If you drive a vehicle for your business in Tennessee, you generally need a commercial auto insurance policy, not a personal one. Commercial auto insurance is coverage for vehicles used for business tasks. Tennessee sets a minimum liability limit of 25/50/25 for vehicles on public roads (Tenn. Code Ann. Sec. 55-12-102): $25,000 for injury to one person, $50,000 for injury per accident, and $25,000 for property damage. A personal auto policy generally excludes regular business use, so a car, van, or truck driven for work usually has no coverage under a personal policy when a claim involves that business use.
Who needs commercial auto insurance in Tennessee?
Commercial auto insurance is for a business that owns, rents, or uses vehicles to do its work. "Business use" means driving for work tasks: making deliveries, hauling tools or materials, visiting job sites, or carrying goods or people for the business. If a vehicle earns its keep for the business, it usually falls outside what a personal auto policy will pay on.
Take a Chattanooga bakery that runs a delivery van to drop off wedding cakes across town. That van is a business-use vehicle. Because the bakery relies on it for work, a personal auto policy is not built to cover it, and a commercial auto policy is the coverage designed for the job.
The businesses that commonly carry commercial auto in Tennessee include:
- Contractors and trades that drive trucks to job sites.
- Retailers, bakeries, and restaurants that deliver.
- Landscapers, cleaners, and mobile services.
- Companies with a fleet, or even a single work van.
- Businesses whose employees drive for work, even in their own cars.
For a broader look at how this coverage works outside any one state, see the general commercial auto insurance page and the full insurance coverage hub.
Why will a personal auto policy not cover business use?
A personal auto policy is written and priced for personal driving: commuting, errands, family trips. Most personal policies contain an exclusion that removes coverage when the vehicle is used regularly for business. When a claim traces back to that business use, the insurer can deny it.
Picture a courier in Nashville who uses a personal sedan to run packages all day and buys only a personal auto policy. One afternoon the courier rear-ends another car mid-route. Because the sedan was being used for regular business delivery, the personal insurer denies the claim under its business-use exclusion, and the courier is left paying for the other driver's damage and injuries out of pocket. A commercial auto policy is the coverage type built to respond to that loss.
The gap is not about the size of the vehicle or the business. It is about how the vehicle is used. A single owner with one van faces the same exclusion as a company with twenty trucks.
Personal auto vs. commercial auto: business use
| Situation | Personal auto policy | Commercial auto policy |
|---|---|---|
| Commuting to a fixed workplace | Usually covered | Not the intended use |
| Occasional, incidental work errand | Sometimes covered (varies by policy) | Covered |
| Regular deliveries or hauling for the business | Commonly excluded | Covered (owned vehicles) |
| Employees driving their own cars for work | Not covered for the business | Covered via hired and non-owned auto |
| Vehicle titled to the business | No coverage | Covered |
Whether an occasional errand is covered depends on the exact policy language, which is why a licensed advisor reviews the specific policy rather than the general rule.
What does commercial auto insurance cover?
A commercial auto policy usually bundles a few coverages. The ones that carry the most weight are liability and physical damage, with hired and non-owned auto filling a common gap.
Liability coverage pays for the injuries and property damage the business's driver causes to other people. It splits into bodily injury liability (other people's medical costs and related losses) and property damage liability (repairs to what the driver hits, such as another car or a storefront). This is the coverage Tennessee requires at a minimum.
Physical damage coverage pays to repair or replace the business's own vehicle. It includes comprehensive coverage, which covers damage that does not come from a collision, such as theft, fire, hail, or vandalism, and collision coverage, which covers damage from hitting another vehicle or an object. Physical damage coverage is usually paid subject to a deductible, the amount the business pays before coverage kicks in. For example, if a work truck is stolen from a Knoxville lot and the policy carries a $1,000 deductible, the business pays the first $1,000 and comprehensive coverage handles the rest of the covered loss.
Hired and non-owned auto coverage covers vehicles the business uses but does not own. A "hired auto" is a vehicle the business rents, leases, or borrows. A "non-owned auto" is a vehicle the business does not own but uses for work, most often an employee's personal car driven on a work task.
That last piece catches a gap many owners miss. Say a Memphis marketing firm sends an employee to pick up event supplies in the employee's own car, and the employee causes an accident on the way. The employee's personal auto policy may deny the claim because the trip was for business, and the firm can be pulled into the claim as the employer. Non-owned auto coverage is the part of a commercial policy that responds when a business is exposed through a car it does not own.
- no glossary page exists yet for the term "commercial auto"; defined inline above.
What is the 25/50/25 floor, and when do higher or federal limits apply?
Tennessee's minimum liability limit for vehicles on public roads is 25/50/25 under Tenn. Code Ann. Sec. 55-12-102: $25,000 for bodily injury to one person, $50,000 for total bodily injury per accident, and $25,000 for property damage. That floor applies to business-use vehicles the same way it applies to personal ones. It is a legal minimum, not a measure of what a given accident actually costs, since a single serious injury claim can run well past $25,000.
Some businesses face higher federal limits on top of the state floor. Interstate motor carriers, meaning trucking operations that cross state lines for hire, fall under the Federal Motor Carrier Safety Administration (FMCSA). Under 49 CFR 387.9, a for-hire interstate carrier hauling nonhazardous property in a vehicle rated 10,001 pounds or more must carry at least $750,000 in public liability insurance, far above Tennessee's $25,000 property-damage figure. Carriers hauling hazardous materials face higher federal tiers still. These federal minimums are separate from, and stacked on top of, the state requirement.
For a business weighing where its number lands between the state floor and a federal minimum, the amount that fits a specific operation is a question for a licensed advisor who knows the vehicles, the routes, and the exposure. Published minimums set the floor; they do not set the right limit for one business.
Tennessee is also an at-fault state, which shapes how a liability claim resolves. It follows modified comparative negligence with a 49% bar (McIntyre v. Balentine, Tennessee Supreme Court, 1992): an injured party can recover only if they are found less than 50% at fault, and their recovery is reduced by their share of blame. For a business, that means how fault is assigned after a crash directly affects what its liability coverage has to pay.
What should a Tennessee business verify about its vehicles?
A few checks tell an owner whether the current setup matches how the vehicles are actually used:
- Who is titled on the vehicle. A vehicle titled to the business generally needs a commercial policy.
- How each vehicle is used. Regular deliveries, hauling, or job-site driving points toward commercial auto, not personal.
- Whether employees drive their own cars for work. If they do, hired and non-owned auto coverage is the piece that addresses it.
- Whether any driving crosses state lines for hire. Interstate for-hire operations may trigger FMCSA minimums.
- What the physical damage deductibles are. The deductible is what the business pays out of pocket on a covered vehicle loss.
These are facts to confirm, not a coverage recommendation. What limits and coverages fit a particular Tennessee business is a decision for a licensed advisor working from that business's specifics. You can read about who stands behind Olive Cover on the about page and how independent agencies work with multiple carriers on the carriers page.
Next step
This page is general education, not advice about any one business. When you are ready to look at your own vehicles and exposure, a licensed insurance advisor can walk through what applies to your situation. Tennessee-specific figures like the 25/50/25 minimum are tracked on the Tennessee insurance facts page.