Personal Auto Insurance Coverage for Small Business Use is an Accident Waiting to Happen / Insurance / Last Modified: February 22, 2017

Many small business owners depend on their personal auto polices for complete coverage. Learn why that might be a huge liability.

Do you need commercial auto insurance? If you have a fleet of trucks delivering goods all over the country, the answer is obvious. Of course you do.

If you have a few vans to operate a tour business in a resort town? Again, of course you do. The risk of one of a company car becoming involved in an accident is far too great to leave it up to chance.

Read: Understanding Commercial Auto Insurance

But what if you have a catering business and use your personal car to deliver lasagna, garlic bread, a kale salad, and a key lime pie to a client across town? Many small business owners – particularly home-based business owners – depend on their personal auto policies to cover them in such situations.

But if Cathy Caterer tries to beat a stoplight while delivering her meal and crashes into another vehicle, knocking it into a third car, she could be responsible for paying medical expenses for everyone injured, repairs to the wrecked vehicles – including her own – and, if any of the injured parties misses work or needs extensive rehab, legal damages.

What's worse, because the car was used for a business purpose, her personal auto insurance likely won't cover any of the expenses. It could not only wipe out the business but also Cathy's personal finances.

That's why the recipe for success in any business that uses vehicles should include a heaping helping of commercial auto insurance.

Read: Just When Do You Need Commercial Auto Insurance? 

In many – but not all respects – commercial auto insurance resembles personal car insurance. Here are some common coverages to look for:

Commercial liability protection.

Liability coverage protects the business if one of its drivers causes a wreck that results in injuries or property damage. Because it covers every potential employee that could drive a vehicle for a business, premiums can be much greater than for personal auto coverage. Most states have minimum levels of coverage.

Collision coverage.

This helps pay to repair or replace your business vehicle if you cause a wreck.

Comprehensive coverage.

This is used to repair or replace the vehicle if it is damaged by vandalism, flood, fire, and certain other perils, or if it is stolen.

Uninsured/underinsured motorist coverage.

This helps if your vehicle is involved in a wreck caused by a driver who either has no or insufficient insurance to pay for your injuries or the damage to your vehicle. It also helps in case of a hit-and-run accident.

Rental reimbursement.

If your business depends on a vehicle, you face the prospect of down time when the auto is being repaired after a wreck. This coverage will pay for a rental car to eliminate the loss of that valuable time.

Non-owned auto coverage.

This kicks in if employees use their personal vehicles for the business and if the business ever uses vehicles it doesn't own.

How to save on commercial vehicle insurance.

You probably know that many car insurance providers offer discounts for personal auto insurance; they do likewise for commercial vehicle coverage. Discounts vary widely by state and provider, but here are some common ones:

Antilock brakes. If your commercial vehicle has this feature, you could earn a price break.
Business longevity. Companies that have operated for more than three years could earn a discount of up to 5%.

Payment in full. Paying up front could earn you a price break of up to 15%.

Claims-free. This price break is granted to policyholders who haven't made a claim in three or more years.

Bundled coverages. Buying other types of business coverage in addition commercial vehicle insurance could earn you a discount of up to 15%.

Increasing your deductible. In general, the higher your deductible, the lower your premium. This comes with a big warning, however: You must not raise the deductible to an amount higher than you'd feel comfortable paying if you got into an accident.

How to get commercial vehicle coverage.

Talk to your insurance agent about your situation and how you use your vehicles. Commercial vehicle coverage should be part of a business insurance strategy that includes general, product, and professional liability coverage. Depending on whether you have employees, you could need employment liability coverage as well.

Read: Crash and Burn by Neglecting Commercial Auto Insurance

No business owner – regardless of the size of the business – should operate without the right insurance. Otherwise, trouble on the highways could mean trouble for your venture.

This article was written by Carrie Van Brunt-Wiley, editor of the the blog.

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