Every business owner dreads the annual insurance review that must be conducted to make necessary adjustments to every aspect of their insurance coverage. A professional relationship with an experienced insurance agent will reduce the amount of effort and ensure that every aspect of the business is covered.
Certain employee activities will require specialty coverage under the business auto insurance policy because these activities fall outside coverage of the health, worker's compensation, and business insurance policies (in fact, some experts even recommend that an
e-commerce business purchase business insurance!) Gaps in insurance coverage can be costly and even devastating to the life of a business.
When the business owner understands the reasons for purchasing adequate
auto insurance for their business vehicles along with coverage types, and impacts on the premium, better decisions can be made to purchase appropriate coverage.
Reasons for Business Auto Insurance
When a business owner first strikes out to fulfill their dream to be self-employed, some details are left for later. One of the most important details to cover is switching from personal auto insurance to business auto insurance. There are very specific reasons to take this step, including:
- Personal insurance will not cover the business use of a vehicle, but many business owners learn this fact after a loss occurs. Many personal policies have a stated disclaimer in the fine print of the policy that exempts the insurance company from paying business-related claims.
- Employees must be covered while using a business vehicle. Business auto insurance will cover the injury-related expenses for the employee that is hurt while driving a company vehicle. Company-issued health insurance will not pay for injuries received in an automobile accident.
- Equipment on the vehicle must be covered under business auto insurance because most vehicles are off the premises when incidents occur. Extra care must be given to covering specialty equipment under the auto policy.
- The company name must be used as the insured on the policy to prevent non-payment by the insurance company. This detail is paramount when vehicles are leased from another entity.
Coverage Types
Business auto insurance falls into nine categories, also called symbols, which designate the vehicles covered under the policy. While the titles are self-descriptive, there are specific instances where each level of coverage could be appropriate. Reputable insurance agents will ask many questions to determine the best level of coverage without over-insuring the business. Reveal every possible use for the business vehicles and notify the agent when new vehicles are purchased.
- Symbol 1 – Any vehicle – Few insurance companies will issue a policy under symbol 1 because of the broad level of risk that is associated with all the vehicles that could be used by a business. This designation is by far the most expensive business auto insurance classification and would benefit only extremely large corporations where itemized details would be impossible to track and list.
- Symbol 2 – Owned vehicles only – Vehicles owned by the insured are covered by this designation. The most important aspect is to verify the accurate insured designation in the policy to prevent a third-party entity, such as a leasing company, from being named instead of the business owner.
- Symbol 3 – Owned private passenger cars – When the business owns vehicles classified by the insurance industry as "passenger cars," other types of vehicles would fall outside the classification and not be covered under this symbol. Consideration must be given to purchase cars that carry lower premiums and are rated as "safe" by the insurance industry. Insuring a fleet of sports cars would be considerably more expensive than a fleet of four-door sedans.
- Symbol 4 – Owned vehicles, not private passenger – Insurance under this symbol covers specialty trucks and buses used for specific tasks. This portion of the vehicle insurance would not cover any vehicle that falls under other symbols.
- Symbol 5 – Owned vehicles, PIP coverage – Some states require that all business carry insurance under this symbol. Personal injury protection (PIP) is required in all "no-fault" states.
- Symbol 6 – Owned vehicles, Uninsured motorist – Certain vehicles must be covered by this category in some states. The experienced insurance agent will make the recommendation for the proper vehicles to place under this symbol.
- Symbol 7 – Specified vehicle coverage – This designation is the most common business auto insurance option because the insured lists the vehicle VIN‘s on the policy. For smaller business firms, this option is the easiest to track and maintain. Because specific vehicles are listed, the premium on the policy is lower than the policies written under symbols 1, 2, 3, and 4, which do not require a specific list of vehicles.
- Symbol 8 – Hired vehicle coverage – Companies with traveling employees carry this type of insurance to cover the cars that are rented for use by employees. This type of coverage prevents each employee from purchasing insurance from the rental car company at the time of rental.
- Symbol 9 – Non-owned auto coverage – Insurance issued under this symbol is purchased to cover gaps left by symbol 8 coverage. An employee is covered if an accident occurs while using their personal vehicle for a business purpose.
Impacts on Premiums
Many factors will raise the premium on business auto insurance. Some of these factors can be controlled while others would cost a great deal of money to correct.
- Business location – High-crime areas present an increased risk to the insurance company and the premium will be increased accordingly.
- Employee driver records – Hire people with clean driving records to prevent drastic increases in auto insurance premiums.
- Safety devices – Theft deterrents on the vehicles as well as locked garages and parking lots will lower the premium assessed.
- Coverage limits – Higher insurance limits will increase the premium, so careful consideration must be given to insure against loss without paying for too much insurance.
- Liability limits – Some business owners choose to carry an umbrella liability policy instead of purchasing the liability component under each of the insurance policies.
- Deductibles – Higher deductible amounts can be set to lower the premium, but care must be given to examine the combined deductibles from all the business policies to prevent a hardship in the event of multiple losses.
Finding the Best Coverage
Business growth will cause multiple changes in the business auto insurance coverage, and the professional insurance agent will ask appropriate questions throughout the year to keep the coverage up to date. Volunteer information to the agent because retaining good customers is his highest priority. Make changes when appropriate and leverage every possible discount including the multiple policy discounts offered by most large insurance companies.
The Small Business Owner's Guide to Business Auto Insurance is a post from:
Moola Days
