will pay $100,000 for bodily injury per person involved in a claim, $300,000 for bodily injury per accident and $50,000 for property damage.
  • You may instead choose "combined single limits," (CSL). If you choose CSL of $300,000, that is the maximum amount your insurance carrier will pay for the total of all BI/PD resulting from one accident.
  • Gravel pits, municipalities and other entities may require you to carry $1 million limits. Make sure of the requirement so you can purchase the right insurance.

Coverage for Your Injuries

  • Coverage varies by state. Medical payments cover the cost of reasonable and necessary medical care provided to you as the result of a motor vehicle accident and applies no matter who is at fault.
  • You will be asked to select a limit amount which represents the maximum amount your insurance carrier will pay per accident.
  • Personal Injury Protection (PIP), available in some states, generally covers medical bills and often covers wage loss and other costs. PIP coverage is subject to a limit often set by the state and applies no matter who is at fault.

Coverage for Injuries and Damages Caused by an Uninsured or Underinsured Driver

  • Uninsured Motorists Bodily Injury and Property Damage covers medical treatment and damage to your vehicle (and sometimes other property) caused by someone who doesn't have insurance.
  • Underinsured Motorist Bodily Injury generally provides protection when the other person has liability insurance, but not enough.

Coverage for Damage to or Theft of Your Vehicle(s)

  • Collision and comprehensive insurance cover the cost to repair or replace your vehicle if it is stolen or damaged in an accident, regardless of who is at fault.
  • Collision covers you if your vehicle collides with another vehicle or object other than an animal.
  • Comprehensive covers damage caused by an event other than a collision, such as fire, theft, vandalism and weather-related damage as well as crashes with animals.
  • Both coverages are subject to a deductible you choose-a higher deductible can mean a lower rate, but it's also the amount that you'll need to pay first in the event of a claim.

Now that we've got the basics down, as you build out your insurance plan, talk to your agent about the different customized options that may work for you.

Inquire about newer products that your carrier is introducing to ensure all your needs are being met. No matter what business you're in or what kind of truck you drive, your commercial auto insurance carrier should be your business partner, and the coverages they offer should help make your life easier-because you've got enough to worry about.

Construction Business Owner, June 2008