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Any vehicles your business owns and any driving you or your employees do for work probably isn't covered by personal auto insurance or your regular business insurance policy. Depending on your business—and how routinely you drive on the job—you may need a dedicated business auto insurance policy to protect your assets and employees, and to comply with insurance requirements in your state.
If your business owns company cars, delivery trucks or specialized vehicles, you need business auto insurance. And if you frequently, or even occasionally, operate your personal vehicle for business purposes, you may want to consider a business auto policy that covers your business-related vehicle use. Here's what to know about business auto coverage.
What Is Business Auto Insurance?
Business auto insurance covers liability and damages for vehicles owned by your business or driven as part of your business operations. Business auto insurance is similar to personal auto insurance, except that it's used to protect your business vehicles and assets instead of your personal vehicle and assets.
If a vehicle owned by your business is involved in an accident, your company could be liable for the injuries and property damage that results. The same may hold true if you or your employee are driving a personal vehicle on the job. Coverage can vary depending on which options you choose, but in general business auto insurance provides protection where your personal auto policy and regular business insurance do not.
What Does Business Auto Insurance Cover?
Business auto policies cover cars, trucks, trailers and other vehicles your business owns. Optionally, it can also cover vehicles your business leases or rents as well as vehicles owned by others that are driven for business purposes—for example, your employee's personal vehicle they use to make deliveries.
Business auto policies typically break coverage down into these basic categories:
- Liability coverage is for bodily injury and property damage that results from an accident. Your state may have mandatory requirements for liability insurance, including medical (or personal injury) coverage and uninsured/underinsured motorists' coverage. Businesses often choose high levels of liability coverage to make sure their assets are protected.
- Collision coverage is for damage that results from a collision or from the vehicle overturning. If you lease a vehicle, you may be required to carry minimum levels of collision and comprehensive coverage.
- Comprehensive coverage is for damages that result from something other than a collision, such as a fire, theft or flooding.
- Specified perils coverage is similar to comprehensive coverage but only covers perils that are named in the policy. Because it covers a limited number of perils, specified peril coverage may cost less than comprehensive.
- Hired and non-owned auto insurance covers vehicles that are not owned by your business, such as personal cars belonging to you or your employees.
You may be able to choose different coverages for each business vehicle listed on your policy, so you can scale coverage up or down based on the vehicle's value, age, frequency of use or safety rating.
Business vs. Personal Auto Insurance
Business and personal auto insurance are similar; the key difference being that business auto insurance is for vehicles owned and used in business. Any vehicle owned or regularly used by your business should be covered by a business auto policy.
What about personal vehicles you use for business—or business vehicles you use in your off time? In general, business and personal auto insurance don't stand in for each other: Most people need both. If you're driving a personal vehicle for work, your personal policy probably won't cover you in case of an accident that happens while you're driving for business. Likewise, business auto coverage usually doesn't cover your personal time.
If you don't have employees or business vehicles and barely use your car for business purposes, your personal policy may offer you limited coverage, but talk to your personal auto insurance provider to confirm. Personal policies vary and in most cases offer only minimal coverage for business use.
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How to Know When You Need Business Auto Insurance
You need business auto insurance when your business owns and operates vehicles, and whenever you or your employees drive on the job. You don't need a business auto policy if all you do is commute to work; your personal auto insurance policy covers that. However, if you routinely use vehicles in your business operations, you may want to consider a business auto policy.
Here are a few cases when adding a business auto policy makes sense:
Your Business Owns, Leases or Hires Vehicles
Any vehicles your business owns should be insured under a business auto insurance policy. Additionally, you may want coverage for vehicles your business leases or rents. These include the following types of vehicles:
- Company cars
- Delivery trucks or vans
- Trucks, vans or trailers used to haul equipment
- Transport vehicles, such as buses or taxis
- Specialized vehicles, such as box trucks or food trucks
You Drive a Personal Vehicle for Business
You may also want to consider covering personal vehicles that are driven for business, including your personal vehicle. With limited exceptions, personal auto policies don't cover business use of your vehicle. If you regularly drive your personal car while at work, you may want to discuss adding business auto insurance with your insurance provider.
Here are a few examples of business owners or contractors who would likely need business auto insurance:
- Gig workers for delivery and ride-hailing apps
- Business owners and self-employed people who drive from one work site to another
- Real estate agents who drive clients to view properties
- Contractors who haul equipment or tow a trailer for work using their personal vehicles
Your Employees Drive on the Job
Your employees' personal auto insurance may not cover accidents that happen while driving on the job. Moreover, their personal liability coverage may not be adequate to protect your business if they're at fault in a major accident. A business auto policy can cover your employees when they use their own vehicles on the job to do any of the following:
- Deliveries
- Client visits
- Transporting equipment or people
- Running errands
The Bottom Line
Not having business auto insurance when you need it could leave you and your business on the hook for medical expenses and property damage if there's a work-related accident. Adding a business auto policy covers your business-owned vehicles, personal vehicle and employees, so that driving on the job doesn't leave anyone exposed.