Do your employees use their personal vehicles to conduct routine work-related tasks? Maybe they use their vehicle to attend client meetings or business trade shows, or to pick up office supplies. Even if your employee has their own auto insurance policy, you may still be open to risk. But how?
Most businesses purchase commercial auto insurance, which covers the use of business-owned vehicles. While this type of coverage does a good job of protecting vehicles your business owns, it doesn’t extend to employees’ personal vehicles. The result is a potential gap in coverage and increased exposure to liability.
If an employee has auto insurance, you might wonder why a 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 cover this type of use, there are no guarantees the limits will be enough to cover the accident. Considering policy limits is especially 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, let’s say an employee has full coverage on their vehicle. They live in California, which requires a minimum of $5,000 in property damages for auto insurance coverage. This essentially covers damages to another vehicle or to property (such as a telephone pole). The employee is trying to save money on premiums, so they opt for the state’s minimum coverage amounts.
Let’s assume your employee is driving to a client meeting. Looking away for a moment, they don't realize the car in front of them has come to a complete stop. 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 quickly realize it only covers vehicles your company owns. Since you don’t own your employee’s vehicle, there is no coverage in place, and your business is open to financial risk.
Hired and non-owned auto insurance covers costs associated with bodily injury or property damage caused by a vehicle used for business purposes or a vehicle your company doesn’t own. You can usually add this type of coverage to your existing commercial auto policy.
It typically covers a variety of expenses, from legal fees to property damage and bodily injury. Medical bills and auto repairs are also included.
Your need for this coverage will depend on whether you have employees who drive for business purposes. Even if your employees don’t regularly drive for business activities, but there is the potential for them to do so, it’s important to put the right safeguards in place. Here are some situations that might call for this coverage:
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 proper coverage is in place. Revisiting their policy limits is important to determine whether the limits are adequate, given how they use their vehicle. Some policies do exclude driving for business use, making it important to discuss further with an insurance professional.
Additionally, be sure to let your employees know what your insurance will cover and how they are protected — as well as any gaps that may exist.
Do you have questions about your current policy or adding hired and non-owned auto insurance? Speak with your insurance professional to better understand your policy and additional options.