4 Things to Consider When Buying Business Auto Insurance

In the world of business, things can -- and do -- go wrong.

• A fire or natural disaster could destroy the office you work in.
• A client could sue the business for damages.
• An employee could get into an accident while driving a company car.

While typical business insurance policies will protect you from property damage and lawsuits, many don't cover losses related to the use of vehicles. To make sure you and all of your company's drivers are safe, you need the right kind of business auto insurance.

The type of business auto insurance you need depends on the size and type of business that you have. Here are four questions to ask yourself when determining the type of auto insurance you need for your business.

1. Do I need business auto insurance at all?

Some small business owners assume that their personal auto insurance policy will cover the use of their vehicles for business. If you drive for business purposes sparingly, that may be the case. But while your personal auto insurance policy will likely cover some business driving, most won't cover a vehicle that is primarily used for business. Check with your insurance agent or broker to see whether the amount of business-related driving you do requires the additional coverage of a business insurance policy.

2. What kind of a policy do I need?

A contract called a business auto coverage form (BACF) is used to designate the level of business auto insurance coverage you want. You can add multiple vehicles to the BACF and designate a different level of coverage for each one. For example, you might add more coverage for a vehicle that's being driven 95 percent of the time than you would for a vehicle that spends most of its time in the company lot. When it comes to the specific level of coverage, a business insurance policy covers the same basic things that a personal auto insurance policy covers:

• Liability coverage pays for bodily injury and property damage caused to others.
• Collision and comprehensive coverage pays for theft of the vehicle or damage from an accident or other causes, such as a falling tree, or a hailstorm.
• Personal injury protection pays for the medical expenses of the driver if injuries are incurred in an accident.
• Uninsured/underinsured motorist coverage pays financial losses if you're in an accident caused by someone who does not have insurance.

3. How much business auto insurance do I need?

Most states require drivers to have a minimum level of auto liability insurance. For example, in South Carolina, drivers must have enough insurance to pay out $25,000 for bodily injuries per person, $50,000 for bodily injuries per accident and $25,000 for property damage per accident.

While that might be enough insurance to drive in a particular state, it's not enough to protect business owners from potential liability. The nonprofit Insurance Information Institute recommends that businesses buy a minimum of $500,000 in auto liability coverage per vehicle insured, which will cover all bodily injury and property damage claims in an accident. Some insurers have their own requirements of customers who purchase business or commercial auto insurance. For example, Nationwide requires a minimum of $100,000 in auto liability coverage per vehicle in its commercial auto insurance policies, and recommends that businesses buy between $500,000 and $1 million worth of coverage per vehicle.

4. Do I need insurance for vehicles I don't own?

Your business doesn't have to own all of the vehicles that are covered. A business auto insurance policy can also cover vehicles that are not in its fleet.

Say an employee using his own car drops a contract off to a client on the way home from work and gets in an accident. The business could be found liable since the accident happened while the employee was doing company business. A non-owned auto liability endorsement added to your BACF provides coverage in such situations. Different insurers offer variations of the non-owned auto liability endorsement. Some examples include:

• Employer's non-ownership coverage, which kicks in when employees drive their personal vehicles for business purposes from time to time.
• Hired auto coverage, which offers protection if you or an employee is driving a hired, rented, leased or borrowed vehicle.
• Any auto coverage, which ensures that any vehicles that you buy during the insurance policy period have the same coverages as those vehicles that are listed on the policy.