Work Auto Insurance: Understanding The Coverage Limits

If you're using your car for work, you might be wondering if your auto insurance covers you outside of your personal use of the vehicle. The answer is: it's complicated. While your personal auto insurance can protect you during business hours, this is not always the case, especially if you drive frequently for work. If driving is part of your job, your employer's commercial auto insurance should cover you, even if you're driving your own vehicle.

Commercial auto insurance covers business vehicles, whether they are owned by a company or an individual using the vehicle for business purposes. This includes people who drive for rideshare or food delivery services.

Personal auto insurance policies typically don't cover work-related incidents

If you're driving your personal vehicle for work purposes, you may need to consider a different type of insurance. Personal auto insurance policies typically don't cover work-related incidents, leaving you vulnerable in the event of an accident. This is because insurance companies view business drivers as a bigger risk than personal drivers, as they are on the road more often and are therefore more likely to have an accident.

In the US, motor vehicle accidents cause 39% of occupational fatalities, with over 2,000 employees killed each year. In 2019, these accidents cost employers a total of $72.2 billion. If an employee causes an accident during work hours and their personal auto insurance cannot cover the costs, the employer may be held liable for the difference. This is known as vicarious liability.

If you use your personal vehicle for work, it's important to understand what your personal car insurance policy covers. If you frequently drive for work, your personal auto policy may not cover any damage or accidents that occur while you're on the clock. In this case, you should also be covered by your employer's commercial auto insurance. Commercial auto insurance protects your business from the costs of accidents in company-owned vehicles, and it can also be purchased for personal vehicles driven for work purposes.

If you only have personal car insurance and are driving for commercial purposes, you are essentially driving uninsured. To avoid this, you may need to add commercial auto insurance or hired and non-owned auto insurance (HNOA) to your policy. HNOA covers the costs of a lawsuit over an accident caused while driving a personal, rented, or leased vehicle for business. This includes employees who use their own cars to run work-related errands or rent cars for business trips.

In summary, personal auto insurance policies typically don't cover work-related incidents. If you use your personal vehicle for work, it's important to review your insurance policy and consider adding additional coverage to protect yourself and your business.

Commercial auto insurance covers business vehicles and personal vehicles used for business

Commercial auto insurance is designed for vehicles used for work, whether they are owned by a company or not. It covers business vehicles and personal vehicles used for business, including cars, light trucks, SUVs, vans, and heavy trucks like semis and dump trucks.

Businesses that use vehicles for their operations typically need commercial auto insurance. This includes companies that own or lease cars, trucks, or vans for transporting goods, equipment, or people. For example, contractors, landscapers, truck drivers, shops running errands or transporting clients, and restaurants delivering food.

Commercial auto insurance offers liability coverage to protect you and others involved in an accident, and collision and comprehensive coverage to protect the car regardless of who was at fault. It also offers non-owned vehicle coverage, which extends protection to personal cars used for business-related purposes. This is important because personal auto insurance policies typically do not cover vehicles used for business purposes.

Additionally, commercial auto insurance covers a wider range of vehicles used for business purposes, such as cars, vans, pickup trucks, box trucks, and service utility vehicles. It also provides more comprehensive liability coverage because accidents involving company vehicles can put business assets at risk. Commercial policies usually offer higher liability limits as they cover an entire business, including multiple drivers, vehicles, employees with poor driving records, and more.

It's important to note that if you are using your personal vehicle for work, you should be covered by your employer's commercial auto insurance, even if you are just running a work-related errand. This is because your personal auto insurance may not cover any damage or accidents that occur while you are on the clock.

Employers can require employees to have a certain level of auto insurance

If an employee gets behind the wheel as part of their job, their auto insurance becomes their employer's business. This is because accidents can have serious implications for the company. In the US in 2019, motor vehicle accidents cost employers a total of $72.2 billion. If an employee causes an accident during work hours and their auto insurance cannot cover the costs of injuries and property damage, the employer may be held liable for the remaining costs. This is called vicarious liability.

To avoid this, employers can require employees to have a certain level of auto insurance. This is especially important if employees are driving their own vehicles for business purposes, as many companies do not think about their employees' car insurance. However, these employees are exposing the company to the same risks as those using company cars. Therefore, employers should calculate and mandate the minimum sufficient car insurance for their drivers. Generally, companies should not let their employees on the road without carrying a minimum coverage of 100/300/50. The best practice would be a 250/500/100 policy.

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 car allowance or vehicle reimbursement. Employers can also require proof of insurance from their employees, to ensure their policy is up-to-date and that they meet the minimum auto coverage requirements for their state. This can be done every six months, as most policies renew bi-annually.

Employers can be held liable for accidents caused by underinsured employees

If an employee causes an accident during work hours 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. In such cases, the employee is usually underinsured, and the employer is held responsible for the costs of doing business, including the costs of employee carelessness or misconduct.

The legal doctrine of respondeat superior (Latin for "let the superior answer") holds an employer legally responsible for the actions of its employees. However, this rule applies only if the employee is acting within the course and scope of employment. In other words, the employer will generally be liable if the employee was doing their job, carrying out company business, or otherwise acting on the employer's behalf when the incident took place.

For example, if a delivery person hits a pedestrian while driving frantically to meet a deadline promised by their company, the employer will probably be legally responsible for the pedestrian's injuries. Similarly, if a lawyer, driving while completely engrossed in a telephone conversation with a senior partner in the firm, hits a pedestrian, the law firm will likely be held responsible.

To guard against underinsured employees, employers should set minimum required car insurance for all employees who operate vehicles as part of the workday and verify employees' auto insurance coverage every six months. By requiring employees to maintain sufficient auto insurance and verifying their compliance, employers can protect both the company and their employees.

Personal injury protection may cover lost wages due to accidents

If you've been in a car accident and have had to miss work, you may be able to claim lost wages as part of your insurance. Personal injury protection (PIP) coverage allows you to collect lost wages from your insurance company up to the policy limit, regardless of who was at fault for the accident. This is just one of several types of insurance coverage that may cover lost wages.

In a car accident case, "lost wages" refers to the money you would have earned from your employer from the date of the accident until a settlement or judgment is reached. To claim lost wages, you must prove that your injuries directly prevented you from working and that the injuries were unrelated to any other event following the accident.

To prove lost wages, you will need to provide documentation such as:

• A doctor's note or disability slip recommending time off work due to your injuries.
• Paystubs, W-2s, tax returns, or other wage documents from before and after the accident. If you are self-employed, you can submit tax returns, profit-and-loss statements, invoices, receipts, bank statements, or finance-related correspondence.
• A wage verification letter from your employer confirming the days you were absent, your pay level, and the number of hours you work during each pay period.

In addition to lost wages, you may also be able to claim lost earning capacity, which involves any disability resulting in a diminished capacity to work. This includes not only lost wages but also the loss of potential earnings in the future.

It is important to review the details of your insurance plan to determine what coverage is included and what documentation is required to submit a claim.

Frequently asked questions