How do you know if/when your personal automobile crosses the line from family car into the realm of commercial vehicle? Particularly if you are self-employed, your daily errands might include business banking or a stop at the office supply store. Do these activities actually change the status of your car? Fortunately, auto insurance carriers have created detailed guidelines in order to help you sort this out.

There are a lot of different guidelines used, such as if your commercial use is very minimal and you rarely, if ever, move people from place to place. However, there are more options. For example, there are also fleet insurance policies to be used in cases where you have a number of vehicles and have employees who drive them.

May I have an example please?

It can be a challenge. Imagine you are a janitor. You carry your brooms, mops, floor buffer and cleaning supplies to the job in your van which is, of course, commercially insured. But you also drive your family car to and from jobs to set up appointments, deal with customers, and collect payments. Should you have a commercial policy on your otherwise private vehicle? Some carriers will allow for some of these restricted uses. Others will not.

Imagine you teach guitar or tutor geometry students. You travel back and forth from the homes of your students and you NEVER transport the students themselves. This sounds cut and dried, but what if you are a property manager and often take potential tenants to and from vacant apartments? In this case, much depends upon the number of miles you drive on average.

Quite simply, if you or your employees use your vehicle to transport goods, products or people, you must invest in a commercial insurance policy. It goes without saying that if your vehicle is registered or titled in the name of your business, it must carry commercial insurance. (This does not necessarily mean you cannot drive the vehicle for personal use, however.)

But why is all of this so important?

The Repercussions of Not Having Commercial Auto Insurance When Needed

If your vehicle were insured as a private or personal vehicle and you were in an accident, your insurance carrier might well refuse to pay any claims. This would leave you on the hook for every associated medical expense as well as payments for damages. Insurance mistakes such as this have far-reaching consequences and have been known to destroy entire lives when businesses and other properties must be sold to pay the bills.

Additionally, if you have employees who drive your car or a ‘company’ car then you’re actually liable for any damage they make while driving that car. For that reason, commercial auto insurance is crucial. Of course, you trust your employees. But even the most trustworthy people can have lapses in judgment. If good, old, reliable Joe pops a top as he’s headed home from the job and is involved in a fatal accident, everything you’ve ever worked for is up for grabs. By buying the most coverage you can comfortably afford, you may protect yourself from lawsuits.

If you – or an employee of yours– causes an accident, and your insurance liability limits have been paid out to the max and/or if you’re sued by the other claimant for the accident, you’re putting any and all of your assets on the line unless you can just write a check for any judgment – and judges and juries almost always rule in favor of the defendant versus the policyholder or a policyholder’s insurance company. If a judgment is passed down to you and you can’t pay out of pocket and your liability limits have been exhausted, assets like your home, auto, savings, any liquid assets, and of course, your business, can be seized to pay for the judgment. If you don’t own the business any longer or don’t have assets to be seized (or enough to cover the judgment) then your wages could be garnished. In some large auto accidents, the judgment can be HUGE, so even if your wages are garnished, you could be facing garnishment deductions from your paycheck until the judgment is paid for.

Consider this – the Insurance Information Institute estimates that the average cost of a non-fatal car accident $26K. That number grows when it’s a commercial claim because people assume you’d have money or at least assets to pay for any damage you’ve done and more since you own your own business. Ironically, they’ll assume you have deep pockets, therefore assuming they’ll get a higher settlement in a lawsuit, when you may not at all if you own a small to medium sized business. Quite simply, businesses are one of the prime targets when it comes to suing one due to a commercial auto accident. When a commercial vehicle is in an accident, there is often an assumption that there are deep pockets involved – yours.

When In Doubt, Seek Professional Help

No, that doesn’t mean visiting a psychiatrist, but if you fail to buy commercial auto insurance when you desperately need it – especially if you’re considered a high risk policyholder due to individual, personal factors like past records, accidents, credit scores, and type of business and vehicle used for that businesses, you just may find yourself having a nervous breakdown if you found yourself in a situation where everything you have is taken.

Surprisingly, commercial insurance can sometimes be comparable to policies designed for private vehicles.

Your best friend in matters such as these is your insurance agent. He or she knows all the ins and outs and can point you toward the most economical, yet thoroughly indemnifying policy for your needs. As you and your agent weigh insurance policies against potential liability, remember that, at least in this case, more is better. A good place to start is $100,000 which is the minimum in most states. Then add more – perhaps a million or more – if several of employees drive your vehicles. In addition, it’s an excellent idea to have over-arching, umbrella-type liability coverage which comes into play if and when an accident exhausts your auto liability maximum. These are available to cover up to five million dollars and are an important part of your liability mitigation plan.

If you use your vehicle for any business tasks whatsoever, make an appointment to chat with your insurance agent about coverage. In matters of insurance, you’ll be happier being safe than ending up sorry.

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