Bumpy roads: Determining whether company car insurance is right for you

Vehicles play a sizeable role in the business operations of virtually all companies and industries. Some companies have designated vehicles for employees to meet and interact with existing and potential clients; delivery companies rely on vans and trucks to provide goods and services; hotels provide complimentary shuttles — the possibilities are endless. But just like the average individual who might rely on their car to get from point A to point B, there are risks that threaten company vehicles. This is where company car insurance comes into play.

If a business owns vehicles and they are titled in the company’s name, those commercial vehicles need insurance for complete coverage. If a business owner’s only vehicle is used for both company and personal use, a company vehicle policy is necessary. In general, there are three options for which vehicles can be covered: the vehicles a business owns; the vehicles a business owns, hires or leases; and the vehicles used for the business, including those that it does not own, hire or lease.

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Understanding company car insurance

To determine if company car insurance is needed, Policygenius says there are three things to consider. The first is vehicle ownership. If a company owns any vehicles, they will need company car insurance. If a company uses vehicles owned by individuals — like an employee — then you may need company car insurance in addition to personal auto insurance, depending on use.

The second is vehicle use. Vehicles used for commuting do not need to be covered by a company policy, but if a vehicle is used to transport people, goods or equipment for work, then you need a company auto insurance policy. The last consideration is the vehicle make and model. There are some vehicles, regardless of how they’re used or who owns them, that need to be covered by company insurance. These vehicles include trucks over 10,000 pounds or with load capacities over 2,000 pounds and vehicles with commercial modifications, like a ladder rack.

“In just about every aspect, [companies] would need an auto liability insurance policy,” says Steve Shepard, underwriting manager, transportation at Burns & Wilcox. He says the auto liability policy would “just about cover” the use of that auto in the course of doing business for any damage that is caused by that vehicle to someone else’s property or body. “That is probably the biggest portion and the highest exposure in a lot of ways because an auto liability policy is really helping protect the assets of the company and the liability arising from the employee’s use of the vehicle.” If an employee is considered negligent or at fault, Shepard says the awards or demands for payment can be rather significant.

The other type of insurance that would be associated with company car insurance is called physical damage coverage. This covers the insured’s property, like the vehicle itself, whether they’re leasing, renting or own the vehicle. An auto liability insurance policy is considered third-party coverage, while physical damage coverage is considered a first-party coverage.

Like any other insurance policy, it’s important to note what is included with basic coverage versus what additional coverage offers. Basic company car insurance coverage includes liability coverage, medical payment coverage/personal injury coverage, collision coverage, comprehensive coverage and uninsured/underinsured motorist coverage. Additional coverage options include trailer interchange coverage, hired vehicle coverage and non-owned vehicle coverage.

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A bumpy road without insurance

Because certain companies and industries rely heavily on vehicles to conduct business, they should look at company car insurance as a means of keeping costs down. Like all forms of insurance, it’s a way to transfer risk. In the event of an accident involving a company’s car, a company is looking at more than just accident-related costs. For example, a company may experience business interruption if it doesn’t have a replacement vehicle to deliver goods, which can lead to reputational damage — all of which impacts its bottom line. The loss of a company car can have a myriad of negative effects that can ripple throughout a company’s operations if they don’t consider all possible outcome.

Insurers that write personal auto policies often offer individuals ways to keep costs down, such as by enrolling in a defensive driving course. Businesses that need company car insurance also have ways to keep the cost of insurance down. Shepard says one way is through deductibles or by taking on more of a self-insured layer themselves. Another way is through risk/loss control or by having safety director in place and working in concert with the insurance company on those policies and procedures that they have in place to help mitigate costs.

To a large extent, vehicles power the success of businesses everywhere. But their success is contingent on the vehicles they rely on. To maintain their course, businesses should turn to company car insurance to avoid the bumps in the road that are ready to derail them.

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