Business car insurance offers the same benefits as personal car insurance. The only difference is that it also protects the business entity(corporation, sub corporation), owners and employees from the financial damage and various liabilities an accident may cause.A company which has employees operating the company’s cars on daily basis should have a business car insurance, so that the employees and the business itself will have a layer of protection against any court action.
A standard business car insurance will cover:
- Bodily Injury liablity and property liability
- Personal injury protection coverage (or “No Fault” coverage)
- Uninsured/underinsured motorists coverage
- Collision coverage (A company may or may not include it, depending on the car driven and the circumstances)
- Comprehensive coverage (Again, an optional item)
Depending on the type of business, it may be beneficial to include the collision and comprehensive coverage in the insurance policy. For example, if your business depends on the car you or your employee is driving then in case of an accident the collision coverage will repair all the damage done to the car or replace the car totally. If you can afford to risk the vehicles, then you’ll pay less in premiums. For example if you rent cars for other people to drive you transfer all the responsibility to the people who rent it from you, so by the contract they will be responsible for any damage done to your car and their insurance will have to cover it. This is not the case with fleet car insurance though.
Some owners of small, family-owned corporations choose to insure a vehicle they use personally ( but that is titled in the corporate name for tax purposes) under their personal, but not corporate auto insurance policy.Because personal insurance is from 25% to 30% cheaper than business car insurance, they save some money on their car premiums, etc. However this can be quite disastrous.
Imagine this situation: you’re an owner of a small company (corporation) and have your vehicle title to the corporation and the insurance policy to your name. You rear-end a vehicle and cause serious damage to the car and the person in it. You and the corporation get sued for $700,000. You have a personal liability limit of $100,000 and also $2,000,000 of coverage under Personal Umbrella policy, so you’ve got the claim covered. However, because the corporation is not insured under your personal insurance policy, you’ll need to pay your corporate dollars to defend your business. (At least $30,000). And if there’s a judgment against the corporation itself, then you’ll have to pay even more money out of your own pocket.
But wait, there’s something else: if your car has had collision coverage, but it was on your personal insurance policy and legally the corporation owned the vehicle, you won’t be able to get the money back for the damage done to your car because your corporation is not listed on your personal auto insurance policy and therefore is not entitled to any money.
There are few solutions to this:
- Put the car on the corporate insurance.
- Insure and title the car personally to avoid any hassles.
- Put the corporation jointly with you as a Name Insured on the cover page (a.k.a. the Declarations page). Use this only if your personal liability limits are equal to the limits of other insurance policies the corporation carries
When you come to think about it, its better to pay for a peace of mind. If you’re buying a car for personal use, insure it and title it personally. If you’re getting it for business use, insure the vehicle same way you title it – under the corporation.