For many small businesses, "the office" is wherever the work is. And that, of course, requires travel - often, by car. Whether you and your employees drive your own vehicles, your business has company cars, or you rent a car to get around, knowing what kind of commercial auto insurance you need to protect your business can be tricky.
In addition to personal vehicle insurance and rental car insurance available from a rental car agency, there are two other types of automobile insurance you should know about: hired auto and non-owned auto coverages. Both can be added as endorsements on your general liability insurance policy.
Hired Auto Insurance Coverage
When you, the employer, or one of your employees has an accident in a rental car, three different insurance policies can potentially come into play. First, the driver's own auto liability coverage still applies, just as if he or she were driving her own car. So, if there's an accident, the employee is personally liable for injuries or property damage to other parties.
The driver may also have hired car physical damage coverage as part of his or her own personal auto insurance policy, which would cover any physical damage to a rental car. Be careful, though, as some "comprehensive" and most "limited" personal auto insurance policies don't include hired car coverage.
Second, there's the rental car agency's physical damage coverage and liability coverage that you are offered at the time of rental.
And third, there's hired automobile coverage - an additional coverage that either supplements or replaces a car rental agency's liability coverage, by protecting your company in the event of a lawsuit resulting from an accident.
Because hired auto insurance only covers liability to your company - not physical damage - it's always a good idea to be sure the driver has hired car physical damage coverage as part of his or her own policy, or to purchase the rental agency's physical damage coverage whenever you or an employee rents a car.
Non-Owned Auto Insurance Coverage
If you and your employees typically drive for business purposes using personal vehicles, you'll want to know about non-owned auto coverage. This type of insurance protects your company against lawsuits that may arise when one of your employees has an auto accident while driving a personal vehicle on company business.
As with hired auto coverage, the driver's personal liability insurance still applies if the driver himself is sued, and the driver's personal auto property damage insurance should cover any physical damage resulting from an accident. What non-owned auto coverage does is protect your business if the other party involved in the accident decides to sue your company.
Do I Need It?
To protect themselves against any liability resulting from an auto accident caused by the or one of your employees while working on a client project, some clients may require your business to carry auto liability coverage. Typically, such coverage is required in contracts with language such as: "Contractor shall carry bodily injury, property damage, and automobile contractual liability coverage for owned, hired and non-owned autos with a combined single limit of liability for each accident of not less than $1,000,000."
But even if your clients don't require it, hired and non-owned auto coverage may be a smart investment. If an employee of your company has an auto accident in their own vehicle or in a rented vehicle while on company business, and their personal insurance is not enough to cover the claim, your company can be held responsible for the excess amount. And of course, there's always the risk that your company itself will be sued.
While the cost of these types of claims can be very high, the cost of protecting your business against them with hired and/or non-owned auto insurance is very low - usually less than $150 per year.
