Insurance taken out by the business to cover vehicles used by the company and protect against damage to company vehicles or damage or injury caused by company vehicle is called commercial auto insurance. Any business that uses automobiles needs commercial auto coverage. Even if employees use their personal vehicles for running company errands, the business could face liability issues if the employee gets into an accident.
There is little difference between personal and commercial auto insurance; however, there are still a few important distinctions to consider. Commercial auto policies usually have increased liability limits in comparison to personal auto policies, as well as, provisions allowing for the coverage of rented or other types of non-company-owned vehicles (such as employees’ personal vehicles driven for company business reasons).
Determining which type of auto policy is appropriate relies on a few ownership-related factors. The first of these is whether the owner or lease of the vehicle is you individually or the company as a whole. If the company is the owner or lease, consider a commercial policy and ensure that the company as an entity is listed on the policy as the principal insured. Another consideration is who will be driving the vehicle – you, the business owner, or the company’s employees. When entrusting company vehicles to employees, a business owner may want to verify that the employees are properly trained and have good driving records. It is also necessary to consider for what purpose the vehicle will be used. Transporting hazardous materials or people or delivering packages may incur the need for commercial auto insurance.
To supplement the commercial auto coverage, the small business should also consider purchasing collision and comprehensive insurance to cover damage to the company’s vehicle. Also, if the business relies on a personal auto or umbrella liability policy to provide protection for company vehicle use, be sure that business-related liability is not listed as an exclusion.
For small businesses specifically, commercial auto insurance policies and personal auto insurance policies will likely have similar coverage. Premiums charged for commercial auto coverage is generally determined by type of automobile being insured, as well as, the specific area where the automobile will be used. Other contributing factors include any equipped safety devices and the amount of deductible being applied to the policy. A higher deductible may commonly be used to lower a policy’s premium.
When commercial auto insurance is needed for more than one vehicle, a commercial fleet policy can be issued. Small businesses benefit from fleet policies because all company vehicles are covered on just one policy. The majority of fleet policies require that any individual driving a vehicle be listed on the commercial auto policy.
Small business owners may not see the necessity in nailing down an appropriate auto policy for their business given all the other issues they face as business owners; however, with over 16,000 traffic accidents occurring daily across the U.S. (averaging around 6 million per year), it is imperative that small business owners insure their company vehicles in order not to sink their business due to costs resulting from damage or injury in accidents by company vehicles.