Most small businesses understand they need commercial auto insurance coverage, but many don’t realize that’s not always enough. They might also need hired auto insurance, and non-owned auto insurance. Commercial auto insurance is for vehicles a company owns. It does not provide coverage for personal, rented, or leased vehicles.
Hired and non-owned auto coverage is important for companies who use rental vehicles. It’s also critical for those who have employees that use their personal vehicles for business purposes, even occasionally. Most policies bundle these two coverages together into one. They can be added to a commercial general liability policy or purchased separately.
When does your business need hired and non-owned auto insurance?
Companies need hired and non-owned auto coverage if they rent or lease vehicles to use for business purposes, or if one of their employees uses his or her personal vehicle for business reasons. There are any number of scenarios where this becomes an important need for your company.
An executive assistant in your office, for instance, may use her own car to go out and pick up Friday’s lunch for the entire office. If she gets in an accident while running that business errand, the third party may sue your company for injuries and damages. Likewise, your HR director may rent a car while in another city to hold job interviews for your company. He could have an accident in that rental car and others involved may choose to sue your company. A company may rent a truck to move new furniture to their offices; to relocate supplies to a new warehouse; or simply to use while the truck the company owns is in the shop for maintenance.
How does this differ from commercial auto insurance coverage?
Business auto insurance policies protect vehicles that the company actually owns. It will not cover damages and claims made against your company if an accident happens in a non-company vehicle. Commercial auto insurance protects a moving company’s truck, for instance, since the moving company owns it. If the moving truck is in an auto accident, the commercial coverage pays related expenses. These include property damages, bodily injuries, medical expenses, and more. It also pays for repairing or replacing the truck when accidents are the fault of an uninsured motorist.
Let’s say, however, a company rents a moving truck and that truck gets in an accident while doing something business related. Despite being used for business purposes, a commercial auto insurance policy will not cover the accident because the company was using a rented truck. The same is true if an employee uses his own personal pickup truck or van. He may be moving company supplies, inventory, or furniture—all of which are direct business purposes—but since the vehicle is not owned by the company, it is not covered by the commercial auto insurance policy.
Doesn’t personal insurance cover this?
Most people wrongfully assume that their personal auto insurance policy—particularly comprehensive—covers their vehicle for everything. Thus, no one thinks twice about using their personal car for miscellaneous business reasons. Personal auto insurance policies do not normally cover accidents, injuries, and damages that occur during business use. If an employee is delivering materials to a jobsite, or simply picking up paper for the printer, they may be personally liable for damages and injuries if an auto accident occurs while performing those business activities. Even traveling to a business-specific event, such as an office team-building picnic, could disqualify an employee for protection under their personal policy if they’re in an accident enroute.
What does hired and non-owned insurance cover?
Hired and non-owned insurance coverage protects your company with liability coverage when it uses vehicles it does not own. This applies to your personal vehicles, employee vehicles, and rented or leased vehicles if your company uses them for business reasons.
If your employee causes an accident, it can result in a lawsuit for your company. Even if they’re simply running to the post office to pick up a company package, your company is at risk of being liable. Hired and non-owned insurance policies pay for the third-party property damages and bodily injuries that arise from these types of accidents and claims.
What are the limitations of hired and non-owned auto insurance?
This coverage is strictly for protecting your company against third-party injuries or property damages. It will not pay for damages to the rental or personal vehicle involved. This type of commercial insurance is a secondary source of insurance coverage. When accidents occur, other insurance coverage applies first. A rental vehicle likely has insurance in place that will pay for some or all of the damages, likewise a personal auto insurance policy may as well. Once these primary policies have reached their coverage limits, the hired and non-owners policy pays remaining applicable expenses.
