How often have you heard somebody say that their claim was rejected due to a reason they had never heard about before? I guess many times, and I know how bad it feels. One feels cheated. But if you ask me, this is the very reason you need to be aware of all the T&C before entering into a contract. Similarly, a very common question about the T&C of insurance I have come across is, does personal car insurance cover business use?
It is essential to know whether you are covered with your existing insurance and what steps you need to take to safeguard yourself. It is essential to know which insurance types are available, suit your needs, and cover all of them. And that is why I have written this article. It will talk about everything you need to know about various types of auto policies.
So, why wait? Let’s jump into the topic.
Does Personal Car Insurance Cover Business Use?
Any guesses? Well, the answer is, it doesn’t.
Your personal auto policy does not cover you if you use your personal, rented, or leased car for business purposes.
But that doesn’t mean that you would be defied cover if you occasionally use your personal car for official reasons. Yes, there is no need to worry if you use your vehicle for trivial official purposes.
But if you use your car for official reasons quite often, your personal auto insurance might not be sufficient. For example, driving to customer locations often or making frequent deliveries, or even if you travel to multiple job sites daily, your personal auto insurance might not be adequate.
Just now, it might feel that commercial insurance is the need of the hour. But hang on, below are a few instances when your personal auto insurance might be sufficient:
- You grab a sandwich for your colleagues when commuting to the office.
- You use your vehicle for client meetings but only occasionally
- Your daily commute is to a single office
- You sometimes make a delivery or run an errand for your boss.
Nobody has control over the few instances when a person might need to use his vehicle for official purposes. Though, it should not be a regular affair.
But why at all should companies need you to buy a commercial or HNOA policy if you are using your personal vehicle?
Why Your Personal Policy Is Not Enough?
The answer is pretty straightforward. Commercial drivers, in general, tend to drive more than personal car drivers. This means that there will be more wear and tear, maintenance, and chances of an accident, and, therefore, more risk.
Furthermore, commercial drivers usually carry valuable customer or business stuff in their vehicle, which personal policy cannot cover.
And lastly, commercial vehicles might carry passengers, which calls for more liability coverage in an accident.
So, in case you too fall in the high-risk zone and drive a company-owned vehicle for business purposes, you need a Commercial Auto Insurance policy. But if you use your personal vehicle for business use, you need Hired or Non-Owned Auto Insurance (HNOA policy).
The Various Types Of Auto Insurance Policies And Which One Suits You?
There are three major types of auto insurance policies:
- Personal liability auto insurance
- Commercial auto insurance
- Hired and non-owned auto insurance
#1: Personal Liability Auto Insurance
Almost every state requires personal liability auto insurance. And it covers you for third-party damage in case of an accident or collision.
For example, if you damage the fencing of a property or collide with another car, then personal auto insurance will pay for the repair and medical bills of the third party.
It does not initially cover your damages. But additional coverages like collision or comprehensive coverage will pay for the repair of your vehicle and your medical bills. It may also include cover for theft, storm damage, or vandalism.
Who is it for?
It is required by every personal vehicle. And it does not cover you if you engage in any frequent business use of your car.
#2: Commercial Auto Insurance
Most state laws also require commercial auto insurance. It safeguards your commercial vehicles if they damage somebody’s property or vehicle.
Also read: Why is car insurance must have?
Initially, it covers the liability part, i.e., the cost of the involved lawsuits and the cost of the damage and medical bills of the other party. But you can add the collision and comprehensive coverage. Then it will cover your property damage and medical bills as well. It will also cover theft, vandalism, and storm damage, etc.
Who is it for?
It is for company-owned vehicles and protects anybody that the policy owner permits to use the vehicle.
Businesses that transport goods or employees and clients via these company-owned vehicles must have commercial auto insurance.
#3: Hired and Non-Owned Auto Insurance
If you use a personal, rented, or leased vehicle for any business purpose and cause an accident, then hired and non-owned auto insurance comes into play. It will pay for the lawsuit and other property damage and medical bills of the third party.
Who is it for?
If you are an employee who regularly runs business errands or somebody who frequently lends his car for business trips, you must consider the HNOA insurance policy.
Some businesses that might need this policy are catering services, cleaning services, construction trades, etc.
If you find it difficult to decide whether you need HNOA or not, go through this checklist by Allstate.
How Does HNOA Insurance Work?
If anybody is using their personal vehicle for the following purposes, HNOA is a must-buy for you:
- Making deliveries
- Visiting client locations
- Picking supplies
- Running business errands
- Transporting work tools or equipment
- Transporting people or goods for a fee
IF you get involved in an accident, HNOA covers only third-party costs like:
- Repair of damage to another vehicle
- Repair of other person’s property
- Medical bills of the other party involved.
- It will also pay for your legal fees, judgments, and settlements if you are sued.
But it will not cover any costs related to you. That is why you should buy HNOA in addition to the personal auto insurance policy, as this will cover your injuries and damage as well.
Pro tip: Buy both insurance policies with the same company to possibly lower your premiums.
In A Nutshell…
HNOA insurance policy is your way to peace of mind if you frequently use your vehicle for business purposes.
The most important reason people invest in insurance is to stay secure and have peace of mind that they won’t go broke if anything adverse happens.
And that is precisely why you should have an HNOA policy added to your personal auto policy. It will cost you way less than an unfortunate accident and will also keep you tension-free!
So, what do you use your personal car for? Do let me know in the comments below. Also, if you have any doubts or suggestions, please comment. I am all ears!
So, that was all the information I had about does personal car insurance cover business use! I hope you liked it and the content was informative.