Over the years I have reviewed several insurance policies. One of the most overlooked coverage is the Commercial Auto Coverage because people will assume that they have coverage under their personal auto policy (PAP). Several people today start their own businesses on the side besides their normal 9-5 job to either provide a better lifestyle or to get away from their current job. They are using their own personal vehicles in these businesses without reviewing their personal insurance coverage.
Most PAP policies are designed and rated to provide coverage for people that drive to and from work, 5 days per week, leaving their automobile parked outside that job for 8 hours and then go home. There are exclusions in the PAP and one of them is for business use. There is an endorsement that can be added that provides business use for professionals like attorney’s, insurance agents, and realtors who use their cars in their business. There is an extra charge for this and is not included under the normal policy.
Now for those people who use their personal vehicles for mowing lawns on weekends, who do delivery of inflatable devices for a company or their own company, who use their vehicle to tow a trailer to a job site, maybe a Rockwall to a jobsite, or provide a courier service, you need to have a commercial auto policy which will cover the exposure of delivery and business use.
The commercial auto policy is rated higher than your PAP due to the different exposures, mileage, and usually higher limits. You can have a commercial auto policy on a vehicle that you use for work and for family use, no problem.
The commercial auto policy is usually at a minimum limit of $300,000, and up to $500,000 or $1,000,000. There are also excess policies that provide coverage above these limits if needed.
You will want to have physical damage coverage which will provide protection for the vehicle in case of accident (whether your fault or not) or theft. This coverage is called collision and comprehensive coverage.
If you tow a trailer, that trailer needs to be listed on the commercial policy also as the liability coverage will extend to the trailer if you run over someone, back into a building or another vehicle, etc. You might want to insure what is on the trailer if fixed equipment or the contents that are in the trailer.
Hiring younger drivers under the age of 25 will increase you rates. Hiring drivers with violations or accidents on their record will also increase your rates. Any violation or accident with any vehicle, whether personal or business is included in the rating process.
If you have exposure of having an employee use their personal vehicle in your business activities, including picking up supplies, going to the bank, making a delivery, you will want to add Non Owned Auto coverage. This would provide your company with defense coverage in case of an incident. The employee’s vehicle would not be covered for damages to it.
If you have an exposure of having to rent or lease a vehicle you can add Hired Auto Coverage which will provide liability coverage only, not covering the physical damage of the vehicle.
Now when you discuss this insurance with an experienced agent, make sure that you request coverage for all vehicles that you may drive. Some policies will only provide “scheduled vehicles” which means that the coverage will not extend to a vehicle that is not listed on the policy. Always call your insurance agent BEFORE you purchase a new vehicle so the price for the insurance does not blow you out of the water. There are several issues that affect the cost of insurance such as the value of the vehicle, the annual mileage, the weight of the vehicle, age of drivers, and driving records of all drivers.
What would an attorney charge to defend you in case of an auto accident? $2000, $5000, or $10,000? Now the real question is, can you afford NOT to have a Commercial Auto Policy?
Larry Cossio has been a licensed insurance broker since 1979 and has been insuring entertainment risks nationwide since 1998. You may contact him at firstname.lastname@example.org or his office at 864-688-0121. (12.01.06)