Do any of the following situations apply to your business?
- Private passenger vehicles (sedans, SUVs, vans) are owned or leased by the business and used for both business and personal use.
- Salespersons use their own vehicles to visit clients.
- Administrative staff uses their own vehicles to run office errands.
- Employees use their own vehicles to deliver goods, provide services, travel to remote work locations, or visit clients.
- Employees rent private passenger vehicles while on business travel.
For businesses that operate their own vehicles such as freight trucks or delivery vans, insuring them on a business auto policy is the obvious solution. Any automobiles owned by a business should be insured by a commercial auto insurance policy. But personal autos, or commercial vehicles used for both personal and business use, raise questions. Reference the following guide on how to insure such vehicles.
Vehicles Listed on the Policy
All vehicles owned or leased by the business should be specifically listed on the business auto policy. It’s as simple as that. We could make it more complicated if you’d like, but no need. If a vehicle is owned/leased by your business, whether semi-truck, trailer, van, private passenger, or any other licensed vehicle, be certain it is listed on your commercial auto policy along with appropriate coverages. Vehicle ownership determines which policy should cover a vehicle. Thus, sales vehicles owned by the business should be listed on the business insurance policy, but private passenger vehicles owned by your salespeople or administrative staff should not.
Some business auto policies allow liability coverage for “all owned autos”, or even better “all autos”. This removes any ambiguity should a claim arise and your business have overlooked adding a vehicle to the policy. Not available in all industries. Ask your Bankers Insurance agent for details.
Vehicles Covered by the policy
Non-Owned Autos (Employee Vehicles)
Often, vehicles that are not owned by the business are still used for business purposes. Examples are salespersons visiting clients and other staff running office errands. In such a case, the individual should obtain their own coverage. However, should an at-fault accident occur while those vehicles are in the service of the business, the business could be held liable. Therefore, ensure your commercial auto policy includes liability protection for “non-owned autos”. This coverage will not pay for your employee’s damaged vehicle – that would be covered on the employee’s own policy – but it will protect your business from liability should it be sued as a result of an accident while that vehicle was serving the business.
Require employees who regularly use their own vehicles for business purposes to provide evidence of acceptable insurance. We recommend a $500,000 combined single limit or higher.
Also, non-owned auto protects the business only after the employee’s policy is exhausted. Since the vehicle belongs to the employee, their policy pays first and the business’s non-owned auto policy, if needed, pays second.
Hired Autos (Rented Vehicles)
For vehicles that are rented while traveling or otherwise, the liability for such should be covered by liability protection for “hired autos” on the business auto insurance policy. Hired auto is simply an insurance term for a rented vehicle. Like non-owned (employee) auto coverage, hired auto protects your business for liability associated with the use of a rented vehicle.
However, unlike non-owned (employee) auto protection, you may need your business to cover the rented vehicle for physical damage as well. It may be required in your rental agreement. In such a case, “hired auto physical damage” coverage can be added to a policy. A maximum level of protection would be listed on the policy, such as $75,000, to ensure coverage for commonly rented vehicles.
With hired auto physical damage protection, business travelers can decline rental car coverage offered by the rental agency, thus saving money. However, any claims would go against the business policy, potentially affecting future premiums. Additionally, this coverage will not reimburse for 1) revenue lost by the rental agency due to the vehicle being out of service, nor 2) any resulting decrease of value to the vehicle. Your business may be liable for these additional expenses charged by the rental agency.
Drive Other Car Coverage
Occasionally a company will provide a business owner, officer, or executive a company-owned vehicle for their personal use. In such a case, this individual may not have a personal auto policy, thus leaving a protection gap that personal auto policies typically cover. Should this individual ever drive someone else’s vehicle, such as while taking turns on an extended road trip or borrowing a neighbor’s car, if they cause an accident, they could still be sued personally. In such a case, the business insurance policy would not provide coverage since the business does not own the vehicle nor was it being used for business purposes. But not to worry, a coverage called “drive other car” can be added to a business insurance policy, naming those specific individuals needing this coverage. Drive other car protection is quite affordable, typically costing only one or two hundred dollars per year per person.
Protecting private passenger autos on a business insurance policy is a common practice, but should be done with care. Contact us with questions. Not a client of ours? Let us compete for your business! Each client is assigned a personal agent in our office, given their email address, and provided a phone number that rings right on their desk.
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