Business Owners Resource Network

June 18, 2009

What is a commercial auto anyway?

Filed under: Business Insurance — natewatson @ 8:20 pm

Everyone knows that you can’t insure a big rig as a personal auto. But after that, there is a lot of confusion as to when, and why, trucks and autos need to be insured as a commercial auto.

What is a commercial auto anyway? 

Everyone thinks that commercial autos are expensive, but that is not always so.  Given that they are priced per year, many are similar in price to that of a personal auto. But given that your business policy excludes all auto liability and your personal auto policy excludes all business use, having your auto as a commerical auto can be important. Let me repeat that.

Your business General Liability policy–excludes ALL automobile liability. That means if you have a truck and it says Bob’s Construction on the side in big red letters (sorry if there really is a bob’s construction), and you get into an accident and they sue Bob’s construction. Guess what. you have no coverage unless that vehicle is insured as a commercial vehicle. NONE.

If you think, well, my vehicle can be insured much cheaper by insuring it as a personal auto, and I just won’t tell the insurance company it is really a business’s auto, and I’ll save a few hundred dollars per year. Same scenario.  You get into an accident; lawyer sees that vehicle is titled in business name and sues the company. Company has no liability, but NEITHER DOES PERSONAL AUTO because personal auto policies exclude any and all business use of vehicle.  So how much liability money do you have coming your way when you get sued here, NONE!

This is very important. You spent all that time making Bob’s construction the number 1 construction company in your area, don’t let it become Danny’s construction because you failed to insure your vehicle correctly and Danny (the guy you rear-ended in the company truck) is now making a good living with your company.

The water does get a little murkier when you don’t own the company. Say you are, oh, I don’t know, an insurance agent named Nate! I drive my vehicle more than just two and from work. I take clients to lunch; I have life appointments all overt the Kansas City metro at all kinds of hours of the day. My company doesn’t own my car; do I need a commercial use policy for my car? The answer is no. I need what most companies call “business use” on my personal auto policy. This gives me the ability to drive more than just to and from work and still be covered. And trust me, if the insurance company finds out you have been lying to them, they have the option to pay only part of your claim, or even worse, none of it.

So here’s the moral of the story. If the company has its name on the title, commercial vehicle. If you own the company and over 50% of the mileage is done for the company, commercial vehicle. If the name of the company is on the side of the vehicle, commercial vehicle. If you are an employee and you go more than just to and from work, you go other places during the day for the boss, business use. If you alone own the vehicle, and you work for someone else, and you don’t go anywhere other than to work, maybe some McDonalds, and then back home…personal auto, no other insurance endorsements needed.

Trust me; don’t lose your company because you wanted to save 20 dollars. Don’t lose it either because your agent didn’t ask. Just because they didn’t ask doesn’t mean you shouldn’t.  

When’s the last time you talked to your insurance agent about commercial auto?  If the answer is a long time, or never, call me.  I would be happy to discuss what you need and what you have. 

Nathan Watson, Brothers and Associates, LLC. 913..322.3388 ext 14.

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