YOU’RE SUCCESSFUL at running your business and you decide it’s time for a new car. You want to take advantage of the great leasing deals many carmakers have on offer, so one weekend you enter into a lease for that vehicle.
On Monday you tell your bookkeeper to add the car to your company’s business auto policy, but he tells you that the insurer can’t add the vehicle since it’s in your name. Knowing you’re going to be using this car primarily for business, you realize you’re suddenly in a bind.
As a business owner or company director wanting to lease a car for yourself, you have the choice of either business contract or personal car leasing, and each option has its own implications, benefits and disadvantages, particularly in terms of insurance.
And if you are using your new car mostly for work (think sales calls and visiting job sites), and you bought it in your name, that mistake can cost you as your business won’t be able to insure it properly.
Your personal auto policy will provide coverage for some business use of your vehicle. The same is true for your employees’ personal auto policies, which also cover some business use of their vehicles.
But, a personal auto policy is unlikely to provide coverage, if the vehicle is used primarily in business.
The personal auto policy – whether yours or your employees’ – may not have high enough limits to protect your business.
For example, take the scenario of you driving to a business meeting while having an intense conversation on your phone with your production department and you plow into a vehicle in front of you, injuring the driver and three occupants. Then they sue you and your company.
If you have only a personal auto policy, your insurer will probably defend you personally and pay the claim up to the policy limit. Your personal auto policy insurer will not defend or pay damages on behalf of your business, however. Most certainly, once your policy limits are exhausted, the other party or business would be on the hook for the rest of the damages, but insurance wouldn’t cover it.
If you or your employees are driving personal vehicles on business and relying on your personal auto policies, be sure that you and they have sufficient liability coverage to protect your business in the event of a serious auto accident.
Do not expect to rely on a personal umbrella policy for any claims that arise from business use of a vehicle. Typically, the personal umbrella excludes all claims occurring in the course of a business endeavor.
If you are in the market for a new car that you’ll be using a significant amount of the time for work, you should seriously consider leasing it in your company name. It will save you from headaches later if you are involved in an accident.
Business auto insurance checklist
If you answer “yes” to these questions, you need business car insurance to stay properly covered:
• Run business errands during the day?
• Travel to client or business meetings?
• Travel between different business sites?
• Drive colleagues or business contacts around?
• Allow other employees to drive your vehicle?
• Make deliveries or collections?