Do I Need Insurance If I Use a Company Car?

More and more people are using company cars or using their own cars for business purposes in today’s economy. In fact, many people no longer own their cars but rely on their employer’s vehicles for all their transportation needs. Ensuring you are covered by a car insurance policy every time you’re behind the wheel is essential. This gets tricky when you consider the personal use of company vehicle insurance.

The driver policy for company vehicles varies from company to company, but if you have been given permission to use a company car, whether for business purposes or on your own time, then you are probably covered under the company’s commercial auto insurance.

There may be times, however, when that’s not the case.

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    In this article

      How insurance for company cars works 

      If the vehicle you are driving — whether for work or, with permission, on your own time — is owned by your company, then the company is required by law to have commercial insurance on that car. That policy may not look all that different from the one you have on your own cars. It may have additional elements, though, and should cover you while using the car for personal reasons.

      [ Read: The Simple Guide to Car Insurance ]

      One crucial element that may be included in a commercial policy is whether it covers business use of personal vehicle insurance. This may be anything from pizza delivery to an auto that you use to drive to your clients’ houses when you’re a consultant. Your personal policy will not cover your car during this time period, so it’s important to ensure that your employer’s policy will.

      This does not include driving to and from work. If you use your car to get to your place of employment, you’re covered by your personal policy. It’s when the car is used for the actual business itself that you need to consider your coverage.

      Do I need insurance for a company car, and who pays for it? 

      In most cases, your company will handle insurance for company vehicles. If they own the vehicles, they are required by law to do so. Some vehicles, such as those over a certain weight or those which can carry a load of more than 2,000 pounds, need specialized commercial policies. This includes dump trucks, food trucks, and more. If the vehicle has modifications such as a ladder rack, it will also require a commercial policy.

      There may also be some gray area to consider if you use a company car for personal reasons and another member of the family uses it — say, for example, your college-age daughter. Although you, as an employee, are covered as a named insured under your employer’s policy, this may not extend to your family members.

      If you own the car, rather than the company, you may also need a commercial policy on top of your personal car insurance. Talk to your employer about whether their policy extends to the use of personal cars for business purposes — if not, you could be in trouble if you have an accident while using the car for work, unless you have supplemental commercial insurance.

      A good place to start your search is with the company of your personal auto insurer. It may be able to write you a commercial policy, and you could save money by bundling the two policies together. If you’re not happy with your current insurer, this is also a good time to switch to a new carrier.

      [ Next: How Much Car Insurance Do You Need? ]

      One special case is rideshare drivers who work for Uber or a similar company. These companies have limited insurance that covers you when you are actually driving to meet a customer and driving that customer to their destination. But you aren’t covered during the period when you are waiting for a customer match — and your personal policy won’t cover that period, either, in many cases. Many insurers now offer an endorsement for your policy that will cover you for that period, and it’s worth purchasing it if you work for a rideshare company.

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        How much is commercial car insurance?

        A commercial policy will most likely cover everything your own personal vehicle policy covers, including the following:

        • Liability: includes bodily injury liability and property damage coverage and will pay for damage and injuries to other drivers, passengers, and the car in an at-fault accident.
        • Collision and comprehensive: pays for damages to the company’s vehicle following an accident or other mishaps, such as theft or vandalism.
        • Medical payments or personal injury protection: covers your own and your passengers’ injuries following an at-fault accident.
        • Uninsured/underinsured motorist coverage: helps pay when you are involved in an accident with a driver who is not carrying insurance or whose insurance policy has low payouts that don’t cover the costs of the accident.

        In addition, a commercial policy may include trailer interchange coverage, which would pay for damages to trailers attached to your vehicle, rental coverage if you need to lease a car or truck for business purposes, and expanded towing coverage for large vehicles.

        How much will you pay for your commercial car insurance policy? That varies depending on a number of factors, such as how many and how old the vehicles are, the driving record of those who are using the vehicles, and where your business is located. Your cost will also be determined partly by how much coverage you get. The non-profit Insurance Information Institute recommends at least $500,000 in liability for each vehicle.

        [ Read: 9 Things You Didn’t Know About Car Insurance ]

        Taking all these factors into account, it is difficult to state an average for all businesses. However, you can expect to pay more for your commercial policy than you would for a personal auto insurance policy. Plan on at least $1,000 a year per vehicle for a commercial policy for a small business.

        How to buy car insurance for a company car 

        1. A good place to start your search is with our Best Car Insurance Companies of 2021 listing. Most national insurers who are known for personal auto policies, like Geico or Nationwide, also sell commercial insurance.
        2. Consider what vehicles you will need to insure: company vehicles will definitely need a policy, but do your employees use their own vehicles for work? If so, ask about a Non-owned Auto Liability Endorsement.
        3. Make some phone calls or visit your local insurance agents to get several quotes. Each company uses its own method to determine pricing, so the quotes will vary.
        4. Ask questions: commercial auto policies can be complex, and it pays to understand what you’re purchasing before you sign on the dotted line.
        5. Although cost will be a consideration, don’t ignore customer service when making your decision. A good agent can make the claims process go smoothly; a bad one may give you months of hassle.

        We welcome your feedback on this article. Contact us at inquiries@thesimpledollar.com with comments or questions.

        Reviewed by

        • Nashalie Addarich
          Nashalie Addarich
          Insurance Editor

          Nasha Addarich is an editor at The Simple Dollar and a former attorney who specializes in home insurance, auto insurance, life insurance, and savings. She is a former contributing editor to Reviews.com.