Business tips for those who need auto insurance for employees

While driving to the airport for a business trip, a car cut across four lanes of highway causing a multi-car accident. I was driving one of those cars that was involved in the accident, and the vehicle I was driving was totaled in an instant. 

Thankfully my employer had adequate commercial car insurance and the insurer handled the claim. I was shaken, but able to continue my trip without worrying about the financial fallout. 

If you’re a business owner, failing to get commercial car insurance that covers your business, employees, and you personally, can be far more expensive than any premiums you’d pay, and a work-related auto accident or incident could leave you open to personal liability, not to mention the out-of-pocket costs you may incur.  

Here’s what you need to know about auto insurance for employees. 

This information is for educational and illustrative purposes only. For questions about your specific insurance needs and coverage, consult a licensed insurance agent and/or insurance provider. 

What Is Commercial Auto Insurance?

If you or your employees use a vehicle during the course of your business business, you may need commercial auto insurance. Commercial auto insurance is similar to personal auto insurance but it generally provides coverage for vehicles owned by a business. 

Why Do You Need Commercial Vehicle Insurance?

Personal auto insurance is designed for personal use of your vehicle, such as running errands, taking the kids to school, and even commuting to work. 

Commercial (business) vehicle insurance and/or  is designed for business use of a vehicle, which could include any of the following:

• Use of company-owned vehicles. If you purchase or lease a car, truck or other type of vehicle primarily or even regularly for business use, or if the vehicle is titled in the name of the business, you need business insurance. 
• Travel to meet or transport clients. If you are a real estate agent who drives clients to view properties, or even to meet them at the property location for a showing, you’ll likely need business coverage for the vehicle. 
• Drive workers to a job site. Let’s say you have a construction business and you pick up workers at their home or a central location to bring them to the job site for the day. You may need insurance that provides coverage if an accident occurs during one of these drives.
• Errands run for work. If you send employees out to run business errands in own car (such as making a cash deposit at the bank or picking up office supplies at Costco), you’ll want to make sure you have the proper coverage.
• Transporting people or goods in your vehicle for a fee. This can include rideshare drivers driving their own vehicle for Lyft or Uber, or drivers for Uber Eats, DoorDash or InstaCart. (Unfortunately, to save money, some drivers go without this additional insurance, which could prove costly.) 
• Transport tools or equipment. Whether it’s a mower and trimmers pulled on a trailer for a landscaping business, or a chair and hair- cutting equipment for a  mobile hairdresser, you will likely need commercial coverage. 

Your personal auto insurance very likely limits or excludes business use of your vehicle. Get in an accident while using your vehicle for business purposes, and your personal insurance may not provide the full coverage you need. 

Also keep in mind that if you get a commercial auto policy, it must meet or exceed liability insurance requirements in your state.  

Are Employees Covered Under a Business Auto Insurance Policy When Driving Company Vehicles?

Probably, but not always. Typically your employees who are driving a company car for business purposes will be covered under your business auto insurance policy, except for excluded instances. 

Watch out for gaps in coverage. 

For example, if your employee is driving your business car for personal purposes and is uninsured — for example, if they don’t own a car— you may need to get a named non-owner policy to provide personal auto liability coverage for times when your employee uses your vehicle.

Certain types of coverage may also extend to rental cars when your employees drive them for your business. Be sure to check with your insurance agent.

Are Employees Covered Under Business Auto Insurance When Driving Their Own Cars for Work Purposes?

If your employees drive their own vehicles for your business (not including regular commuting to and from their jobs), you will likely need to add hired and non-owned coverage to your commercial auto insurance policy.  

What Does Non-Owned Auto Liability Insurance Cover?

Non-Owned Auto Liability Insurance is a must if your full-time, part-time or even temporary staff uses their personal car for your business. 

If that employee is involved in an accident that results in property damage or medical injury to a third party while the vehicle is used for business, commercial insurance with this coverage will typically pay for damage and/or medical payments to a third party that exceed their personal policy limits, minus any exclusions of course. If your business or your employee are sued because of the accident, it will likely cover the defense costs. 

Let’s say you have a catering business and your employee uses their own car to deliver cupcakes to a customer, but on the way they rear end another car. This coverage can pay for physical damage and/or medical expenses that exceed their own auto insurance coverage. 

This type of coverage doesn’t cover a business vehicle owned by the business. If they take your bakery delivery van and get involved in an accident, your commercial auto policy should cover that. 

Your employee should also understand that this policy probably won’t cover damage to their personal vehicle or their medical bills. Instead those expenses will likely be handled by their own insurance company and/or workers’ compensation insurance. 

Your employee should also understand that your non-owned auto liability insurance policy does not cover them when they are driving their vehicle for personal purposes. For example, if they drop those cupcakes off at the client’s location, and then get in an accident while driving home in their own car, that accident may fall under their personal auto insurance coverage since it happened while they were commuting home.

Finally, if your employees rent cars for business use, be sure to instruct them on what to do in the event of an accident. Some business credit cards provide rental coverage but you need to make sure you understand the limitations of any coverage, and share that with employees.

What’s the Difference Between Commercial Insurance and Regular Insurance?

Personal auto insurance policies generally don’t cover business use of a personal vehicle. Some entrepreneurs try to save money by figuring that, in the event of an accident, they can always say they weren’t driving the vehicle for business purposes. But that can be risky and could expose them or their small businesses to significant costs, or even require your business to get a small business loan to cover out-of-pocket expenses.

And to make matters worse, judgments from lawsuits against the business could hurt business credit.

You may be able get commercial auto insurance coverage through your current auto insurance company or an insurance agency, though not all providers offer it. 

If you don’t have commercial auto insurance, or if you aren’t sure whether you need Hired and Non-owned Auto Liability Coverage, get an auto insurance quote from a licensed professional who understands the needs of small business owners. 

FAQ’s on Business Auto Insurance

Can a business claim auto insurance as a business expense?

Auto insurance premiums are typically a deductible business expense. However if you choose to use the standard mileage rate for your vehicle expenses you typically can’t deduct actual expenses such as insurance. If you don’t use the standard mileage rate, you can deduct insurance as an actual car expense. 

If you use a car for both business and personal purposes, the expenses must be split. 

Can employees claim auto insurance as a business expense?

Before the Tax Cuts and Jobs Act suspended certain miscellaneous itemized deductions, employees who used their car for work were able to take an employee business expense deduction as part of their miscellaneous itemized deductions reported on Schedule A. 

This no longer applies as of tax years after December 2017, and it’s true even if your employer doesn’t reimburse you for business use of your car.