Am I Covered?-Personal Vehicles for Business Use
This is another installment of our series at IPG Insurance entitled “Am I Covered” where we go over different claims scenarios and if your personal or business insurance would cover said claims.
So, you have started a new landscaping business.
You’re only a few weeks in, but things are really starting to pick up. Currently you have around 50 yards a month, and just landed a large commercial contract with a few gas stations in town.
Things are looking good until one day while driving to a job you get into an accident. Your truck's tailgate is a little banged up, but your trailer, along with your two brand new zero turn mowers, and all of your other equipment is a total loss.
Frustrated and anxious, you call your personal insurance agent to file a claim.
A few weeks later you get a letter from your insurance carrier informing you of the bad news.
You’re not covered.
That is the hard lesson that most contractors who use their personal vehicle for business use learn. Or, even worse, they find out that their truck is covered but the trailer, along with the thousands of dollars of money making equipment locked inside, are not.
Note** It is important to read over your policy before using it in any business aspect. Make sure if you are starting a business you speak with your agent and let them know what you will be doing with the vehicle. Your agent should be able to go over and explain all coverages needed.
In an effort to save a few bucks, it’s easy for contractors to say, “I’ll just keep my three trucks and trailers on my personal auto policy. Seemingly, there’s less headaches and for a brand spanking new business saving any money you can is key.
As a business owner, you need the same types of coverage for the vehicles you use in your business as you do for the vehicles you use in your personal life: liability, collision and comprehensive, personal injury, and coverage for uninsured motorists. However, while the coverage is similar, a personal policy differs greatly from a commercial one.
A personal auto policy, in some instances, will provide enough coverage for some businesses—but rarely (if ever) in the case of landscape contractors. Your clients expect you to have higher liability insurance limits when you transport people, equipment and materials.
LIMITATIONS OF A PERSONAL POLICY
The limitations of a personal policy, coupled with the risks associated with the landscaping business, should be reason enough for you to secure the true commercial coverage your business needs.
The main reason to have a commercial policy is proper titling. Your business’s name, not your own, should be written on the face page of the policy. For instance, Taylor’s Lawn Care LLC, as opposed to Charlie Taylor. If the business is a sole proprietorship, it should be listed as Charlie Taylor dba Taylor’s Lawn Care.
So why a commercial policy?
The answer to this is simple: If there's a claim against the company but the policy is for the individual, the claim could be denied. Plus, with a commercial policy, all predefined employees, partners and stockholders are also considered insured drivers 24/7 as long as they have permission to use the vehicle for whatever work the vehicle is classified to do.
Trailer coverage can also be a tricky subject due to the gross vehicle weight (GVW) of the trailer and how it is titled, as liability coverage follows the power unit pulling it. More on this later.
If you are purchasing both general liability and commercial auto insurance from the same insurer, it probably doesn’t matter. But if you’re using two different insurance companies, you could be in for a few headaches; the two insurers could end up arguing for weeks or months over who should pay the claim.
Another Claim example:
A pedestrian was walking down the street and stopped to help an employee lift a mower that got stuck while being backed off the trailer. When they lifted the mower, it slipped off the load ramp and fell onto the pedestrian’s foot .
Covered? Yes! The claim was paid from the auto policy because the accident technically happened on the trailer. It took weeks for the insurers to decide which policy would respond.
On the topic of trailers, this is another area that needs special consideration in regard to your commercial auto coverage. They, too, should be titled in the name of the company, because the liability for damages caused by the trailer follows the power unit (truck).
Many insurers will not include trailers used for commercial purposes on a personal auto policy. On the other hand, most insurers provide automatic liability coverage on a commercial policy for trailers under 2,000-pound GVW. If the GWV is over that amount, the trailer needs to be scheduled on the policy and a premium is charged.
How much will it cost?
Commercial auto rates can vary from company to company, but compared to an uncovered loss, or a denied claim the prices are very reasonable.
As a small business owner, I'm aware of the need to save money, especially on startups, so here are some tips to lessen the burden a little.
Increase your deductible for physical damage insurance, but make sure it’s still an amount you’ll be able to pay out of pocket if something does happen.
Pay your insurance in full to get up to a 5% discount.
Insure personal vehicles with the same insurance company; you may qualify for a multi-policy discount.
Experience counts. Make sure your agent knows how long you’ve been in business, and how long you’ve been a customer. You may qualify for certain discounts.
Anti-theft devices such as OnStar may qualify you for additional discounts
Maintain a good credit history.
Park your vehicles in a safe, well-lighted location.
Draw up a lease between yourself and your company for use of the auto. This helps lessen the headache of registering the vehicles in the business name.