Understanding why auto insurance is generally important does not constitute rocket science. However, many contractors believe that requiring their employees to carry their own auto insurance is enough to protect them in times of liability. This may not be true. Certain types of car usage —even with personal vehicles — are not covered under a normal policy.
Commercial auto insurance is more expensive than personal. However, if you are using vehicles specifically for business purposes, you may need to have this kind of coverage. Here are some things to look for when determining if a more robust insurance policy is right for you.
It’s Not About the Vehicle
Many companies think that commercial insurance applies only to construction equipment, big rigs and the like. This is not necessarily true. You may need to acquire this kind of coverage even for a four-door sedan, depending on several factors.
Under whose name is the vehicle in question registered? If it is registered to your business then there is no question: you need commercial coverage. Registering it under the name of the business owner does not eliminate the need for commercial insurance, however. If the vehicle is registered personally to an individual but is still used exclusively or largely for business purposes, you will need special insurance.
Who are the primary drivers of the vehicle? If the owner or the employees of the business are the ones using the car on a daily basis, then a commercial policy may be necessary. When you look into your liability, your insurer may require you to list all of your employees as potential drivers. This allows proper underwriting and risk management for the vehicle’s use.
Primary or Frequent Business
Generally speaking, you will need to increase your policy if your vehicle is being used primarily or frequently for business. If your vehicle is being used on average more than three times a month for business, it may be necessary for a higher-end policy.
Determining what constitutes “business use” may be your first step. Consider whether you use your vehicle for any of the following purposes:
- Moving equipment, whether it is tools, housekeeping supplies, ladders or heavier machinery
- Transporting hazardous materials
- Delivering goods, including flowers, retail, newspapers or even pizza delivery
- Taxi, chauffer or messenger purposes
All of these uses may be cause for a commercial auto insurance policy.
Talk to Your Insurer
The best way to know if you need a specialized policy is to talk to your insurer. Remember not to try to spin your information based on what you want to pay. It may seem unnecessary to pay extra for coverage, but in the long run when you need to use your policy you will be grateful to have it. Having improper coverage can increase your liability and affect your bottom line when it comes to risk management issues.
If you need more information or have questions about personal versus commercial auto policies, we are here to help. Feel free to give us a call.