Does Your Business Need Hired and Nonowned Auto Insurance?
Do your employees use their personal vehicles for work-related tasks? Maybe they use their vehicles to attend client meetings or business trade shows, or pick up office supplies. Even if they have their own auto insurance, you may still be open to risk. But how?
Most businesses have commercial auto insurance, which covers business-owned vehicles. While this type of coverage protects the vehicles your business owns, it doesn’t extend to employees’ personal vehicles. The result may be a coverage gap and increased liability exposure.
Why would your business be liable for an employee’s vehicle?
If your employee has auto insurance, you might wonder why your company would be liable for an accident. The reason is that not all personal auto policies cover business use of a vehicle. Even if an employee’s policy does include this type of use, their limits may not be enough to cover the accident. Considering policy limits is important, in case the employee is involved in a multivehicle accident or one resulting in extensive bodily injury. Once the employee’s coverage is tapped out, they will look to your business.
For example, say an employee has full coverage on their vehicle. Their state requires drivers to have at least $5,000 in coverage for property damage. This may only cover damage to another vehicle or property, such as a telephone pole. The employee is trying to save money on premiums, so they opt for the state’s minimum coverage.
Let’s assume your employee is driving to a client meeting. They look away for a moment, and they don’t realize the car in front of them has stopped. The accident is on the freeway, and the employee is traveling at 50 mph. The result is a multivehicle accident. In this scenario, $5,000 in property damage doesn’t go very far.
Naturally, you might turn to your commercial auto insurance policy for additional coverage. But you’d quickly realize it only covers vehicles your company owns. Since you don’t own your employee’s vehicle, there is no coverage and your business is left with the bill.
Understanding hired and nonowned auto insurance
Hired and nonowned auto insurance is for vehicles used for business purposes or vehicles your company doesn’t own. You can usually add this type of coverage to your existing commercial auto policy.
It typically covers various expenses, from legal fees to property damage and bodily injury. Medical bills and auto repairs are also included.
Who needs hired and nonowned auto insurance?
Your need for this coverage will depend on whether you have employees who drive for business purposes. While your employees might not drive for business purposes regularly, you need safeguards in case they do. Here are some situations that might call for this coverage:
- You or your employees rent vehicles on business trips.
- You give employees an auto allowance to use personal vehicles for business.
- You let employees drive their personal vehicles to pick up supplies or special items for the office.
- You borrow an associate’s vehicle occasionally.
- Your employees use their personal vehicles to travel to client locations.
What should your employees know?
If your employees drive their personal vehicles for work activities, they should speak with their insurance professional. Your employee should explain exactly how they plan to use their vehicle at work to ensure they have the right coverage. Revisiting their policy limits will help them determine whether those limits are adequate, given how they use their vehicle. Some policies exclude driving for business use, so it’s important to discuss this with an insurance professional.
Additionally, educate your employees about what your insurance will cover and how they are protected, including any coverage gaps.
Do you have questions about your current policy or adding hired and nonowned auto insurance? Speak with us to better understand your policy and options.