Whether owned by your business, owned by yourself, or leased, if you have a car, truck, van, or a fleet of these vehicles that are used by your small business, then it’s essential that you have business auto insurance. In fact, it’s mandatory in most states. Even if it wasn’t required, it’s a wise coverage to have because it transfers the risk away from you, the small business owner, to your insurance company.
Business auto insurance, also referred to as commercial auto insurance, is designed to protect a small business from a financial loss relating to business use of a vehicle, whether the loss related to vehicle damage or bodily injury to the claimants as a result of the use of those vehicles. Business auto insurance will pay claims of third parties injured in an accident, as well as cover the repair or replacement of a vehicle damaged or destroyed in an accident.
It’s important to point out that business use of a personal vehicle isn’t covered by most personal automobile policies. Some small business owners mistakenly believe that if they use their personal car for business, they’ll be covered by their personal auto insurance policy. Not the case. Most personal car insurance policies exclude business use of vehicles. So, to counteract the potential risk of a serious car accident wiping out the reserves of your small business, it’s critical to obtain business auto insurance.
There are two main types of business auto insurance coverages: employer non-owned coverage and hired auto coverage.
Employer Non-Owned Coverage
In many cases, small businesses allow their employees to use their own vehicles for company purposes. When employees use their own car for work purposes, it’s referred to as “non-owned” vehicles. Same goes for the small business owner, who doubles his own personal vehicle as a business vehicle. Typically, these “non-owned” vehicles won’t be included in your business auto insurance. As noted above — and it bears repeating — commercial auto insurance and personal auto insurance are different. That is, an employee’s personal policy won’t generally cover his use of his own vehicle for carrying out his job duties.
If your employee is using her own vehicle for company business, and an accident happens, your small business could be face liability without the proper insurance. In this case, employer non-owned auto coverage would protect you and your company. Therefore, this coverage is a critical addition to your business auto insurance if you or your employees are using non-owned vehicles for business purposes.
Hired Auto Coverage
Hired auto coverage is quite similar to employer non-owned coverage in that it also protects your business against third party liability claims as a result of a vehicle accident involving a vehicle your business doesn’t own. But there are some differences. Namely, hired auto insurance provides liability protection when you are driving a vehicle that isn’t registered or owned by you or your business. The best example of this is when you rent a vehicle for business use; hired auto coverage will provide protection for the rented vehicle.
Commercial auto insurance is typically structured “ala cart”, which means if your business uses vehicles that are non-owned, leased, or rented you may need non-owned or hired auto coverage as part of your comprehensive business auto insurance policy.