As a small business owner, you’re implicitly responsible for every aspect of your limited liability company. Sure, you may have a board of directors, an executive team or even co-owners. But, ultimately, any major issues that arise with your company will find their way onto your shoulders to some degree or another.
If your business involves a business car or, more specifically, the business use of a personal vehicle, you need to be sure that you and your business are adequately covered. Here’s what you need to know about business auto insurance and how you can minimize any negative repercussions.
The Role of Business Auto Insurance
As you might expect, any business vehicles still require the same basic coverage that you require for personal use. But since your business interests are intrinsically tied to these vehicles, you do need to go beyond that. Unfortunately, your business owners policy does not extend to auto insurance either.
As the business owner, your starting point will likely be the Business Auto Coverage Form (BACF), a common contract for providing auto liability insurance.
Each business vehicle can be scheduled on the form separately, allowing you to vary the amount or types of coverage for each vehicle. In most cases, you will be required to secure liability insurance if, for example, your business vehicle is involved in any instance of bodily injury or property damage.
Depending on your state of operation, you may also need to look into uninsured motorists coverage, physical damage coverage or other types of policies.
Regardless of the level or type of coverage you select, the vehicles you may elect to cover generally fit into one of three categories:
Vehicles your business owns
Vehicles you hire or lease
Vehicles used for business purposes
Whichever type of policy you select, be sure that you are upfront with your insurance agent regarding your business's vehicle use and the operators of the vehicles.
In particular, you want to ensure that you have liability protection in the event of an accident. The more you anticipate and disclose when designing your policy, the better off your business will be.
Using Personal Auto Insurance
If you are planning (or have been) using your personal vehicle as a part of your business, you may be wondering if this is technically legal or if this activity leaves your vehicle vulnerable to policy gaps.
As it turns out, your private auto policy — as well as that of your employees — can be applied to business activities. However, if the vehicle is mainly used for business purposes, if it is owned by your business or if you’re carrying business equipment or other assets, you’ll need a different policy to provide the liability coverage you need to effectively protect your business.
While personal policies may provide a modicum of assistance, you simply cannot trust them to serve your business vehicles well. You need to thoroughly evaluate the balance between personal and business use.
To minimize exposure to liability, stress the nuances of your business auto insurance policy with your employees and enforce these regulations to the letter.
Types of Car Insurance Coverage
As we’ve discussed, you really need to take a close look at your auto insurance to be absolutely certain that you’re not playing fast and loose with your company’s liability.
Here’s a quick breakdown of the main types of coverage.
The nature of physical damage coverage is fairly self-explanatory, but it is actually comprised of three separate subsets. Collision coverage provides assistance for damage incurred during a collision with an object or event that overturned the vehicle.
Meanwhile, comprehensive coverage allows for most losses not included in collision coverage, with exceptions such as wear and tear and mechanical problems. Specified perils coverage then assists with any scenario that is so named within the policy itself.
We’ve mentioned liability a fair amount thus far, but liability coverage itself dictates the amount of all damages that your insurer is obligated to pay. Some insurers recommend that a business carry at least $500,000 in auto insurance.
In the event of a lawsuit against your business, your insurer will step in to defend the covered damage or even settle the lawsuit on your behalf. Which route they take is up to their own judgment. Once your limit is reached, your business is exposed and fully liable for any damage incurred.
Combined Single Limit
Your BACF does not typically carry separate limits for bodily injury and property damage liability as personal policies do. Rather, it has what is called a Combined Single Limit, allowing for higher potential limits in either category. While such a policy may also include limits for each occurrence of damage, this too tends to be higher, providing greater flexibility for your business and how you decide to leverage your investment in business auto insurance.
(In)sure of Yourself
Business auto insurance can be a bit complex, but if you keep yourself informed, you can wisely avoid placing your business at risk. In the end, it’s this protection that demonstrates how committed you are to proving yourself to your community and prospective customer base.
While it can be overwhelming at first, running a small business doesn’t have to be as stressful as it appears. At Incfile, we provide professionals just like you with the tools to set your company up for long-term success.
With our extensive resources and expert assistance at your disposal, you’ll be more than ready to serve your customers and fulfill your mission. For more about how we can help, check out our website and get started today!
Robert Yaniz Jr.
Robert Yaniz Jr. has been a professional writer since 2004, including print and online publications. Much of his experience centers on the business world, including work for a major regional business newspaper and a global law firm