In this article, we will know about the benefits of business auto insurance.
What Exactly Is Business Auto Insurance?
You need some of the same insurance protections as a business owner for the automobiles, trucks, vans, and other vehicles you use for business as you do for personal use.
You need a different policy because your Business Owners Policy (BOP) does not cover vehicles.
What Are The Benefits Of Business Auto Insurance?
Following are the specifications and the benefits; of why someone should buy a business auto insurance
For bodily harm and property damage that can happen from a business accident whiles, you or a member of your company is driving for work. The majority of states have laws requiring you to carry medical payments insurance, uninsured/underinsured motorists’ coverage, and personal injury protection (PIP) in some cases. In addition, physical damage insurance is available for cars that your business owns, rents, or leases.
Many insurers utilize the Business Auto Coverage Form (BACF), which is the standard insurance form, to provide commercial auto coverage. Even though the form just mentions “autos,” autos are defined to include any vehicle intended for use on public roadways, including cars, lorries, trailers, and vans.
Each vehicle you use for business purposes can be “scheduled” individually, or listed on your insurance with the appropriate coverages. In other words, based on the features of the vehicles (size, age, and safety rating) and the coverage you require for it, you can choose different coverages for your various vehicles.
Do I require business auto insurance?
Your insurance agent will enquire specifically about how you utilize vehicles in your business, who will be operating them, whether you own, rent, or lease them, and whether you and your workers will likely be using their personal automobiles while working for your business. The sorts of coverage you require will be revealed by your responses to these questions.
Generally, the level of liability protection required by a business may only be offered by a BACF. Many insurers recommend a business auto coverage maximum of $1 million, with a minimum of $500,000 — that even a small business requires to cover the potential damages in a major accident. This is because of today’s litigious world.
Will Business Use Be Covered by My Personal Auto Policy?
Some business uses of your vehicle are covered by your personal auto policy. In a similar way , certain business uses of your employees’ automobiles are covered by their personal auto policy as well (depending on the type of business).
Even if not specifically excluded, the way you use your car might not pose a risk the insurance provider is willing to take on under personal auto coverage. When a policy poses too much danger, the insurance provider may impose a higher premium, decline to issue coverage, or terminate policies. A commercial auto policy could be the best option in these circumstances.
Most of the time, a personal auto policy does not provide coverage if a vehicle is used largely for business purposes. Your personal insurance company could be able to change your policy to say that you sometimes use your personal car for business. A personal auto policy won’t provide coverage if the car belongs to a business. The necessity for a commercial auto policy would arise.
It’s possible that the personal auto policy you or an employee have won’t provide enough protection for your business. Imagine, for example, that you are driving to a business meeting while on a heated phone call with a sales rep. It’s too late to avert a collision by the time you realize a van in front of you is stopped in order to make a left turn. Five passengers and the driver were also hurt in the collision. Your business and you are both sued.
If you simply have personal auto coverage, your insurer will likely personally defend you and settle the claim, subject to the policy maximum. But your personal auto insurance company won’t defend or pay for your business if it gets hurt.
If you or your business uses company-owned vehicles, you probably require commercial auto insurance. You can require professional and non-owned auto insurance if you have to use your personal vehicle for professional activities like client meetings, business errands, or deliveries (HNOA).
Your personal auto coverage might not be sufficient to cover the costs in the event of a catastrophic accident or one in which many people are hurt. If that happens, the people who were hurt will probably sue your business to get their money back.
Expect not to rely on personal umbrella coverage for any claims resulting from the usage of a car for business purposes. Most of the time, the personal umbrella doesn’t cover all business-related disagreements.
Which Automobiles Are Included?
Depending on the options you choose, the business auto policy’s coverage scope might be either broad or specific. For example, it might only be about one car that is described in detail. The policy might also be drafted to cover the named insured’s liability exposures resulting from the usage of any vehicle, which would represent extremely comprehensive coverage.
There are generally three choices for the automobiles you decide to protect.
Autos owned by your business
- All vehicles that your business owns, rents, or hires
- All vehicles utilized for business purposes, including those owned, rented or leased by your business
- The third type is the only one that shields the business from liability when an employee or owner uses a personal car while working, thus the business of firms should get it.
Verify the correct insured is listed on the policy.
Most insurance contracts say that the owner of the car must be named as the “primary insured” on the “Declarations” page of the policy. Make sure to let your insurance agent know if you individually or your company own the title to any vehicles you use for both business and pleasure. If you need to do a claim or a claim is made against you, this will help you prevent issues.
Physical Damage Protection
There are three types of physical damage insurance for cars: collision, comprehensive, and specified hazards.
Losses resulting from the overturning or collision of a covered vehicle with any object are covered under collision coverage.
Because it covers losses from all causes excluding collision and overturn, which are insured under collision coverage, and a few policy exclusions including wear and tear, mechanical failure, and acts of war, comprehensive coverage is the most inclusive type of auto physical damage coverage. Flood, fire, theft, glass breakage, falling items, explosions, earthquakes, and collisions with wild birds or animals are some of the loss scenarios covered by comprehensive insurance.
Many of the same risks are covered by specified perils coverage, which is less expensive because it only covers “identified” risks (those that are expressly included in the policy). “Fire, theft, and Combined Additional Coverage (CAC)” is another name for it.
If your company operates a big fleet of cars, it may eventually be more expensive to retain the risk—that is, to pay for any physical damage up front rather than via insurance—than to insure the fleet against physical damage (also known as self-insurance).
No matter how many vehicles your business has, it might be more economical to obtain physical damage insurance only on the newer or more expensive vehicles.
What Will the Insurance Company Pay for Physical Injury?
The (ACV) of the car at the time of the loss determines how much an insurer will pay for auto physical damage or theft claims. The highest amount that will be paid is the minor of the ACV or the price of repairing the car or buying a new one that is of comparable quality. The ACV is modified for depreciation and the physical state of the auto in the case of a total loss. As a result, the insurer will offer less money if the car is older and in worse shape because its value has decreased more.
Depending on its decision, the insurance provider may repair or replace the damaged or stolen car in addition to paying you the cash worth of your loss. In the event of a theft, it might give you back the taken car in exchange for payment for any damage the theft may have caused.
The liability element of the BACF obligates the insurer, up to the policy limits, to pay all damages that the business is legally required to pay due to property damage or bodily injury caused by a covered vehicle.
The insurer is required to defend the business or reach a settlement in the event that an auto liability lawsuit is filed against the insured business and the loss is protected by the policy. The insurer has complete discretion over whether to challenge or settle the claim.
When the insurance policy limitations are used up, the insurer’s obligation to defend or settle comes to an end. Imagine, for illustration, that you or one of your employees caused an accident that results in three injuries. For the first two claimants, judgments or settlements have reached the policy limit. In the event that the third party receives a judgment in their favor, your business would be responsible for paying the award directly.
In circumstances of egregious negligence, such as drunk or reckless driving, punitive damages may be granted. A BACF is not allowed to pay for punitive damages in several states due to legal restrictions. or other if you managed to live in a state that allows punitive damages, your policy might not cover them.
What Amount of Liability Coverage Is Required for My Business?
A business auto coverage limit of $1,000,000 is frequently advised, with $500,000 as the minimum. In light of the increased security it offers, the greater limit does not substantially increase the cost.
A Combined Single Limit (CSL) is what, exactly?
In contrast to personal auto plans, which have separate limits for bodily injury liability and property damage liability (split limits), the BACF usually has a Combined Single Limit (CSL) Other limitations can be purchased, but these two are the most popular.
Do Business Umbrellas Include business auto insurance?
If your business umbrella policy lists your auto liability policy as an underlying policy to which it offers coverage, it will offer protection for owned, hired, and non-owned vehicles.
What Liability Insurance Do I Require If My Employees Drive Company Cars for Personal Use?
Some companies permit workers to use company vehicles for personal use in the evenings or on the weekends by driving them home. You have coverage for owned vehicles driven home by employees as long as these vehicles are listed on your business auto policy and the relevant “coverage auto symbols” are displayed on the “Declarations” page.
Personal auto policies for employees do not cover their use of business vehicles unless the car was given to them on purpose as a temporary replacement for their own car while it was being fixed. Additionally, employees are not protected by their employer’s business auto policy if they lease, hire, rent, or borrow vehicles for personal use.
When your personal vehicle doubles as your business vehicle
Sometimes individuals who are given access to a company vehicle, such as executives or staff, only have that vehicle. They neither own a personal car nor do they have personal auto insurance. In this case, personal use of the vehicle is not covered by the BACF. You must include the Drive Other Car Coverage Endorsement in your BACF in order to fill this coverage gap. This offers protection while the stated person or a member of their family is operating insurance that has been rented from a third party.
What Kind of Coverage Do I Need If Employees Drive Their Own Cars for business?
In the event that one of your workers is at fault in a traffic accident, your business may be held accountable for any ensuing property damage and bodily injuries if your employees use their personal vehicles for business-related purposes, such as visiting clients.
Business owners occasionally are unaware of this exposure. Think about these instances:
- On her way back from lunch, your office manager makes a stop at the office supply store to pick up a few things for the office.
- A manager leaves a product sample at a client’s office on the way home.
- A salesman travelling in his personal automobile stops at a client’s location for a quick visit while on vacation.
In any of these scenarios, a business may be held accountable for an auto accident with damages in excess of the employee’s personal auto coverage’s policy maximum.
You can add this form of liability to the BACF under “any auto” or “non-owned autos” to offer coverage for your business when employees use their personal vehicles for business-related purposes. One or more number symbols that appear in the declarations serve as indicators of the sorts of automobiles that are covered. These are referred to as covered auto designators. The number range used by the policy is 1 through 9 and 19. (which are land vehicles). Each number corresponds to a group of covered vehicles.
The limitations of the employee’s own auto policy are excessed by this BACF coverage. The business must have this non-owned auto protection if the employee’s limits are minimal, such as just enough to meet state financial responsibility requirements.
It seems sense to mandate that employees maintain commercial auto insurance on their vehicles. To prevent privacy issues, ask employees to sign MVR authorization forms allowing your company to obtain their motor vehicle data annually. This will allow you to verify their insurance coverage each year.
If You Allow a Dangerous Driver to Drive, You Are Responsible
When you permit someone to use one of your vehicles, you are legally responsible. You may be held accountable for “negligent entrustment” if you don’t take reasonable steps to verify that the motorist is licensed to drive or if you let someone drive who you know has a bad driving record and they cause an accident.
When someone gives another person access to a vehicle while knowing that the use of the vehicle by this person poses a risk of injury to others, this is referred to as “negligent entrustment.” In addition to any damages given for negligent entrustment, the person who caused the accident would also have to pay.
Before giving a driver access to a car, your company is responsible for checking their credentials. Even for a little errand, never give a bad driver access to a vehicle.
Maintaining low premiums
Avoiding accidents is the greatest way to keep your BACF premiums low. Safety when driving needs to be emphasized. Drivers shouldn’t feel obligated to drive recklessly because of excessive production demands. Establish a policy on the use of hands-free devices, cell phones, and texting. Consider taking annual driver refresher courses as well. All cars should be kept in good condition.
Additional ways to cut costs:
- Employ somebody with a clean driving record
- Commercial Auto and Other Policies Together
- Pay the entire insurance bill.
- Maintain vehicle security.
- Increasing the deductible on your business auto insurance
- Discount for business experience (three years or more in business)