Estimated reading time: 6 minutes
Return To: Commercial Auto Insurance – The Ultimate Guide
If you’re self-employed or a small business owner in North Carolina, you may be wondering “Do I need business auto insurance”? If a vehicle is owned by your NC business, then you are required to have commercial auto insurance. However, confusion arises if vehicles are used for both personal and business purposes.
What is the Difference Between Commercial Auto Insurance and Personal Auto Insurance?
One of the main differences in Business Auto Insurance and personal auto insurance depends on what you are using the vehicle for. If you’re using the car in your personal life, then personal auto insurance covers you. If you’re using the vehicle for business purposes, then commercial auto insurance covers you.
In contrast to personal auto insurance, commercial auto insurance also:
- has higher liability coverage limits
- is tax-deductible
- can cover named employees or all employees
- includes extra coverage, such as equipment coverage (i.e., trailers, forklifts, etc.)
I use my vehicle for both business and personal use?
The answer to mixed-use vehicles is much more complicated and depends on what you do and how much the vehicle is used for business. In general, if you only use your car to drive you to and from work, then personal auto insurance is sufficient. However, if you use your vehicle to transport materials, products, or people, then you may likely need additional coverage.
For instance, let’s say you are a repairman who drops their kids off at school with the same truck they drive to a job. If you get in an accident on the way to your kid’s school, your personal auto insurance should cover the damages. But, if you get in an accident while driving to the job site, your personal auto insurance will most likely deny your claim since you were using your truck for work.
Some personal auto policies offer additional coverage if you use your vehicle for minimal work purposes. Though, in cases where your personal vehicle plays a large role in your business, you may need separate coverage. A qualified insurance agent can advise you according to your individual circumstances.
Is Auto Insurance for Business Beneficial?
The main benefit of commercial auto insurance is that it provides financial protection for your business in the event of unexpected accidents involving your vehicles. For both your employee and your vehicle, medical and repair costs can add up to staggering amounts that you can’t possibly anticipate.
These accidents also often typically occur at the most inopportune times. Your business could be in the process of focusing funds on other important ventures and an accident during that time may be something that you can’t afford.
Having commercial auto insurance is like having protective armor. It gives you peace of mind, leaving you free to focus your efforts on other matters or aspects of your business that are more important and crucial.
Another benefit of commercial auto insurance is that the premiums paid for it are also tax-deductible. This means that, at the end of the fiscal year, you could be facing lower tax liabilities, which can afford your business greater opportunities to focus on other aspects where funds may be required.
What Does Business Auto Insurance Cover?
Most personal car insurance policies split liability between Bodily Injury and Property Damage. But most commercial auto insurance policies combine Property Damage and Bodily Injury into a single limit. Even though it is one limit, the two types of liability cover different things.
Bodily Injury Liability
Bodily injury liability coverage will pay for damages related to injuries sustained from an accident caused by you or another covered driver.
Bodily injury liability covers damages such as:
- Medical expenses
- Disability
- Rehabilitation
- Lawsuit settlements and legal fees
- and more
Property Damage Liability
Property damage liability will pay for damages to other people’s property as a result of an accident that is caused by you or another covered driver. Examples of such damage include:
- Vehicle repair
- Vehicle actual cash value
- Damage to other real property that was in the vehicle (i.e., cell phones, laptops, etc.)
What Options and Add-Ons are Available for Business Auto Insurance?
Depending on your business, you may want to opt for additional auto insurance coverage. Beyond the basic bodily injury and property damage liability, you should consider the following business auto insurance options and add-ons.
Collision coverage
While property damage liability covers other people’s property, collision coverage covers your covered vehicle. Whether caused by impact with another vehicle or object, it will cover the lesser of the cost of repair or the actual cash value of your vehicle.
Though collision coverage is usually optional, some auto lenders require you to have it.
Comprehensive coverage (other than collision)
Collisions aren’t the only causes of damage. Other common causes of damage are fire, theft, larceny, and contact with an animal, to name a few. Comprehensive coverage will pay the cost of repair or the actual cash value of your vehicle in such cases.
Non-owned auto coverage
Non-owned auto coverage provides coverage for your employees’ personal vehicles that must be used as part of their daily business activities (excluding driving to and from work).
Hired auto coverage
For leased or rented vehicles, this covers comprehensive and collision damage, as well as any other contractual obligations to the leasing or rental company.
Towing and Labor
This option covers towing expenses and labor costs for jump starts, minor roadside repairs, and if keys are lost, broken, or locked in the car.
Rental reimbursement
After an accident, rental reimbursement will pay for a rental car up to the limits of your policy, so you still have a means of transportation while you repair or replace your vehicle.
Medical payments
While bodily injury liability covers other drivers and their passengers, it usually does not cover you and your passengers. This additional coverage pays for reasonable expenses that are not covered by your health insurance or your passengers’ health care insurance.
Why Do I Need Business Auto Insurance in North Carolina?
If you own a business in North Carolina and that business owns a vehicle, you are required by NC state law to carry business auto insurance. The minimum coverage required is known as 30/60/25:
- $30,000 bodily injury per person
- $60,000 bodily injury per accident
- $25,000 property damage
North Carolina auto insurance requirements also require all licensed drivers to carry Uninsured/Underinsured Motorist Coverage that is at least equal to the highest liability on any one vehicle insured under the policy.
If the vehicle in question is not owned by the business, you will need to consider several factors to determine if you need commercial auto insurance. The main factors to consider are:
- How the vehicle is used
- Who owns the vehicle
- What kind of vehicle
- Whether your vehicle requires higher liability limits (i.e., large vehicles cause more damage, thus higher liability is recommended)
If your business does not own a vehicle, but you are wondering if you still need to cover personal vehicles that are used for business purposes, contact us today. We can help you determine if you need additional coverage for your or your employees’ personal vehicles.