Understanding Non-owned Auto Liability Insurance

Businesses form and grow in many different ways, and sometimes this can lead to surprises when an auto accident happens while someone is out on company business.

For example, your employees may have run deposits to the bank or other work errands for years without any issue. However, if one of your employees gets in an accident while doing work for the company, the insurance claims process could become very complicated.

That’s because even if an employee is driving his or her own vehicle, it’s being used for business purposes—and that might not be covered by a standard auto insurance policy.

If your employees regularly use their own vehicles for company work, if you rent vehicles for employees to use, or if you hire drivers to use vehicles your company owns, you’ll need coverage called non-owned auto liability insurance.

What is non-owned auto liability insurance?

Non-owned auto liability insurance is commercial insurance coverage for employees who either drive vehicles they don’t own for work or use their own vehicle for work purposes.

Here are a few examples:

• If you own a business that provides livery services, such as driving people to and from the airport using company-owned vehicles, you will need to purchase non-owned auto liability coverage. That’s because your employees’ personal auto insurance covers them when driving their own vehicles for their personal use.
• If you own a business that routinely has employees use their own vehicles to run work errands or conduct business, you’ll need non-owned auto liability coverage in this situation as well. Even though your employees are using their own vehicles for which they have insurance, most auto policies do not cover accidents that happen when a personal vehicle is being used for commercial purposes.
• If you run a business that occasionally needs to rent a vehicle that your employees will use, you’ll need non-owned coverage. For example, if you run an event-planning business and have the occasional need to rent a larger delivery vehicle to transport a tent or folding chairs, etc. In this situation, the vehicle is not owned by the company or an employee, but is instead being rented for work purposes.

This last example—renting a vehicle for your business—is not always included in a non-owned auto liability coverage policy. Some insurers sell additional insurance called Hired Auto coverage to protect a business for this type of risk. If your business sometimes needs to rent vehicles, ask your insurance agent if this is covered under your non-owned auto liability policy, or if it makes sense to purchase additional coverage.

What types of businesses need non-owned auto liability insurance?

Any business that depends on transporting goods and services is a likely candidate for non-owned auto liability insurance. Whether your employees drive vehicles owned by the company or their own cars, you probably need this additional coverage. Here are some examples:

• Restaurants that deliver food
• Livery companies
• Grocery store delivery
• Snow removal businesses
• Event planning
• Landscaping
• Businesses that have employees meet clients on-site
• Businesses that have certain employees run company errands, such as making bank deposits

The most obvious candidates for non-owned auto liability coverage are delivery businesses. If a big part of an employee’s job is driving—whether it is their own vehicle or one owned or rented by the company—the need for coverage is clear.

It’s less obvious when employees are running errands. To determine if you need non-owned auto liability insurance for your business, take a look at how tasks are accomplished. If employees are using their own cars for work purposes, you likely need the additional protection that non-owned auto liability coverage offers.

What is covered by a non-owned auto liability policy?

Non-owned auto liability policies do not cover everything a standard auto insurance policy would cover. For your business, you’ll want to make sure that you also have commercial auto insurance coverage.

A non-owned policy is liability coverage. This means that if your employee is using their own car to run an errand for the business and gets into an accident, this coverage will protect your business if it is sued.

This type of insurance would not cover things such as items stolen from the vehicle, damage to your business property, or injuries that your employee sustains in an accident.

What factors affect premium rates for a non-owned auto liability policy?

As with other forms of insurance, a lot of different factors will contribute to your premium cost. The size of your business, where you are located, and how far your employees typically drive are all considerations.

Your claims history will also factor into your premium cost, particularly if you’ve carried non-owned auto liability insurance before and had to make a claim.

If your business owns the vehicles employees will be driving, the type of vehicle will likely affect premium costs, since more expensive vehicles cost more to repair. The driving history of your employees matters too; if any have had accidents in the past, your insurance premium may be higher.

If you’re interested in learning more about non-owned auto liability coverage, contact the experts at Rate Insurance. With access to a wide range of commercial insurers, they have the information to find you the right policy at the right price for your business.

Disclaimer:

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