All motorized vehicles, whether used for personal or business purposes, need auto insurance. Automobile liability insurance – required by most states – covers medical expenses for injured persons and damages to the property of other individuals as a result of a motor vehicle accident caused by the insured’s negligence.
While the types of coverage provided by personal and commercial auto insurance policies are essentially the same, there are important distinctions. Typically, commercial auto insurance policies have higher liability limits, for example $1 million. They also may have provisions that cover rented and other non-owned vehicles, including employees’ cars driven for company business.
Several factors related to ownership and use of vehicles determine whether a personal or commercial policy is appropriate. These include:
- Who owns or leases the vehicle – you individually or the business as an entity
- Who drives the vehicle – you or your employees
- How the vehicle is principally used – for example, transporting people, delivering packages or carrying hazardous materials
Discuss these matters with a licensed insurance agent knowledgeable about commercial auto insurance. You might also want to consider the purchase of collision and comprehensive (other than collision) coverage to protect yourself against damage to your vehicle.
- If your business owns or leases a vehicle, make sure its name is listed on the policy as the principal insured.
- If you are relying on either a personal auto insurance or personal umbrella liability policy to provide you with protection for your company’s use of vehicles, look closely at the provisions, as business-related liability may be excluded.
- If your employees operate a company car, make sure they have good driving records and are trained properly.
- Consider increasing insurance on your business vehicle to cover permanently attached items, such as a generator or storage unit.
The following factors can affect the cost of your insurance premiums:
- Premiums are linked to the type of vehicle driven. So if you’re buying or leasing a new car or truck, check the insurance rates before you make your final choice.
- Safety devices can help reduce your premiums. If you’re buying or leasing a new vehicle, consider getting one with anti-lock brakes, side air bags, automatic seat belts and daytime running lights.
- Anti-theft devices, such as an alarm system and global positioning system – so that your vehicle can be located if stolen – can help reduce your premiums.
- Where you park your vehicle can impact premiums. If you have access to an indoor garage or locked parking lot – places that decrease the likelihood of theft – you may qualify for lower premiums.
- The geographic region in which your business operates affects your premiums. For example, areas prone to extreme weather – hail, wind storms, hurricanes, etc. – higher traffic patterns or higher risk of theft may have higher insurance rates.
- The number of claims you have previously filed can impact your insurance costs.
- The coverage limits you choose affect the premium – the higher the coverage amount, the higher your premium. If you’re using your vehicle to conduct business, you may want to consider a higher liability limit so that coverage protects both your business and personal assets if you are sued due to an accident.
- The cost of your insurance is directly linked to your policy’s deductible amount. The deductible is the amount of money that you agree to pay as part of a claim, before your insurer pays the remaining amount toward that claim.
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