What Is Commercial Auto Insurance?
As a business owner, you need some of the same insurance coverages for the cars, trucks, vans or other vehicles you use in your business as you do for vehicles used for personal travel.
Your Business Owners Policy (BOP) does not provide any coverage for vehicles, so you must have a separate policy.
Most states require you to purchase liability insurance for bodily injury and property damage that may result from a vehicle accident occurring while you or someone from your organization is driving on business. Many states also require you to have uninsured/under-insured motorists coverage and/or medical payments coverage (known as Personal Injury Protection (PIP) in some states). You can also purchase physical damage coverage for vehicles your business owns, leases or hires.
The Business Auto Coverage Form (BACF) is the most commonly used contract for providing business auto liability insurance. Although the form refers only to “autos,” autos are defined to include cars, trucks, trailers, vans or other vehicles designed for use on public roads.
Each vehicle you use in your business can be separately “scheduled,” or listed on your policy along with corresponding coverages. In other words, you can choose different coverages, for your various vehicles, depending on the vehicle’s characteristics and the coverage you need for it.
Do I Need a Commercial Auto Policy?
Your insurance agent will ask in detail how you use vehicles in your business; who will be driving them; whether you own, rent or lease; and whether you and your employees are likely to be driving their own cars for your business. The answers to these questions will indicate the types of coverage you need.
In general, only a BACF can provide the level of liability protection—the recommended minimum is $500,000—that even a small business needs to cover the potential damages in a serious accident.
Will My Personal Auto Policy Cover Business Use?
Your personal auto policy provides coverage for some business use of your vehicle. Similarly, your employees’ personal auto policies cover some business use of their vehicles too.
A personal auto policy is unlikely to provide coverage, however, if the vehicle in question is used primarily in business. It will not provide coverage for any vehicle owned by a business. The personal auto policy, whether yours or your employee’s, may not have enough coverage to protect your business.
How Much Liability Coverage Does My Business Need?
Many insurers recommend a business auto coverage limit of $1,000,000, with $500,000 as the minimum. The higher limit does not add a great deal to the premium, considering the amount of additional protection it provides.
What Coverage Do I Need if My Employees Use Company Vehicles for Personal Business?
Some businesses let employees drive company vehicles home and use them for personal purposes in the evenings or on weekends. So long as these vehicles are scheduled on your business auto policy and the appropriate “coverage auto symbols” are shown on the "Declarations" page, you have coverage for owned autos taken home by employees.
Employees’ own personal auto policies will not cover their use of a company car unless the car has been specifically borrowed as a temporary replacement for the employee’s own car while it is unavailable. In addition, employees who lease, hire, rent or borrow autos for their personal use are not covered by their employer’s business auto policy.
When Your Business Vehicle Is Also Your Personal Vehicle
Sometimes employees or executives of a company or other persons who are supplied with a vehicle owned by the company have only that vehicle. They do not own a personal vehicle nor do they obtain personal automobile coverage. The BACF does not cover personal use of the vehicle in this situation. To close this coverage gap, you need to add the Drive Other Car Coverage Endorsement to your BACF. This provides insurance while the named individual or a member of his or her family is driving a car borrowed from a third party.
What Coverage Do I Need if Employees Drive Their Personal Vehicles on Business?
If your employees drive their own cars for business purposes—to visit clients, for example—your business could wind up liable for property damage and bodily injuries resulting from a traffic accident for which an employee was at fault.
You can add the Non-owned Auto Liability Endorsement to your BACF. It provides coverage when employees drive their own vehicles on business. This BACF coverage is excess over the limits provided by the employee’s personal auto coverage. If the employee’s limits are low—such as only to satisfy state financial responsibility limits—then it is critically important for the business to have this non-owned auto protection.
Seek Professional Guidance
Insurance agents and brokers, insurance counselors, and other trained financial consultants can help provide answers to detailed questions about a particular policy. These professionals are also helpful in selecting the right policy and the appropriate amount of coverage.