You are a business with a few (or maybe many) vehicles to insure. Maybe Nationwide or Liberty Mutual insured them for you; great companies, but they have decided to insure fleets of vehicles on a very restricted (in most cases, completely restricted) basis. You received one of the many hundreds of letters from one of these, or other insurance companies, telling you that they would not insure you.
Why? You ask. No losses, good track record. I’m a stellar customer. Why am I getting dumped? Now I am faced with surplus lines insurance—twice the price, same coverage. What is going on here?
What is going on is that throughout the industry, some of the insurance companies are finding that fleet auto insurance (5 or more vehicles) has become non-profitable. You are being painted with a very broad brush, which includes all of the fleets that don’t have as good a record as you.
Stuff happens that can affect you. for example:
I just had one of my clients’ drivers try to avoid a cat and ended up swerving into a driveway and destroying a vehicle parked there. Big truck totaled the vehicle in the driveway.
That same client, that same month, had another driver swerve to avoid a tire coming from the opposite side of the freeway. Big truck ended up totaled and hanging off the guard rail over a 25-foot drop. Nobody injured, but a big loss.
What to do? Fortunately, because of my affiliations, I have quite a number of insurance companies who will write insurance coverage for fleets of commercial vehicles-competitively. More than most agencies. We are competitive on fewer than 5 vehicles as well.
So, what am I getting with Commercial Vehicle Insurance? How does this all work?
There are two major ways in which we can insure a vehicle used for business, depending on the actual use, the type of vehicle and the insurance company.
Personal Auto Insurance: covers your vehicle while going to and from work and for personal use.
Commercial Auto Insurance: covers your vehicle for business use
Personal auto policies exclude business use
commercial use can be Sales, Service or commercial trucking
Let’s explore these uses.
Sales use: this is called business use. It assumes that mileage you put on your vehicle will be in traveling to customers’ sites to make sales, speak to existing clients, go to meetings or meals with clients and so on. This could be use in a private passenger vehicle.
Service Use: An example of this would be a contractor using a pickup truck to go to a work site or sites, where he would be using his tools for his job. You don’t even have to think contractor in this. You could easily think domestic cleaning service, such as “Merry Maids.” They go from customer to customer during the day and do their work in each location, bringing their cleaning tools with them. We can think of other examples as well.
Commercial use: an example would be delivering packages, or products such as raw materials. The type of vehicle used could be a personal vehicle like a mini-van delivering printed products, to a step van such as Fedex or UPS, all the way up to a gasoline truck, cement truck, tow truck or produce truck. Heavy equipment qualifies as commercial use as well. Think tractor and trailer or flatbed. As long as it can be registered to travel on roads and freeways, it can be commercial use. Equipment such as bulldozers are in a different category.
Some insurance companies will accommodate sales use on personal lines policies. Some will even allow light pickup trucks, (no more than ½ ton) as service vehicles. An example of this might be a contractor who operates as an individual. He may be able to insure his truck for being at one or two jobs per day.
Such a policy will be rated for business use and covered that way. Beware of using your personal vehicle for sales calls and not advising your insurer that you are doing that, as your policy may specifically exclude such use unless endorsed for business. Your insurance carrier may not allow such endorsements, and you don’t want any rude surprises in case of an accident.
Make sure that if you are driving for work, that you have adequate insurance coverage. $30,000/$60,000 will not do if you are in business. An accident in your commercial vehicle will likely exceed that limit, and then they go after the business. Get the highest limits you can.
So why bother with commercial insurance?
Your client may require you to have certain coverages not afforded by personal insurance.
Your client may require higher limits than available on a personal insurance policy; $1,000,000 combined single limit, for example. Personal lines policies normally do not have limits this high.
Your client may require an additional insured certificate, which actually names them as part of your policy. This is very common with commercial, and largely unavailable for personal lines.
You may need to tow a commercial trailer. This is definitely not covered by personal lines insurance.
You may have employees who drive for work incidentally (running to the Post Office for stamps,) or consistently (a salesman using her personal vehicle to make sales for your company.) For this type of use, you would add non-owned auto coverage to your policy. This protects your business in the event that this person is in an accident while on company time or business. I did have a client who asked an employee to pick up lunche for the business owner, and the driver got into an accident. Of course, if an attorney finds out that it is business use, they will sue the company for any damages in excess of your coverage limits. If you are operating as an individual, rather than as a corporation or LLC, such a lawsuit can affect you, the business owner directly.
If you are in business, the best protection for you is to operate under an entity such as an LLC or a corporation, and insure your vehicles under that entity.
If you have questions, give us a call. 888-885-3388