QuestionHOW WOULD FAMILY MEMBERS BE COVERED ON A COMMERCIAL AUTO POLICY. INSURANCE IS IN CORPORATION NAME, BUT SINCE NO PERSONAL AUTO I THINK THERE IS A GAP. WOULD WE NEED TO PURCHASE DOC AND BROADENED PIP TO MAKE THE POLICY EQUAL TO A PERSONAL AUTO POLICY. THANKS FOR YOUR HLEP!
AnswerHi Barbara,
It is impossible to answer your question inasmuch as there are different corporate arrangements. But I am going to assume that this might be a family owned company. That is most likely, I guess, to afford you the chance to include your family as a business expense and hence to be able to deduct the cost of their insurance off of the pre-tax dollars. I guess I am also going to have to assume that these members are not involved in corporate operations, otherwise they would have no problem being named on the corporate policy.
I am going to give you a full half hour since I think there is a hidden risk to your proposal. I will address this after the insurance question.
As for the insurance question: HOW does one do this? Your solution would accomplish the task. But maybe for a family corporation the agent might have a product that could embrace all of you living within the same household. You could name each as a corporate officer of some kind.
The key to this is your agent's recommendation. And it sounds about right as you have suggested for a solution. But let's explore some topics a bit out of the insurance realm. This is the hidden risk I am going to take some time to write about.
Did you have an attorney form the corporation? If so, that is the best place to start the inquiry I am going to suggest. If not, you still need to find someone who can address my concerns.
The primary risk is losing your corporate protection by including family members who have nothing to do with the corporate operations on corporate auto insurance.
What I am interested in at the outset is not how to get the family covered with insurance: it is how to keep a party with a NON-ACCIDENT claim against you (i.e. versus the corporation, which of course has no assets) from piercing the corporate veil and going after your personal assets.
I have no way of knowing your circumstances, so just ignore this warning if it is not applicable to your situation. But one of the reasons some people do incorporate is to protect their personal assets in case the corporate activity does create a big liability.
This is what I referred to earlier as a non-accident claim. Assume that this is a big claim versus the corporation, and that there are few corporate assets to go after.
Hence, the attorney for the claimant will attempt to pierce the corporate veil so that she can go after the personal assets of the corporate owners. This is not too easy to accomplish, so do not be alarmed. But I thought that at least you ought to have this in mind as a possible risk of including your family members on the corporate auto insurance policy.
One of the ways attorneys can attack the personal assets of a family corporation is to show that they did not treat it as a separate corporate business entity. And of course including family members on the insurance when they are not active in the company is one piece of evidence that could be used against the owners.
You might save a little since you think you can deduct the cost of the insurance as a corporate expense, but what if something bad happened and you ended up in litigation? Your little arrangement could end up costing you a whole lot more than you saved in taxes.
I hope that this analysis is of benefit to you.
Best wishes,
Dr. Settlement, J.D. (Juris Doctor)
www.SettlementCentral.Com
