FAQ: Insuring Business Vehicles

If your company owns vehicles used in the regular course of doing business, you likely need Business Auto Policy (BAP) coverage. This is true even if you lease or rent vehicles or if your employees use their personal vehicles for business. 

Here are answers to some of the most common questions about insuring business vehicles.

What is a Business Auto Policy?

If your business owns and uses motor vehicles for business purposes, you most likely need a Business Auto Policy (BAP). This protects any vehicle used on public roads.

BAPs cover both liability and physical damage. You may also need uninsured/underinsured motorist coverage as well as personal injury protection. You'll need to check on the requirements for the states in which you operate. Additional endorsements can be purchased for specific coverage.

Will My Personal Auto Policy Cover Business Use?

A personal auto policy is unlikely to provide coverage for any vehicle used primarily for business, and it likely wouldn't provide enough coverage to protect your business in the event of a lawsuit. This is true even if a personal umbrella policy is in effect.

Vehicles owned by the company will not be covered by your or an employee's personal auto policy. 


What Vehicles Are Covered?

A business auto policy is also known as a business auto policy form (BAPF). This form itemizes all the vehicles you choose to cover in your policy and allows you to assign the scope of coverage based on that vehicle's role and use in your company.

In general, you have three options for which vehicles you choose to cover.

  • Autos your business owns
  • All autos that may be leased, rented, or hired
  • Any employee's personal autos used for business

You'll be able to specify which autos are covered and what type of coverage they should receive. That's why it's important to read your BAPF thoroughly and make sure all your questions are answered. 


How Are Claims Handled?

As with personal auto insurance, the amount of money you receive in a claim payout depends on several factors. If the accident were not your (or your employee's) fault, your insurance company would work with the other party to agree on a settlement. The damage you're responsible for will depend on the type of coverage you purchased and the vehicle's worth.

In general, any claim will be based on the vehicle's Actual Cash Value (ACV). You'll receive either the actual cost of repair/replacement or the ACV – whichever is lower. The ACV will be adjusted for depreciation so that older vehicles will result in lower payouts.


What is Liability Coverage?

Liability coverage protects your company if you or an employee are responsible for causing a car accident. It is required in most states. Liability protection will help you cover claims involving bodily injuries or death, as well as property damage.

Liability coverage is usually split into three separate categories: 

  • bodily injury per person
  • bodily injury per accident
  • property damage per accident.

On your policy, you'll most likely see it expressed like this: 200/500/100. That indicates a policy has a $200,000 limit for bodily injury, a $500,000 limit for bodily injury per accident, and a $100,000 limit for property damage per accident. The higher your limits, the more your coverage will cost you. But your business will be responsible for any costs above your liability limits, so it's important to assess and cover your exposure correctly.

You should also be aware that liability coverage may not protect you from punitive damages if you or your business is responsible for a drunk driving accident or reckless behavior.


What is a Combined Single Limit (CSL)?

You may be able to combine your liability limits into one maximum payout amount. This is known as Combined Single Limit coverage. Rather than provide separate policy limits, a combined limit will provide one larger amount used to pay out all claims, regardless of whether they are for bodily injury or property. So, if you are involved in an accident with high property damage but little bodily harm, you can appropriate coverage accordingly.

A Combined Single Limit will likely be more expensive, but it can help businesses with high-value assets. It also provides flexibility in how liability coverage is applied. 


Does Business Umbrella Insurance Cover Vehicles?

A business umbrella policy may cover vehicles owned by your company. It can help protect liability limits that exceed your auto coverage. It will also help cover liability in other areas of your business.


Can My Employees Use Company Vehicles for Personal Business?

Any vehicle included on your business auto policy form (BAPF) will be covered, even if an employee uses it for personal purposes. However, suppose the company-owned car is their only vehicle and does not carry personal auto insurance. In that case, you will likely need to purchase a Drive Other Car Endorsement as part of your BAP coverage. This covers the driver (and possibly other family members) when driving a non-owned vehicle for personal use.

Is My Business Liable if Employees Use Personal Vehicles for Business?

Yes… maybe. Suppose your employees use their personal vehicle to drive to client appointments, meetings, conferences, or other work-related events. In that case, your business could be liable if they are involved in an accident. While their personal auto coverage will come into play, your business may be liable for any settlements above the employee's personal policy. To make sure you're protected, you can add a Non-owned Auto Liability Endorsement to your BACF. 


Am I Liable for Allowing a Bad Driver on the Road

Your company is legally liable when it allows someone to drive one of its vehicles. It's your responsibility to make sure all drivers are qualified, licensed, and have a good driving record. If you knowingly allow an unqualified driver or one with a poor driving record to drive a company car, you could be liable for negligent entrustment. Damages for negligence will be in addition to liability costs.

How Can I Keep My Premiums Down

The easiest way to keep premiums down is to encourage safe driving and to avoid accidents. Keep all business vehicles well-maintained and serviced. Provide regular safe driving tips to employees, especially during seasons of inclement weather. This pamphlet and other resources are available at osha.gov.


How Do I Get Started?

The first step is to work with a qualified, trusted insurance agent. An agent can help you assess your vehicle assets' worth, your liability exposure, and more to help you determine the type and amount of coverage you need.

If you'd like to further discuss your business insurance coverage, give Sea Mountain Insurance a call or contact us for more information. We're happy to answer your questions.