When do you need business car insurance?

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Here's what you need to know...
  • Commercial auto insurance is recommended on any vehicle that’s primarily used for commercial purposes
  • Business auto insurance typically costs more than personal coverage
  • You may also get special coverage for employees who use their vehicles for company errands

When you start a business, you’ll find that there are hundreds of tasks that you need to handle. One of the first things you should do is get the right insurance in place on your vehicle.

Whether you’re buying a new auto for the business or you’re going to use the family minivan, you’ll want to get a plan that protects your business assets and keeps your family’s financials separate.

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Business Owned, Business Insured


When you buy a vehicle and put it in the company’s name, you need to carry commercial insurance on it, which includes vehicles that are owned by an individual but used almost exclusively for the business.

You may be worried about the cost of business insurance, but it’s easy to keep this expense in check by shopping around for the right plan.

To determine if a vehicle is used primarily for business or pleasure, you can ask yourself these questions:

  • Will employees drive the vehicle?
  • Is it used for commercial purposes more than three times in a given month?
  • Will it carry business tools?
  • Is it marked as a business vehicle with special wraps or signs?

What BACF Typically Covers

Commercial auto insurance is known as the Business Auto Coverage Form, and it applies to all types of commercial vehicles. While it will typically refer to the autos, it also extends to:

  • Cars, vans, and trucks
  • Trailers
  • Custom vehicles used on public roads

This policy typically only provides liability protection, usually in the minimum amount of $500,000. However, you can shop around for a policy that will also provide you with comprehensive or specified perils coverage.

This optional insurance may not be cost-effective with older vehicles, but it’s highly recommended if you have newer cars or more valuable automobiles on the road.

Special Considerations for the Self-Employed


If you’re an independent contractor or have an LLC, then you may be confused about your car insurance. The simplest solution may be to just leave your private coverage in place, but this may not be the right option.

If you’re going to be working from home, then you may want to talk with your insurance company about the coverage to see what they recommend. They may ask you specific questions, including:

  • What type of work you do and if you will need to drive your car for the work
  • How many miles you expect to drive for business and personal use
  • If you will transport passengers or employees in the car
  • If you will carry merchandise, inventory, or tools as part of the business

Beware of Very Low Rates

It’s smart to shop around for better rates, but you should be wary of any policy that sounds too good to be true. When one company offers prices that are substantially lower than the competition, you may not be receiving the same level of protection.

When you compare quotes, be sure that you’re submitting the same information to companies and asking for the same type of policy. Read the fine print to ensure that you will be covered, and ask questions if you have any concerns.

Coverage for Employee who Drive Personal Vehicles for Work


If you have employees who drive around on the job to make deliveries or run errands, then you’ll save money if they use their own vehicle. However, you can still be held liable if they cause an accident while on the clock.

You can protect yourself by hiring people with clean driving records, but you should also insist that they have insurance with at least $500,000 in liability protection.

You may also want to purchase a business auto insurance policy that will cover those exposures and limit your own liability.

To simplify your accounting and billing, talk to your auto insurance company about this protection. You may be able to get all the protection you need from one reliable company. Be prepared to provide the company with information about your employees, including the driver’s license numbers and contact information.

Expect Higher Premiums

One reason people may avoid buying commercial auto insurance is that it does typically carry higher premiums. As you add coverages and features, the rate will continue to rise. Insist on a plan that includes bodily injury and property damage coverage to take care of damages to structures as well as injuries to other parties.

Additionally, you may want to consider medical payments coverage, and comprehensive insurance will protect your own asset.

If you’re worried about how these additions will change the coverage, remember that you can always compare different quotes to find a better rate.

With the right type of plan, you can confidently drive around town to build your business. Shop around for the best rates, but insist on a plan that offers you the coverage you need.

The additional peace of mind will be well worth the additional expense. With the right company behind you, the company can grow, and you won’t have to worry about losing everything as the result of an accident.

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