Auto Insurance: Can Your Employer Dictate Your Coverage?

Employers can require employees to carry a certain amount of auto insurance coverage on their personal vehicles if driving is part of their job. This is to ensure that the employee is protected in the event of an accident and to reduce the company's liability in the case of an underinsured employee. While employers can ask for proof of insurance, they should also provide compensation to help cover the cost of the higher premium.

Employers can ask for proof of insurance

Proof of insurance is documentation that proves an insurance policy is legitimate and up-to-date. It is typically provided in the form of a letter or an ID card. It includes the names of those insured under the policy, vehicle information, the policy number, and the policy effective and expiration dates. It also includes coverage amounts, premiums, and fees.

Some employers may ask for proof of insurance as part of a regular verification process, often on a semi-annual or bi-annual basis. This is to ensure that employees maintain the appropriate level of car insurance and decrease the probability of company insurance liability in the event of a vehicle accident.

It is important to note that employers can require employees to carry a specific amount of auto insurance coverage on their personal vehicles if they are driving for work. However, the employer should incorporate the higher insurance premium into the employee's car allowance or vehicle reimbursement.

Additionally, employers should be aware that simply obtaining proof of insurance coverage may not be sufficient. While employees may submit pictures of their insurance coverage cards, these cards often do not list the liability limits and other important information. Instead, employers should obtain copies of each employee's auto insurance declarations page, which includes detailed information on coverage limits and other relevant details.

Employers can require a specific amount of auto insurance coverage

It is within an employer's rights to require their employees to have a certain level of auto insurance coverage, especially if driving is part of the job. This is to ensure that both the employee and the employer are protected in the event 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 US alone. 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 known as vicarious liability.

To avoid this, employers should calculate and mandate the minimum sufficient car insurance for their drivers. While states have set minimum insurance coverage requirements, these are often very low. For example, a 25/75/25 policy would cover the driver up to $25,000 per injured person, $75,000 in total injuries, and $25,000 in property damage. However, a serious accident can easily exceed these limits, leaving the company financially liable. Therefore, it is recommended that employers require a minimum coverage of 100/300/50, or even 250/500/100, for their employees who operate vehicles as part of their job.

It is important to note that if an employer requires an employee to increase their insurance coverage, they should also increase their auto reimbursement or car allowance to offset the resulting premium increase. This is only fair, as the employee is incurring additional costs to comply with the employer's requirements.

Additionally, employers should verify their employees' auto insurance coverage every six months, as insurance policies typically renew every six months. While some may consider this micromanaging, it is a necessary step to protect both the company and the employee. If an employee's insurance coverage lapses or is insufficient, the company could be held liable in the event of an accident.

By requiring and regularly verifying sufficient auto insurance coverage for their employees, employers can protect their company, their employees, and their company's reputation.

Employers can be held liable for an employee accident

Employers can be held liable for an employee's car accident under the legal doctrine of "respondeat superior" (Latin for "let the superior answer"). This means that an employer is legally responsible for the actions of its employees if they are acting within the course and scope of their employment. In other words, the employer will likely be held liable if the employee was doing their job, carrying out company business, or acting on the employer's behalf when the accident took place.

For example, if a delivery person hits a pedestrian while driving frantically to meet a company-imposed deadline, the employer will probably be legally responsible for the pedestrian's injuries. Similarly, 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.

However, if an employee is acting independently or purely out of personal motives, the employer might not be held liable. For instance, if a salesperson hits a pedestrian while using a company car for personal errands after work hours, the company will most likely not be held responsible.

It's important to note that employers can require employees to carry a specific amount of auto insurance coverage on their personal vehicles if they are used for business purposes. This helps protect both the company and the employee in the event of an accident.

Employers can require insurance for personal vehicles driven for business

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. As an employer, you are responsible for protecting your employees and your company. 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.

When it comes to personal vehicles driven for business, a lot of companies don’t think about their employees’ car insurance. However, these employees are exposing the company to the same risks as employees using company cars. This is why employers should calculate and mandate the minimum sufficient car insurance for their drivers.

A personal auto insurance policy won't usually cover incidentals that occur while the employee is on the clock. If an employee is driving for business-related reasons, they may have to pay out-of-pocket for any legal, repair, and car rental costs. Essentially, if an employee is driving for commercial purposes and only has personal car insurance, they are driving uninsured.

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

Employers can require insurance for company cars

Motor vehicle accidents cause 39% of occupational fatalities, with over 2,000 employees killed annually. In 2019, motor vehicle accidents cost employers $72.2 billion in the US alone. 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 difference. This is known as vicarious liability.

To avoid this, employers should calculate and mandate the minimum car insurance coverage for their drivers. While most states set a very low minimum required insurance coverage, employers should require employees to carry a specific amount of auto insurance coverage on their personal vehicles if they are driving for work. It is recommended that companies require a minimum coverage of 100/300/50, with the best practice being a 250/500/100 policy.

Employers can require this higher coverage by incorporating the higher insurance premium into the employee car allowance or vehicle reimbursement. They should also verify their employees' auto insurance coverage every six months, as a minimum auto insurance requirement is meaningless if the employee lets their coverage lapse.

By requiring sufficient auto insurance coverage and regularly verifying their employees' compliance, employers can protect both the company and their workers.

Frequently asked questions