Understanding Company Vehicle Insurance

Many businesses require their employees to drive company vehicles. Whether your business owns one vehicle or an entire fleet, auto insurance is a mandatory consideration. An auto insurance policy provides coverage for liability as well as physical damage associated with the vehicles owned by your company.

Liability Insurance
The liability portion of the policy covers any damages your company is required to pay that result from an accident involving a company-owned vehicle.

All states require vehicle owners to purchase a minimum amount of automobile liability insurance. Most states have separate minimum coverage limits for bodily injury to each person who is hurt in an accident, for bodily injury for all people hurt in the accident, and for property damage. Be sure to purchase enough coverage to protect your business assets — typically this amount will be much higher than the minimum limits mandated by your state.

When purchasing automobile insurance for your business, you must first decide which vehicles you want to cover for liability. There are generally three options: automobiles owned by the business; all automobiles owned, hired, or leased; or all automobiles, including those that are not owned, hired, or leased.

The third option — covering all automobiles, including those that are not owned, hired, or leased — provides the greatest protection, and includes coverage for your employees' personal cars when they're used for business purposes.

Physical Damage Coverage
Physical damage coverage pays for damage to the insured vehicle. There are three basic types of physical damage coverage: collision, comprehensive, and specified perils:

1. Collision coverage pays for losses that result from a collision of the insured vehicle.
2. Comprehensive coverage is broader, and provides coverage for losses other than those covered by collision.
3. Specified perils coverage is a less expensive option than comprehensive coverage. It generally covers fire, theft, and various specified perils.

Businesses that own fleets of vehicles are at an increased risk of loss, and thus require more coverage. For example, vehicles parked together overnight are at risk of being destroyed in a single incident, such as a fire. In many cases, companies purchase additional property coverage to protect vehicles kept unattended on the premises. Another option that decreases the risk of large-scale accidents is to allow employees to take company vehicles home at night.

Insurance Premiums
Auto insurance premiums are based on a number of different factors. When determining rates for physical damage coverage, the insurer will look at the gross vehicle weight, business use, and the number of miles the vehicle is driven each year. Companies can help control the costs of their auto insurance premiums by following some basic guidelines:

• Check employees' driving records, and prohibit employees with poor driving histories from operating company vehicles;
• Emphasize driving safety, and require employees to wear seat belts;
• Ensure that employees know how to properly operate company vehicles;
• Properly classify vehicles with the insurance company. Track vehicle usage and the number of miles driven per year, and update these records when you renew your policy;
• Keep all company vehicles well-maintained;
• Choose vehicles with updated safety features, such as antilock brakes and air bags.