Auto Insurance: Can Your Boss Dictate Your Policy?

If an employee uses their personal vehicle for work purposes, their personal auto insurance policy will often not cover any incidentals that occur while they are on the clock. This is especially true if they are not the ones driving the vehicle when the incident takes place. In such cases, the employer can be held liable for the difference in costs. This is why employers can require employees to carry a specific amount of auto insurance coverage on their personal vehicles. However, the employer should pay for the upgrade by incorporating the higher insurance premium into the employee's car allowance or vehicle reimbursement.

Employers can require more insurance on personal vehicles used for work

If your employees are driving their personal vehicles for work, your business is at risk of financial liability in the case of an accident. Motor vehicle accidents cause 39% of occupational fatalities, with over 2,000 employees killed in an average year. In 2019, motor vehicle accidents cost employers a total of $72.2 billion in the U.S. alone.

If an employee causes an accident during the workday, and their auto insurance cannot cover the costs of injuries and property damage, the employer can be held liable for the difference. This is called vicarious liability.

To protect your company, you can require employees to carry a specific amount of auto insurance coverage on their personal vehicles. The key is that the employer pays for the upgrade by incorporating the higher insurance premium into the employee car allowance or vehicle reimbursement.

You should also verify your employees' auto insurance coverage every six months. Most policies renew every six months, so that's when you'll want to check up on their coverage.

You can also provide company-owned vehicles to your employees. In this case, you will need to insure the vehicles under your company's commercial auto insurance policy. A commercial auto policy will cover all your company's business vehicles and your liabilities associated with them during work-related operations.

Commercial auto insurance covers many vehicle-related incidents, but it has some limitations and exclusions. For example, it does not cover business or personal property in your vehicle, intentional bodily injury or property damage, or completed operations (the work you have completed).

If your employees use their personal vehicles for work, they should be carrying liability insurance on their personal auto policies. In most cases, this insurance will be the primary coverage in the event of an accident they're responsible for. Your commercial auto liability would serve to fill any gaps in terms of liabilities.

Employers can be liable for accidents in personal vehicles during work hours

Employers can be held liable for accidents that occur during work hours, even if the employee is driving their own personal vehicle. This is known as "vicarious liability" or "respondeat superior" ("let the superior answer"). In such cases, the employer must answer for the careless driving of its employee.

For vicarious liability to apply, the driver must be an employee (not an independent contractor), acting within the scope of their employment, and doing something to benefit the employer. If these conditions are met, the employer may be held responsible for any costs incurred from the accident, including personal injuries to the employee, other people involved, and property damage.

However, commute time is generally not considered work time, and accidents that occur during a commute are typically not the responsibility of the employer. There are exceptions to this, such as when an employee has to drive somewhere other than the usual place of employment or make work-related stops during the commute.

It's worth noting that employers can require employees to carry a certain amount of auto insurance coverage on their personal vehicles if they are used for work purposes. This is to protect both the company and the employee in the event of an accident.

Employers should verify employees' auto insurance coverage regularly

Employers should regularly verify their employees' auto insurance coverage to protect their business in the event of an accident. If an employee is underinsured and causes an accident during work hours, the employer may be held liable for the difference. This is called vicarious liability and can cost the company financially and reputationally.

Motor vehicle accidents cause 39% of occupational fatalities, with over 2,000 employees killed in an average year, according to OSHA. In 2019, motor vehicle accidents cost employers a total of $72.2 billion in the US alone. This highlights the importance of employers ensuring their employees have adequate auto insurance coverage.

Every car insurance policy has liability limits, which are the maximum amounts the insurance company will pay out in the event of an accident. Most states set very low minimum liability limits, so it is recommended that employers require employees to exceed these state-minimum coverages. A best practice policy would be a 250/500/100 policy, which includes a $250,000 bodily injury limit per person, a $500,000 total bodily injury limit for multiple victims, and a $100,000 property damage limit.

While employees may submit pictures of their insurance coverage cards as proof of insurance, these do not list the liability limits and other important information. Instead, employers should obtain copies of each employee's auto insurance declarations page, which is typically found in the multi-page policy document received when a policy is obtained or renewed. This page includes the policyholder's name and address, the insurance company's name and contact information, coverage amounts, policy dates, and more.

By requiring employees to maintain sufficient auto insurance coverage and verifying their compliance, employers can protect both the company and their employees.

Commercial auto insurance covers company-owned vehicles

Yes, an employer can require an employee to carry a specific amount of auto insurance coverage on their personal vehicle. This is particularly relevant if the employee is driving for work purposes, even if it's just commuting to appointments. In this case, the employer should pay for the upgrade by incorporating the higher insurance premium into the employee's car allowance or vehicle reimbursement.

Now, let's focus on commercial auto insurance and how it covers company-owned vehicles.

Commercial auto insurance is a type of insurance policy that businesses need if they use vehicles for their operations. This includes businesses that own or lease cars, trucks, vans, or other vehicles for transporting goods, equipment, or people. The insurance covers the company's business vehicles and associated liabilities during work-related operations. It is required for any vehicles used for work purposes in certain states, such as Texas.

Commercial auto insurance policies typically cover:

• Liability for bodily injuries or property damage caused by the company vehicle.
• Physical damages to the company vehicle.
• Hit-and-run incidents involving the company vehicle.
• Incidents where the company vehicle is hit by an uninsured driver.
• Hired auto liability for accidents with rented vehicles (optional).
• Non-owned auto liability for accidents involving an employee's car used for business (optional).
• Glass or windshield replacement.
• Driving for personal reasons (damage only).

However, commercial auto insurance does not cover:

• Business or personal property inside the company vehicle.
• Intentional bodily injury or property damage.
• Completed operations (work that has been completed).
• Rental reimbursement (optional).
• Driving for personal reasons (liability coverage).

It's important to note that commercial auto insurance only provides coverage during work-related operations. If an employee uses a company vehicle for personal reasons, they may need their own personal auto liability coverage. Additionally, commercial auto insurance does not cover tools and materials inside the vehicle unless they are permanently attached.

The cost of commercial auto insurance depends on various factors, including vehicle type, risk level, location, employee driving records, policy deductible, and limits. On average, commercial auto insurance costs around $147 to $220 per month.

Commercial auto insurance is necessary for business vehicles

Commercial auto insurance is a necessity for businesses that use vehicles for their operations. This includes businesses that own or lease cars, trucks, vans, or other vehicles to transport goods, equipment, or people. The insurance provides liability and physical damage protection for these vehicles, which are typically exposed to more risk than personal vehicles.

Protection for High-Risk Activities

Commercial vehicles are generally exposed to more risk than personal vehicles. Businesses that use vehicles for operations, such as contractors, landscapers, and truck drivers, require commercial auto insurance to protect their vehicles and operations.

Compliance with Legal Requirements

Businesses must comply with legal requirements for insurance coverage. In the case of company-owned vehicles, employers are responsible for setting the auto insurance policy. Commercial auto insurance ensures compliance with these requirements and provides adequate coverage for business vehicles.

Coverage for Employees

If employees use their personal vehicles for business purposes, commercial auto insurance can provide optional coverage for accidents caused by employees using their cars for business. This protects both the employee and the company in the event of an accident during work-related operations.

Coverage for a Variety of Vehicles

Commercial auto insurance covers a wide range of vehicles, including cars, light trucks, SUVs, vans, and heavy trucks like semis and dump trucks. This versatility ensures that businesses can obtain the necessary coverage for their specific vehicle types.

Protection Against Financial Losses

Failing to have commercial auto insurance for business vehicles can leave a business vulnerable to financial losses in the event of an accident. Commercial auto insurance provides financial protection by covering injuries, property damage, and legal costs associated with accidents involving business vehicles.

Customizable Coverage Options

Commercial auto insurance offers customizable coverage options to meet the specific needs of businesses. This includes liability, collision, comprehensive, uninsured/underinsured motorist, and medical payments coverage, among others. Businesses can tailor their policies to ensure adequate protection for their vehicles and operations.

Frequently asked questions