What is business vehicle insurance?

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Here's what you need to know...
  • Business vehicles must carry car insurance by law
  • The liability policy not only pays the other driver’s medical bills and car repairs, but it will pay to defend you in court
  • Business car insurance  just covers the vehicle itself
  • Using your personal vehicle for any business purposes at all your personal insurance may not be covering you


If you own a small business, you know how important insurance is to the survival of your business. In our litigious society, you need to have the right amount and kinds of insurance in place to enable your business to keep operating even if you are sued.

While there are several different kinds of business insurance available, one of the most important is car insurance. But what constitutes car insurance for business purposes?

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Why You Need Business Car Insurance

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Each state requires that car owners be financially responsible for any damage they cause with the cars they own.

This might mean paying to repair a dented fender or paying for the hospital bill of a driver you hit. In most cases, this is done through car insurance.

If your business owns a vehicle, whether it is one car or a fleet of work trucks, as the owner, the business must carry car insurance by law. This ensures that you and your employees are legally driving.

Not only that but insurance also protects your business.

If one of your employees causes an accident that leaves someone severely injured, it’s highly likely that the injured party will sue your company for pain and suffering on top of all the medical expenses.

Moreover, it’s highly likely that he would win.

Without insurance, how would you pay a large settlement like this? Does your business have tens of thousands of dollars that it could easily pay and still keep afloat? For most companies, this would be a no.

However, with business car insurance, this is covered by your liability insurance. The liability policy not only pays for the other driver’s medical bills and car repairs, but it will pay to defend you in court and for any settlement won in a lawsuit.

What It Covers

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Car insurance for business purposes covers much the same things as personal auto insurance, according to the specialists at the Insurance Information Institute. Of course, you must have liability coverage.

Liability is usually divided into two parts. One part covers the medical expenses for anyone in the other car, driver, or passenger. The other part covers property damage. This could be to another car or to a structure that is hit by your company car.

Liability covers the other car and driver if the accident was the fault of you or your employee. If you have comprehensive and collision, they cover your business vehicle.

If the accident was the fault of the driver of your business car, collision will pay for the repair. Comprehensive will pay for non-accident related damage, like replacing it if it is stolen.

This is optional coverage, as the state will not require it. Whether you decide to carry it depends on the circumstances of your business. If you do not carry them, then you will be completely responsible for the repair or replacement cost should anything happen to your vehicles in these circumstances.

If you do not carry them, then you will be completely responsible for the repair or replacement cost should anything happen to your vehicles in these circumstances.

Many states require all drivers to have uninsured/underinsured motorist coverage. Since the at-fault driver is supposed to pay for the damages, you might be in a hard place if an uninsured driver hits one of your business vehicles. This coverage will pay for your damages is this were to happen to you.

This coverage will pay for your damages is this were to happen to you.

It is also a great coverage to have for another reason. In many states, personal car owners are only required to carry a small amount of property damage liability. For example, if you

For example, if you live in Massachusetts, drivers may only be carrying $5,000 in property liability. If one of these drivers causes an accident that totals one of your business’s $40,000 work trucks, what do you do?

This is where the underinsured motorist coverage comes in. It pays the gap between what the other driver’s insurance will pay and the actual cost of the damage he caused.

If this coverage is optional for you, you should consider carrying it anyway.

The other option you may be given is some sort of medical coverage for the employees in the vehicles. This might be covered by your company’s workers compensation insurance. Go over your current coverage to see if you even need this on your policy.

How Much Do You Need

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Every state sets a minimum amount of liability a business owned vehicle must have. However, just like for personal insurance, these levels are probably too low. Remember that you are not just trying to drive legally but to protect your business.

Remember that you are not just trying to drive legally but to protect your business.

The state of Connecticut’s Insurance Commissioner suggests that the minimum coverage any business should carry is $1 million.

This number may be higher for your business. This partly depends on how many assets your company has, how many employees, and vehicles you have, etc. Go over this with a business financial advisor or your insurance agent to determine how much your company needs.

Go over this with a business financial advisor or your insurance agent to determine how much your company needs.

What It Does Not Cover

There are a few things business car insurance does not cover. The main one you need to worry about is the property in your vehicle.

If you or your employees keep tools, equipment, or carry merchandise in the company vehicles, the business car insurance does not usually cover them. The coverage for loss or damage to these items is usually covered under one of your general business insurance policies. The business car insurance usually just covers the vehicle itself.

The coverage for loss or damage to these items is usually covered under one of your general business insurance policies. The business car insurance usually just covers the vehicle itself.

Most business car insurance policies will cover a vehicle that your company borrows or rents, but be sure to ask the company to be sure that they are not exclusions on your policy.

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Home Businesses

If you have a home based business, you may think that you do not need business car insurance. In addition, depending on the type of business you have, you may not.

But you need to be aware that if you use your personal vehicle for any business purposes at all, like deliveries or hauling supplies, your personal insurance may not be covering you.

Most personal auto insurance policies will not cover your vehicle if it is being used for any business purposes. Commuting to work is not considered a business purpose.

So if the insurance company figures out that an accident occurred while you were delivering the product, for example, they could deny your claim since it falls under the exclusion.

Even worse, they may not defend you if you were to be sued because of the accident. Because they ensure you as an individual, if the other driver sues your business, the auto insurance company probably won’t be of any help, and if they are, you might not have a higher enough level of coverage, says Insure U.

There are a couple of easy ways to ensure that you are covered even when you are using your personal vehicle to carry out business. More than likely, you have some sort of general business insurance even for a home based business.

If so, ask the company you have this policy with how much it would be to add coverage for the vehicle just for the times when you need it for business.

Another option might be you current auto insurance provider. Sometimes, they will agree to sell you a rider to your policy that will extend your coverage to business use.

A business-use rider on your existing policy is a great option your insurer offers it, as it is usually very inexpensive with an increase of around 10% of your current premium.

Using Employees’ Vehicles

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You may think that because your business does not own any vehicles that you do not need car insurance. However, if you ever borrow or rent cars, you need to look into it.

If you ask or require your employees to use their personal vehicles to carry out business, you are putting them in the same predicament that the home business owner is in.

Their personal policies might not cover them, and they will be driving uninsured.

Not only might your employee’s insurance not cover the damages from the accident, but the other driver has the right to sue not just the employee but also your business. Even if his insurance does pay the claim, his liability will not pay to defend your business in court.

There is an inexpensive solution to this situation, called non-owners business car insurance. This type of policy is designed for businesses that do not own vehicles, but need to provide coverage to borrowed or rented cars.

This policy would ensure that you and your employee are covered when they are driving for you.

This could also save you money if your employees travel frequently and need to rent vehicles. Non-owners policies are far less expensive than the rental insurance offered by rental car companies.

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