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.
Which policy will cover my car?
If you are using your new car mostly for work (think sales calls and visiting job sites), and you bought the car 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 employee’s, may not have high enough limits to protect your business.
Take the scenario: You are driving to a business meeting while having an intense conversation on your phone with your production department and you plow into a car 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 your business could be on the hook for the rest of the damages, but your firm’s insurance would likely not cover it.
If you or your employees are driving personal vehicles on business and relying on your personal auto policies, be sure 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.