Introduction
When you buy a car, it's second nature to insure it by
purchasing a personal auto insurance policy. But is this personal
coverage sufficient if you drive around for business purposes? Even
if your company doesn't own a fleet of delivery vehicles, that
doesn't mean you can pass on commercial auto insurance.
So where do you start? With rising costs across the auto
insurance industry and various types of coverage, finding an
affordable policy that's the right fit for your business may
require some legwork. But protecting your business in case a
routine work-related errand takes a wrong turn can mean all the
difference.
When do you need
it?
If you are running a home-based business, for example, you may
assume your personal auto insurance is enough, but this isn't
always the case. Unfortunately there is no black and white answer
that dictates when you need to buy a rider to your personal
insurance policy to cover the business use of your car.
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Talk with your insurance agent about how often you use the
vehicle for work, and he or she should be able to help you decide
what's best. If it turns out you need to add business coverage,
you can expect to pay about 10 percent more than you are currently
paying for your personal policy.
If your business owns a company car, however, there's no way
around buying a commercial auto policy, which is meant to protect
your business's assets in the event of an accident. This is an
absolute must.
The gray area comes in when your employees use their personal
vehicles for business purposes - even for something as simple as
trips to the post office. If they get into an accident, their
personal insurance will kick in, but anyone involved in the
accident can also come after your business.
You need a hired and non-owned policy in this situation. It not
only protects your business if your employee is involved in an
accident on the way to a sales call, for example, but it will make
your employees less apprehensive about using their personal cars
for business, since they won't be held personally liable in
case of an accident (and their personal auto policies won't be
at risk). This type of policy will also cover cars rented for
business use.
Depending on a number of factors - from what state you live in
to the type of car your business owns - a commercial auto policy
can cost more, or less, than your personal auto coverage. Keep in
mind, however, that prices in the auto insurance industry overall
are on the rise.
What does commercial auto
coverage include?
There are a number of parts to a commercial auto insurance policy -
some are required and others are just good to have, if you have the
cash to pay for them. The more you add to your package, of course,
the more expensive your premium.
Liability will be the biggest factor in your business auto
policy when it comes to protecting your business. It can be broken
down into two parts: bodily injury and property damage. Bodily
injury liability (BIL) will protect your business from being sued
for bodily injuries, lost wages, or even death by a person involved
in an accident with one of your employees. Property damage
liability will cover the cost of damages done to property and
structures not owned by your employee or business in the event of
an accident.
Medical payments is another part of a policy that is required by
most states. If your employee is in an accident and the other
person involved is hurt, it will cover the cost of treatments that
person needs.
Although many states don't require collision and
comprehensive insurance, it's good to have since it will
protect your property. Collision will cover the cost of repairs for
damage done to a company car in the event of an accident (most
non-owned polices do not include collision). Comprehensive coverage
takes effect if your car is broken into, vandalized, or damaged
during a natural disaster.
Uninsured/Underinsured motorists coverage is still required by
some states, but usually it's optional. This type of coverage
gets tricky, but basically if you are involved in an accident with
a driver who has inadequate insurance coverage, or none at all,
this will kick in and cover damages and injuries.
Other extras include towing and rental reimbursement. This
coverage doesn't include towing due to illegal parking, but if
your disabled company car must be towed to a repair shop, it will
cover that. And if you need to rent a car in the meantime, it will
cover that cost.
How premiums are
set
The cost of a business auto policy will depend on how much coverage
you decide to get. Liability will be the most expensive part of the
policy. Although your state usually sets a minimum that you need to
have, it's most likely way below what you should have -- $1
million of liability is recommended. It's going to have to
cover repairs to cars and hospital stays of injured persons - if
this coverage amount falls short, coming up with the difference
puts your business at risk.
Other aspects that affect cost are the location of your business
(state as well as neighborhood), number of employees driving,
whether you are insuring a company car or employees' cars, and
the driving records of your employees.
Once you have a policy in place, the number of claims you file
could raise your premium. Depending on all of these factors, you
could have an annual premium per car that's as low as $200 (if
you need just a hired or non-owned policy) or one that exceeds
$2,000 (for a more comprehensive package).
Keeping your costs
down
Compare quotes. Prices will range between insurance brokers.
Make sure to get at least three quotes and compare before signing
on the dotted line. And when comparing, know what your state
requirements are.
Raise deductibles. If you can afford it, raise your
deductibles. This will bring your premiums down. Just make sure
you'll be able to afford those deductibles if you ever need to
pay them. Most insurance companies will allow you to pay up to a
$1,000 deductible for comprehensive and collision coverage.
Drop collision. If you do own company cars, drop
collision coverage if repairs will end up costing more than the
cars are worth.
Type of car. Choosing a company car that doesn't cost
much to repair or is an older model can also lower your
premiums.
Quick tips
Quote online. Comparison-shopping can be easier if you quote
online. But once you have the quotes, it's in your best
interest to purchase in person with a local agent rather than
online. So if you do get into an accident, you will deal with
someone face to face.
Find a small business auto insurance broker. There are
agents that specialize in small business auto insurance - just look
in the yellow pages. Since it's their specialty, they'll
know the ins and outs of your small business's particular
needs.
Be honest. When it comes time to discuss what packaged
policy will be best for you, don't downplay how often you use
your car for work. In the event of an accident, if your insurance
agent investigates and finds out you weren't truthful about
your use, your claim could be completely denied. So be sure to get
the right amount of coverage.