For organizations where vendors may need to drive from location to location, it’s critical to ensure they have the right type of coverage in place to protect all involved. In many cases, vendors that have small fleets to large fleets will have a commercial auto policy in place, but for those that don’t, you must check whether they use hired or non-owned autos.
In this post, we’ll explain what a commercial auto policy covers and why it’s important to check for hired and non-owned autos for those that don’t have a commercial policy in place.
What Is a Commercial Auto Policy and What Does It Cover?
A “Commercial Auto Policy” may be referred to in a number of ways, including: commercial auto insurance, commercial car insurance, truck insurance, or fleet insurance. For the remainder of this post, we’ll refer to this type of insurance as a commercial auto policy. Let’s first define what this policy type is:
According to Trusted Choice, “Commercial auto insurance provides protection for any vehicle designated for business use against both property damage and liability. Whether you drive a vehicle that is for dedicated business use or drive a personal vehicle for business, it is important to have commercial auto insurance, as your vehicle will not covered under a personal auto policy.”
What Does a Commercial Auto Policy Cover?
Similar to a personal auto policy, commercial policies cover things such as collision, medical payments or personal injury, uninsured motorist, liability, and comprehensive. However, just because a personal auto policy is in place, doesn’t mean a vendor will be covered should something happen while they’re driving for business purposes. The two policy types are different and may include eligibility requirements, different definitions of coverages, exclusions, and limits.
Of course, each policy is set up differently based on each company’s needs, so it’s important to understand each policy in depth and to review the certificate of insurance to see what’s actually covered, and what may not be.
When Is a Commercial Auto Policy Needed?
According to Geico Insurance, a business must have a commercial auto policy in place if they are transporting goods or people for a fee. A personal auto policy simply won’t provide coverage for scenarios where:
- A vehicle is used to conduct a service
- A company needs higher limits of liability because of the nature of the work
- A company is hauling a considerable weight in tools or equipment or towing a trailer used to conduct business
- Employees operate the vehicle or if ownership is in the name of a corporation or partnership
Why You Must Check Vendors For Hired or Non-Owned Coverage
Most small businesses don’t own a fleet of vehicles, in which case the company doesn’t need a commercial auto policy. Instead, they likely need a hired or non-owned policy, which is sometimes referred to as HNOA insurance. This type of insurance is used for businesses that either rent vehicles for business reasons or have employees use their own personal cars for work errands or work purposes. For example, a company might rent a limo for an important client arriving at the airport, hire a taxi to get across town for a lunch meeting, or rent a car for an important sales meeting in another city, ask an employee to run a work errand, and so on.
It’s important to note that HNOA insurance does not cover commuting or personal errand time, even if errands are run during business hours. Any accidents taking place during these times would be covered on the individual’s personal auto insurance policy.
According to Insureon, a HNOA insurance policy would cover legal fees and the damages employees cause other people, including:
- Medical bills
- Damaged property
- Auto repairs
Businesses can usually purchase HNOA insurance as a standalone policy or they can add it onto their existing general liability policy.
Why Checking Policy Coverage Matters
If your organization works with vendors or contracts who may be renting or hiring vehicles, or if they have a fleet of their own vehicles, then it’s key to check their policies and make sure their certificate of insurance properly dictate the right coverage, amounts, and limits to keep all involved protected.
Insurance tracking services like myCOI can help your team handle the everyday tasks of managing certificates of insurance and protecting your company against underinsured claims, costly litigation and failed audits. The software is an easy-to-use, cloud-based solution developed and supported by a team of insurance professionals and is built on a foundation of insurance industry logic to automate the certificate of insurance communication process and ensure you remain protected.