A significant aspect of insurance for many businesses – particularly larger ones – is business auto insurance. A business insurance policy is similar to a personal one in terms of how it is priced and what coverage extends to. However, there are some differences that are worth noting.
♦ Commercial use
In a personal auto insurance plan, an exclusion clause denies coverage to private vehicles used for business purposes. Business auto insurance policies define commercial use, but vehicles covered under such policies can be used privately. It is advisable to name the business as the “principal insured” on a commercial auto insurance contract to avoid any confusion – particularly for sole traders.
♦ Fleet insurance
Business policies give the entity an opportunity to cover all vehicles under an umbrella policy known as fleet insurance. This option suits business owners who have multiple vehicles and drivers to cover. Fleet insurance is much cheaper per vehicle than purchasing individual policies.
♦ Premium-affecting factors
A business insurance policy is affected by factors similar to those affecting personal car insurance. Actuaries take the business location; driver records; type(s) of vehicle; deductibles; and the presence of safety and anti-theft devices into account when evaluating the premium.
♦ Parts of a business auto insurance policy
A business car insurance plan is composed of three primary facets: physical damage insurance, liability insurance, and miscellaneous coverage.
Physical damage insurance covers both collision and comprehensive damage or losses. Collision coverage applies to damage or loss arising from an accident, no matter which party is at fault. Comprehensive coverage indemnifies damage/loss arising from non-collision events named in the policy. It typically includes theft, vandalism, fire, earthquake and floods.
Liability insurance is relevant when you are at fault in an accident, covering bodily injury and property damage to third parties. This liability coverage is critical to a business, since it covers legal judgments and costs. Many commercial car insurance plans also carry uninsured motorist coverage, in the event of an accident where an uninsured motorist is at fault. In some cases, underinsured motorist coverage is available where the other motorist, who is at fault, does not have sufficient liability insurance to cover the claims.
♦ Miscellaneous tidbits about business auto insurance
Additional features (known as endorsements) could be borne by a commercial car insurance plan and customized to suit the needs of the business. These include roadside service, new vehicle replacement cost and auto lease coverage.
Some damages to business vehicles might not be covered – for example, damage caused by strain/overload or loss or damage during transit by sea.
Many business insurance plans provide indemnity for the insured vehicle if it is towing another vehicle for business purposes (but not for hire or reward). Even damage by the towed vehicle could be covered, but not usually damage to the towed vehicle.
Business auto insurance policies can be customized to suit the unique coverage needs of businesses. While strong similarities do exist between commercial and personal auto insurance plans, personal car insurance policies will not cover commercial use. If in doubt, a robust commercial auto insurance policy is the better option.