If you own a car you are familiar with liability insurance as it’s the most common insurance purchased and is required by most states. The same is true for commercial policies. Commercial liability insurance is broken up into two different areas of coverage: bodily injury and property damage. Its purpose is to protect you from the costs resulting from an accident you or one of your employee has caused.
Do you need commercial auto insurance? If you are using a vehicle (car, truck, van, fleet, etc.) for business purposes, the answer is “yes” you need it as part of your insurance policy. Most states require it and in some cases, such as freight carriers or brokers who transport items or people across state lines, federal law requires it also. The Department of Motor Vehicles (DMV.org) adds, “Besides the fact that you are most likely required by law to have commercial liability auto insurance, there is one other very important reason to have liability as a big part of your commercial insurance policy: Having liability insurance can greatly help you avoid lawsuits that put your company at risk.”
A question we frequently run into is whether a personal auto policy will cover the vehicle for business use. That question is a double-edged sword. A personal policy will provide some coverage for business use of your vehicle. But, it is highly unlikely that it will cover it adequately and protect your business should the vehicle be involved in an accident. And, worse yet, it might not cover it at all. It’s a risk not worth taking.
Another question asked is about employees using their own vehicle for business purposes. Business owners have the option to insure vehicles owned by the business, hired or leased vehicles, and those not owned by the business, but used for business. The vehicles not owned by the company would be employee owned vehicles that they are using for business purposes for your company. If this is the case in your company, talk with your insurance agent as you will want to explore the option of insuring vehicles not owned or leased by your company in order to be protected in case of accidents.
The Insurance Information Institute (iii.org) confirms the importance of having auto liability insurance for employees that use their personal vehicle for business. They provide some scenarios that could put your company at risk if you don’t have the proper liability coverage. For example an accident occurs when:
- Your office manager stops by the office supply store to pick up some items for work on her way back from lunch.
- On the way home, a supervisor stops by a client’s office to leave a product sample.
- While on vacation, a salesperson driving his personal vehicle makes a brief stop to visit a customer.
Any of the above accident scenarios could result in damages that are far exceed the liability limits of the employee’s personal insurance and could thus affect your company financially.
Talk with your insurance agent about all aspects of commercial liability insurance for advice on the type and limits that best suit your business. Commercial policies are very versatile and have many options. You’ve worked hard to build your business. Don’t put it at risk by not having the appropriate insurance coverage!
This information is not intended to be exhaustive nor should any discussion or opinions be construed as professional advice. Should you have any questions or would like to discuss your risk exposure with your commercial auto insurance, please contact the insurance pros at ARCW Insurance. We are here to help.