10 mins

Finding the best type of insurance for your company cars

Hero

The difference between types of car insurance can make or break a company’s bottom line. What works for your budget – business car insurance or commercial auto insurance?

Introduction

As a business owner, you must be prepared for the worst; this means you are willing to pay top dollar to guarantee all of your employee-driven vehicles are looked after by a reputable insurance company, lest you risk having employees leveraging someone else’s “uninsured motorist coverage.” Indeed, you could find yourself subject to some steep medical payments and auto liabilities on your employees’ behalf. Whether you own, lease, or have your employees use their personal vehicles for business purposes, you need a specific type of collision coverage. There are two types of vehicle protection you ought to look into for damage coverage: business car insurance and commercial auto insurance. 

  • Business auto insurance: This type of insurance covers company-owned, leased, or employee vehicles used for business purposes.
  • Commercial fleet insurance: This is designed for businesses with multiple vehicles; it covers a fleet of cars or trucks.

One key difference is that business car insurance often requires a “business use endorsement” to be added to a personal auto policy. This endorsement provides coverage for business use of a private vehicle and may be used as an alternative to providing company cars. It is important to note that this endorsement is only appropriate for individual employees and not for fleets of vehicles. A company with a fleet of cars will likely need commercial fleet insurance instead. This article will compare and contrast business use endorsement vs. commercial fleet insurance, which are the two types of coverage companies need to consider.

What is business car insurance? Understanding costs and coverage

Business use car insurance is designed to cover vehicles used primarily for business purposes, such as traveling to meetings, transporting goods, or providing client services. This type of coverage should include liability insurance for collision, comprehensive, and uninsured/underinsured motorists, among other things.

The cost depends on the insurer, the specific kind of coverage, and the type of vehicle being insured. Larger trucks whose business purposes center on transporting flammable goods will cost more. Given the wide range of tasks a company may need its drivers to undertake, business car insurance is occasionally more expensive than personal car insurance, as it covers a more significant risk and typically offers more extensive coverage. Nevertheless, most business car insurance is nearly identical to the offerings of personal car insurance plans and includes things like liability, collision, and comprehensive coverage. Moreover, business car insurance may cover property damage liability, vandalism, lost equipment, rental cars, and employee injuries.

What does business car insurance cover?

Employers are responsible for ensuring their employees have adequate insurance coverage when using company vehicles or personal vehicles for work purposes. Business car insurance covers various things, including liability, collision, comprehensive, and uninsured/underinsured motorists. Due to these complex circumstances, business car insurance is more expensive than personal car insurance. 

Additionally, employees must remember that using a company vehicle for personal use is a taxable benefit and must be included in the employee’s income and withheld taxes. Overall, having the appropriate insurance coverage when employees drive for work is essential.

For companies with fleets of vehicles, commercial fleet insurance is likely a more appropriate option. Commercial fleet insurance covers all vehicles in a company’s fleet, regardless of who is driving them. This coverage includes liability, collision, comprehensive coverage, and coverage for any customizations or equipment added to the vehicles. Commercial fleet insurance also typically covers any damage caused by the cars to third-party property.

In terms of cost, commercial fleet insurance can be more expensive than commercial car insurance, as it covers multiple vehicles and personal injury protection for multiple employees instead of just one. However, the cost of commercial fleet insurance can be offset by the benefits of having all of a company’s vehicles covered under one policy. Many insurance companies offer discounts for companies with larger fleets of automobiles, which can help to lower the cost of commercial fleet insurance.

The choice between business car insurance and commercial fleet insurance will depend on a company’s specific needs. Companies with individual employees who use their personal vehicles for business purposes may benefit from adding a business use endorsement to their personal auto policies. Companies with fleets of cars will likely need commercial fleet insurance to ensure all of their vehicles are adequately covered. Ultimately, the most important thing is for companies to ensure they have appropriate insurance coverage to protect their employees and assets.

Is using a company vehicle a taxable benefit?

Using a company vehicle for personal use is a taxable benefit and must be included in the employee’s income and withheld taxes. However, there are exclusions for cars used only for business purposes. Additionally, if there are instances in which an employee sends a reimbursement to the company for the personal use of the vehicle, the taxable benefit may be reduced. 

Business use endorsement

Business use endorsement is a cost-effective option for businesses that do not have a fleet of vehicles. Adding a business use endorsement to an employee’s personal auto insurance coverage saves businesses money insofar as they no longer have to provide a company car. The employee’s personal auto policy provides coverage for both personal and business use of the vehicle, making it an attractive alternative to the cost of a separate commercial vehicle insurance policy. This endorsement extends the coverage limits of the personal policy to include business use of the vehicle, but it does not provide the same level of coverage as commercial insurance. It is important to note that a business use endorsement may only cover some of the needs of a business, particularly if the company has a fleet of vehicles.

Commercial Fleet Insurance

Commercial insurance is a business owner’s policy explicitly designed for a corporate fleet of vehicles. Commercial auto insurance covers a variety of vehicles, including cars, trucks, vans, and trailers used for business purposes. Commercial insurance provides coverage for liability, collision, comprehensive, and other types of coverage that are specific to business use.

Commercial fleet insurance is a type of commercial insurance policy that covers multiple vehicles under one policy. It is designed for businesses with a fleet of cars used for business purposes. This policy can save companies money because it offers a discount on the premium compared to insuring each vehicle individually. Commercial fleet insurance can provide businesses with coverage for liability, collision, comprehensive, and other types of coverage that are specific to business use.

Comparing Business Use Endorsement and Commercial Fleet Insurance

Business use endorsement and commercial fleet insurance are two types of coverage that businesses can choose to insure for business purposes. While they offer protection for businesses, there are some critical differences between them.

The main difference between business use endorsement and commercial fleet insurance is the number of vehicles covered under each policy. Business use endorsement is designed for businesses with a small number of vehicles used for business purposes. This coverage is typically added as an endorsement to a personal auto insurance policy and covers the driver for both personal and business use of the vehicle.

On the other hand, commercial fleet insurance is designed for businesses with more vehicles used for business purposes. This policy covers multiple cars under one policy, saving companies money on their premiums. Commercial fleet insurance offers more comprehensive coverage compared to business use endorsement. It covers liability, collision, thorough, and other types of coverage specific to business use.

Another key difference between business use endorsement and commercial fleet insurance is the cost. Business use endorsement is typically less expensive than commercial fleet insurance because it covers fewer vehicles and offers less comprehensive coverage. However, the cost of commercial fleet insurance can vary depending on the number of cars insured, the type of vehicles insured, and the level of coverage the business requires.

Which Type of Coverage is Right for Your Business?

When deciding whether to choose business use endorsement or commercial fleet insurance, there are several factors that companies need to consider. These factors include the number of vehicles used for business purposes, the type of vehicles used, the required coverage level, and the budget for insurance premiums.

Additionally, it is essential to note that commercial fleet insurance typically covers a wider range of risks than a business use endorsement. Commercial fleet insurance policies may cover not only the vehicles themselves but also the cargo or equipment being transported, as well as liability coverage for bodily injuries and property damage caused during a business-related commute. This can be especially important for businesses that operate in high-risk industries transporting valuable goods. So, if you’d like to avoid having to pay off high medical bills, then you need to be sure you’ve got the best policies paid for – no matter how high those insurance rates may be.

Regarding insurance costs, commercial fleets can be more expensive than a business use endorsement. However, the insurance cost will depend on several factors, including the number of vehicles in the fleet, the type of vehicles, the level of coverage needed, and the driving records of the employees driving the cars.

Choosing business car insurance or a commercial auto insurance policy will depend on the specific needs of your business vehicles. A business use endorsement may be sufficient if you have a small number of vehicles and employees who use their own vehicles for business purposes. However, commercial fleet insurance may be a better option if you have a large fleet of company-owned or leased vehicles or if your business operates in a high-risk industry.

Conclusion

Choosing the proper insurance for your type of business and the kind of company car or fleet you use is an important decision based on carefully considering your business needs and potential risks. If your employees drive long distances, their vehicles may be more prone to physical damage and require additional coverage, for instance. Business car insurance and commercial fleet insurance offer benefits and drawbacks, and it is essential to weigh these factors before deciding. Working with a knowledgeable insurance agent can help you navigate the options and choose the policy that best suits your business.

Disclaimer: nothing contained in this blog post is legal, accounting, or insurance advice. Consult your lawyer, accountant, or insurance agent and do not rely on the information contained herein for any business or personal financial or legal decision making. While we strive to be as reliable as possible, we are neither lawyers nor accountants nor agents. For several citations of IRS publications, on which we base our blog content ideas, please always consult this article: https://www.cardata.co/blog/irs-rules-for-mileage-reimbursements. For Cardata’s terms of service, go here: https://www.cardata.co/terms.

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