Business Owner Advice: What type of insurance do I need for my vehicles?

type of insurance


Businesses usually have a pool of vehicles, whether personal to the owners or in the name of the business. The fleet size of the vehicles used in the normal course of business may vary depending on the size of the business. For a small business, day-to-day affairs may be conducted through a few vehicles or even vehicles hired on a rental basis as needed. For large businesses, you may notice a much larger fleet with hundreds of vehicles in the business carpool.

In order to protect the business and the owners from damages and even lawsuits, vehicles used in conducting your business affairs need to be insured by a reliable insurance provider. What type of insurance you’ll be needing will depend on several other factors, such as usage and ownership of the vehicle in question. For instance, if a vehicle in use is in the name of the owner, then its insurance policy will vary from the vehicle being in the name of the business.

Does your business need auto insurance?

Having a suitable auto insurance policy is a must for all business owners. Just make sure to be vigilant in the selection and evaluation of available auto insurance policies as they’ll determine the cost, annual premiums, and coverage and allow you to run your business smoothly.

Fleet auto insurance

So the next question that pops up in your mind would be, what is fleet auto insurance? Well, it means insurance coverage for a pool of vehicles that are used for commercial purposes in conducting a business affair and covered under a single contract. A business auto insurance policy differs from personal car insurance. In a business auto insurance policy, vehicles hired on rentals owned by the business as well as employee-owned vehicles can be covered with certain terms and conditions.

Can personal auto policy cover business use?

Your personal auto policy may provide coverage for business usage as well, to some extent depending on the usage of that vehicle. You have to carefully look for any exclusions in your personal auto policy specifying any business usage. In such cases, whether there are no exclusions, your insurance provider may allow you insurance coverage for business usage of the vehicle and consequently charge you an extra premium. Insurance providers may cancel such coverage of business usage of a personal vehicle if they assess their risk to be beyond their risk appetite. The catch in this scenario is that vehicle is used for both personal as well as business purposes.

To what extent your personal auto policy will cover any probable damages will depend entirely on the actual scenario. In the event of an accident, your insurance provider may find it difficult to defend you on two fronts, personally as well as defending the business. For serious damages, your personal auto policy may not be enough to cover the damages, which will result in lawsuit decisions/settlement in the court.

Impact of employees who are bad drivers

Mistakes come with consequences. Allowing bad drivers to drive your business vehicles can prove to be a blunder for the business. If you are aware of an employee having a questionable or bad driving record and you still allow him/her to drive for your business, you are legally liable for the resultant as well.

By emphasizing corporate social responsibility, businesses should make sure that only qualified drivers having valid licenses sit behind the wheel. Businesses cannot separate themselves in case of an accident as it comes within the domain of “negligent entrustment.”

Liability Coverage

To what extent does an auto insurance policy provide coverage when liability arises? Well, the onus of paying the damages up to the policy limits lies on the insurer. When a lawsuit is in place, it is up to the insurance company to decide whether they feel confident in defending the business in court. The one responsible for paying the damages gets to decide whether to contest the case or settle. It’s not up to the business to make that decision.

A business may find itself in a situation where multiple lawsuits are in play, and damages claims are way beyond the policy limit. In that scenario, the business is liable to pay off the other party if it loses the case.

Types of physical damage coverage

Physical damage coverage for your vehicles can be segregated into three types, as narrated below.

Collision coverage

That’s a basic level of auto insurance coverage which, in the event of an accident, covers any losses that you may incur directly from the collusion. It may be in the form of hitting an object or overturning the vehicle.

Comprehensive coverage

The broadest form of auto insurance coverage is comprehensive coverage. Excluding what is covered under collision coverage, comprehensive coverage provides you a defense against all other physical damages. There may be a few exceptions to that in the form of wear and tear, breakdowns, etc. In comprehensive coverage, losses incurred in the form of flood, fire, explosion, collisions with animals, falling of objects or glass breakage, etc., are all covered.

Specified perils coverage

You can ask your agent to agree on a pre-defined list of perils that will be covered under this type of policy. Specified perils coverage, as the name suggests, differs from comprehensive coverage as it only covers the pre-defined perils. As the list of perils can be limited, premiums paid against this policy can be lowered too.

Saving extra policy costs

Successful business owners try to play smart by analyzing where cost-cutting can be applied in favor of the business. If your business vehicle pool is quite large, you may profile your vehicles keeping in view their usage, drivers of vehicles, and how old those vehicles are. Risk profiling enables you to insure only those vehicles that you feel should be covered to minimize any potential damages claim risk.

In the long run, you, as a business owner, will not only minimize your annual premium cost but can also manage your insurance risk more efficiently.