Small businesses with field, service or delivery operations that involve the use of company-owned vehicles need the protection of auto insurance customized for their specific requirements.
Commercial auto coverage provides financial (and potentially legal) assistance if an employee is deemed at fault in a motor vehicle accident that causes property damage or injury to another person.
Commercial policies typically have higher policy limits than would be available for personal auto coverage, and this difference can be important in arranging the appropriate level of protection for your small business.
While commercial auto insurance - which can also cover a company's cover trucks and vans - is a good idea, it's also required under the laws of most states. In some states, your company may also have to purchase uninsured or under-insured driver coverage.
Some business owners may be tempted to try to cover company-owned vehicles with a personal vehicle insurance policy, but doing so can result in a claim being denied when you need the protection most - after an accident.
When should you purchase commercial auto coverage? The following provides some starting points:
- A vehicle is registered under the company's name.
- An employee drives the vehicle for work purposes.
- The vehicle is used to deliver merchandise or transport people for a fee.
- The vehicle carries equipment or has a trailer attached for business purposes.
- The vehicle exceeds a certain gross weight.
Like personal auto policies, the cost of commercial vehicle insurance will depend on how and where a vehicle is used. The cost of insuring a small delivery truck, for instance, will likely be higher than buying a policy for a car used by a sales rep.
Hired auto coverage, which can be added to a broader commercial auto policy or business owner's policy, is designed to protect the operation of cars or trucks that are rented for business purposes. If an employee has an accident while driving a rental car, for example, the company can be held liable for any resulting third-party injuries or damage (the policy won't cover physical damage to the rented vehicle).
Your insurance agent or broker can provide important advice about the need for commercial auto insurance, and can help you make the most effective decision for your company's needs.