Jessica Sautter is a Content Writer for CarInsuranceCompanies.com with a Bachelor’s Degree from Eastern Michigan University in Elementary Education with a Major in Reading and a Minor in Mathematics.

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Chris Harrigan has an economic degree from Limestone College and an MBA from Clemson University. He previously managed auto insurance claims for Enterprise Rent-A-Car. Currently, he is using his business and insurance expertise to provide insurance data analysis and visualizations to enhance the user experience.

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Reviewed by Chris Harrigan
Former Auto Insurance Claims Manager

UPDATED: Oct 7, 2020

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Key takeaways...

  • Even if you’ve bought personal auto insurance before, business car insurance is a bit different. Not only do you need to meet legal requirements, you need to protect your business
  • Liability not only pays for the medical expenses stemming from that accident, it also pays for the driver’s car repairs. If the car is not fixable, liability pays to replace the car
  • Not only does it act as a secondary policy to your auto insurance but it cans also be a secondary policy to your general business insurance
  • Since your insurance rates depend highly upon the driving records of your employees who will be using the vehicles, set a hiring standard that will help keep insurance rates down

Even if you’ve bought personal auto insurance before, business car insurance is a bit different. Not only do you need to meet legal requirements, you need to protect your business.

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Because of this, the level of coverage you need for your business will be different than if you were buying for your personal vehicles. So, before you buy business car insurance, read these tips to make sure you get the lowest price on the coverage you need.

Table of Contents

Business Car Insurance Coverage

Business car insurance is structured the same as personal auto insurance. Depending on which state your business operates in, parts of your insurance policy will be required by law while others parts are optional, even for businesses.

Liability is the most important part of auto insurance. It will pay for several different things, all related to the other driver who is hit if you or your employees cause an accident.

Liability not only pays for the medical expenses stemming from that accident, it also pays for the driver’s car repairs. If the car is not fixable, liability pays to replace the car. It also pays to defend you if you are sued because of a car accident caused by you or someone from your business.

In many states, all car owners, including business owners, must have uninsured/underinsured motorist coverage on their policy.

This pays to repair your car if the driver who caused the accident doesn’t have liability insurance. It also helps with the costs if the driver doesn’t have enough insurance to cover all the bills.

There are two different types of medical coverage you can add to your policy. Medical payments will pay for the medical bills related to a car accident. Personal injury protection also pays the bills, but can also pay for things like house help during recovery or funeral expenses.

One or the other of these is required in many states. If you are not required to carry this, go over your insurance policies with your agent. If you have a worker’s compensation plan that will cover car accidents, you might not need this coverage.

Collision coverage will repair or replace your company’s vehicle if you or your employee causes the accident. While it is not required by law, it is by a lender if you are still paying on the vehicles.

Usually sold with collision, comprehensive also pays for repairs to your vehicles, but not after an accident. This covers damages from non-accident related issues, like theft, fire, or storm damage.

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Increased Liability Levels

While the two types of vehicle coverage are structured the same, you have to think about business insurance in a different way than you would personal insurance.

Many people just want to have enough personal insurance to keep from getting a ticket. As a business owner, you need to think of car insurance as a tool to protect your business.

In our litigious society, you need to be prepared for the possibility that anyone who is involved in an accident with one of your business vehicles might sue.

And they won’t just sue whoever was driving, but also your business.

That’s why even small businesses should carry at least $1 million in liability per person. Of course, if your financial advisor suggests more, go by her recommendation as she knows what your business requires.

The $1 million is a general recommendation for most small businesses.

Consider an Umbrella Policy

You might want to also look into an umbrella liability policy. It acts as a secondary policy that kicks in if the liability policy from your business auto insurance policy is exhausted.

There are a couple of great benefits to an umbrella liability policy. Not only does it act as a secondary policy to your auto insurance but it can also be a secondary policy to your general business insurance.

This means that the same policy can also provide additional funds if someone slips and falls in your store and sues over it.

Umbrella insurance policies are also relatively inexpensive. They are usually sold in multiples of $1 million for just a few hundred dollars a year.

This is a small price to pay to protect the business and the personal assets you’ve worked so hard to build, as the New York Times reports.

Non-Owners Business Car Insurance

One of the biggest gaps in business insurance can come when businesses borrow vehicles. If you don’t think that you ever borrow someone else’s vehicle, consider this:

If you ask your employees to do company business in their personal vehicles, you are, in essence, borrowing their vehicles.

The problem with this has to do with insurance. According to the National Association of Insurance Commissioners, most personal auto insurance policies do not cover the vehicle if it is being used for business purposes, except for driving to and from work.

The language is on nearly every policy in this country.

So if your employees run errands for you, make deliveries, go on sales calls, pick up colleagues from the airport, or do anything else for the business with their cars, you are setting them and yourself up for a possible insurance disaster.

If you or that employee causes an accident while undertaking a business-related errand, it is highly likely that the personal insurance of the driver won’t cover the accident at all.

So, not only will there be no liability to pay for the other vehicle or driver’s medical bills, there will be no provision to pay for your or the employee’s car.

This makes the likelihood of a lawsuit all the more probable. It won’t just be the driver that is sued either, but your business as well. Even on the chance that his insurance does cover the damage from the wreck, it won’t pay to defend your business in a lawsuit.

The best way to handle this situation is to buy non-owners business car insurance. This is an inexpensive policy designed for businesses that do not own any vehicles but need coverage when they borrow or rent them.

This policy will cover your employee’s personal cars when they are on company business and will help defend you in case of a lawsuit stemming from a traffic accident.

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For Those Who Work from Home

If you run a business from your home, you make not think that you need business car insurance. Just as in the above scenario, if you use your personal car for this business, you might find yourself without coverage if you have an accident while carrying out your business.

What you need is a policy that will cover you when your personal vehicle is being used for business purposes.

You have a couple of options with this, and both would be cheaper than just buying a traditional commercial car insurance policy.

First, call your personal auto insurance company and explain the situation to them. Ask if it would be possible to buy a rider for your existing policy that would cover the car during business activities.

If they don’t offer this product, get a quote for a separate policy. Since most companies offer a multi-policy discount, you would save money by getting both from the same company.

Also, talk to the company that handles your general business insurance. Even home businesses often have insurance. They might be able to add car insurance to your existing policy to make sure you are completely covered.

If you are still unsure about whether you need commercial or business car insurance, the Insurance Information Institute has a helpful article here.

Ways to Save Money on Business Car Insurance

Business car insurance is a necessity for many businesses, but that doesn’t mean it has to cost a lot. There are ways to save money even on car insurance for your business.

As with those who work from home, try to combine your business car insurance with another insurance policy.

Insurance companies, as a way to bring in additional clients, will usually offer a discount on each policy you have with them if you have more than one.

So check with the agent who handles your general business insurance, worker’s compensation, and other insurance needs. Get a quote for adding car insurance.

Then get quotes, not only for the car insurance but also for the rest of your business insurance policies. It’s possible that you could find a cheaper insurance provider for all your policies this way.

Also, pay attention to the type of vehicle you are buying for your company. Specifically look at the safety features and anti-theft devices on the cars. Insurance companies will offer deductibles for things like anti-lock brakes and active car alarms.

Keep in mind that the property inside the vehicles is generally not covered under the car insurance policy, which only covers the vehicle itself.

If you or your employees keep tools or other business equipment in the vehicles, make sure that your other business insurance extends to cover this equipment.

Since your insurance rates depend highly upon the driving records of your employees who will be using the vehicles, set a hiring standard that will help keep insurance rates down.

Drivers with multiple tickets or accidents, even if it is in their personal vehicles, will drive your insurance costs up.

It is common for businesses that hire drivers to ask for a driving abstract for potential employees. This will allow you to see exactly what kind of driving record the insurance companies will be looking at as well.

Also, consider requiring drivers to undergo a driver’s safety course once a year. Not only will this help keep accidents down, but insurance companies will likely you give you a discount for this. For more tips on auto insurance for your business, Insure U offers this article.

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References:

  1. https://www.insureyourcompany.com/blog/7-tips-for-saving-money-on-your-commercial-auto-insurance-policy/
  2. http://www.nytimes.com/2008/03/18/business/businessspecial3/18insure.html?pagewanted=2&ei=5088&en=c2d670733ee1d1e9&ex=1363492800
  3. http://www.naic.org/documents/consumer_guide_auto_booklet.pdf
  4. http://www.insurance.insureuonline.org/smallbusiness/topic_com_auto.htm