Just as every driver in every state is required to be covered by some form of car insurance, every commercial automobile should also be insured specifically to account for the unique risks a business presents. Commercial automobile insurance can protect your venture, whether you own a fleet of delivery vehicles or just occasionally use a personal vehicle to transport clients.
What's the big deal? If there's a wreck involving a vehicle while it's being driven for commercial purposes, the business could be liable for the injuries and damage it causes, as well as any legal awards. That obviously could exhaust your capital in a hurry.
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It could get even worse if you have a home-based business and cause a wreck in your personal vehicle. Remember: Your homeowners insurance liability coverage won't apply to anything involving your business. Your personal auto policy also likely won't apply. Bottom line: Every small business owner should be familiar with commercial automobile insurance and how it applies to his or her venture. Otherwise, a crash could turn into a crash and burn for your business -- and for your personal finances as well.
Here are just a few real-world examples of how driving for business purposes without the proper auto insurance coverage could get you into trouble:
A delivery driver speeds over a curb and crashes into the median.
Even if the driver has her or his own auto policy, most insurers won't pay for damage incurred while the vehicle is being used for commercial purposes. Additionally, the more miles driven, the higher risk a policyholder is considered to be. Since delivery drivers are constantly on the road, they'll likely require much different coverage than average drivers.
What's the best way for employees driving their own vehicles on behalf of your business to be insured? It can vary according to your situation and state, but typically the company should purchase a rider on its current insurance policy for non-owned vehicle coverage. If the employer does not have this kind of coverage (or if you're self-employed and making deliveries), the driver should invest in his or her own commercial coverage.
A real estate agent takes a client to a showing and backs into the mailbox.
Again, most insurers will require you to add some type of commercial coverage to make sure you're properly covered. In the event of an accident, business passengers typically are far more likely to sue for damages than passengers who have a personal relationship with you. Your commercial auto coverage should address the higher liability risks associated with transporting clients.
A business owner travel to pick up supplies and gets stranded on the roadside.
Since your vehicle is transporting items used to support a business, a personal car insurance policy might not provide the type of coverage you'll require should you have any sort of car trouble. Consider, for example, you're a small business owner transporting expensive equipment or other valuables essential for your company. Your coverage limits could need to be raised to cover the value of the property, and you'll need to factor in greater potential losses since your income may also be affected.
Additionally, if you've installed equipment on your vehicle used to support your business -- such as ladder racks or permanent toolboxes on a landscaper's truck -- your personal car insurance most likely will not cover the costs of towing, renting, or other damages. Check with your agent for definitive answers.
Who needs commercial auto insurance?
If you use your car for anything more than commuting, you should consult a licensed auto insurance agent in your state. Here are a few examples of vehicles used in businesses that should have commercial auto insurance:
- Any vehicles used for delivery of goods such as food, newspaper, packages and other items, messenger services, and any vehicle used to pick up major materials or supplies intended for a business.
- Vehicles used for limo, taxi or other passenger-transportation services.
- Any vehicles owned/leased by or titled/registered to a partnership or corporation.
- Any vehicles driven by employees or non-listed drivers on a regular or occasional basis.
- Any company vehicles leased or rented to others.
- Pickups, vans and utility vehicles with a gross weight exceeding 10,000 pounds or with a rated load capacity of greater than 1 ton.
- Any vehicles equipped with snowplowing equipment, cooking/catering equipment, bathrooms, altered suspensions, hydraulic lifts, or racing equipment.
- Any vehicles with equipment such as ladder racks or permanent toolboxes used for business.
Car insurance can involve stacks of complicated paperwork, and it gets even trickier when a business is on the line. Fortunately, it's not a one-way road -- you'll be glad your auto insurer made you take another look at your risks and adjust your coverage limits when your business is on the line.
This article was written by Kelly McMurtrie, who contributes to the HomeInsurance.com blog. HomeInsurance.com is a resource center for insurance consumers and homebuyers across the country.
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