Cover Your Cars

Make sure your fleet--even if it's just a fleet of one--is covered with commercial auto insurance.

By Mie- Yun Lee

Opinions expressed by Entrepreneur contributors are their own.

When you buy a car, it's second nature to insure it bypurchasing a personal auto insurance policy. But is this personalcoverage sufficient if you drive around for business purposes? Evenif your company doesn't own a fleet of delivery vehicles, thatdoesn't mean you can pass on commercial auto insurance.

So where do you start? With rising costs across the autoinsurance industry and various types of coverage, finding anaffordable policy that's the right fit for your business mayrequire some legwork. But protecting your business in case aroutine work-related errand takes a wrong turn can mean all thedifference.

When do you needit?
If you are running a home-based business, for example, you mayassume your personal auto insurance is enough, but this isn'talways the case. Unfortunately there is no black and white answerthat dictates when you need to buy a rider to your personalinsurance policy to cover the business use of your car.

Talk with your insurance agent about how often you use thevehicle for work, and he or she should be able to help you decidewhat's best. If it turns out you need to add business coverage,you can expect to pay about 10 percent more than you are currentlypaying for your personal policy.

Get free price quotes on auto insurance

If your business owns a company car, however, there's no wayaround buying a commercial auto policy, which is meant to protectyour business's assets in the event of an accident. This is anabsolute must.

The gray area comes in when your employees use their personalvehicles for business purposes - even for something as simple astrips to the post office. If they get into an accident, theirpersonal insurance will kick in, but anyone involved in theaccident can also come after your business.

You need a hired and non-owned policy in this situation. It notonly protects your business if your employee is involved in anaccident on the way to a sales call, for example, but it will makeyour employees less apprehensive about using their personal carsfor business, since they won't be held personally liable incase of an accident (and their personal auto policies won't beat risk). This type of policy will also cover cars rented forbusiness use.

Depending on a number of factors - from what state you live into the type of car your business owns - a commercial auto policycan cost more, or less, than your personal auto coverage. Keep inmind, however, that prices in the auto insurance industry overallare on the rise.

What does commercial autocoverage 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 thecash 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 autopolicy when it comes to protecting your business. It can be brokendown into two parts: bodily injury and property damage. Bodilyinjury liability (BIL) will protect your business from being suedfor bodily injuries, lost wages, or even death by a person involvedin an accident with one of your employees. Property damageliability will cover the cost of damages done to property andstructures not owned by your employee or business in the event ofan accident.

Medical payments is another part of a policy that is required bymost states. If your employee is in an accident and the otherperson involved is hurt, it will cover the cost of treatments thatperson needs.

Although many states don't require collision andcomprehensive insurance, it's good to have since it willprotect your property. Collision will cover the cost of repairs fordamage done to a company car in the event of an accident (mostnon-owned polices do not include collision). Comprehensive coveragetakes effect if your car is broken into, vandalized, or damagedduring a natural disaster.

Uninsured/Underinsured motorists coverage is still required bysome states, but usually it's optional. This type of coveragegets tricky, but basically if you are involved in an accident witha 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. Thiscoverage doesn't include towing due to illegal parking, but ifyour disabled company car must be towed to a repair shop, it willcover that. And if you need to rent a car in the meantime, it willcover that cost.

How premiums areset
The cost of a business auto policy will depend on how much coverageyou decide to get. Liability will be the most expensive part of thepolicy. Although your state usually sets a minimum that you need tohave, it's most likely way below what you should have -- $1million of liability is recommended. It's going to have tocover repairs to cars and hospital stays of injured persons - ifthis coverage amount falls short, coming up with the differenceputs 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, andthe driving records of your employees.

Once you have a policy in place, the number of claims you filecould raise your premium. Depending on all of these factors, youcould have an annual premium per car that's as low as $200 (ifyou need just a hired or non-owned policy) or one that exceeds$2,000 (for a more comprehensive package).

Keeping your costsdown
Compare quotes. Prices will range between insurance brokers.Make sure to get at least three quotes and compare before signingon the dotted line. And when comparing, know what your staterequirements are.

Raise deductibles. If you can afford it, raise yourdeductibles. This will bring your premiums down. Just make sureyou'll be able to afford those deductibles if you ever need topay 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, dropcollision coverage if repairs will end up costing more than thecars are worth.

Type of car. Choosing a company car that doesn't costmuch to repair or is an older model can also lower yourpremiums.

Quick tips
Quote online. Comparison-shopping can be easier if you quoteonline. But once you have the quotes, it's in your bestinterest to purchase in person with a local agent rather thanonline. So if you do get into an accident, you will deal withsomeone face to face.

Find a small business auto insurance broker. There areagents that specialize in small business auto insurance - just lookin the yellow pages. Since it's their specialty, they'llknow the ins and outs of your small business's particularneeds.

Be honest. When it comes time to discuss what packagedpolicy will be best for you, don't downplay how often you useyour car for work. In the event of an accident, if your insuranceagent investigates and finds out you weren't truthful aboutyour use, your claim could be completely denied. So be sure to getthe right amount of coverage.

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