Businesses face somewhat different problems than private car owners when it comes to purchasing vehicle insurance. Most car owners know that agents routinely ask the question about how the car will be used. They always want to know if it will be used for business because it adds more risk to the insurer. Business need to purchase the right type of insurance to make sure that they are adequately protected from financial losses.
A car used for business use is often driven into areas that most people avoid.
Businesses try to serve the largest possible territory to increase the size of their potential customer base. This means that sales people, customer service personnel, and delivery drivers will need to go into areas that may have high crime and are not safe. The chances of the car being stolen, vandalized, or broken into can increase exponentially. When insurers know that a car will be used for business, the assumption of larger risk is made and premiums are adjusted upward accordingly.
Businesses often use drivers other than the owner to operate the vehicle.
While insurers try to have a list maintained of approved drivers, it is not always possible to have a perfect list at all times. Employees come and go. There can be a lag between a change of drivers and the receipt of accurate driving records on new drivers. Insurance companies work on the idea that company drivers will be relatively high risk. This way, they can insure anyone who drives the car even when the records are not up to date. Employers who can provide the insurer with an accurate driver list can sometimes reap the reward of lower premiums.
Liability risks for companies is high when they begin to put vehicles on the road.
When a company car is wrecked, the assets of the company are on the line. Unlike individuals, most companies rely on their assets to generate the revenues that keep the business running. If those assets are lost, the company can be forced not only into bankruptcy, but out of business. Because of this, companies must buy liability insurance that can be many times higher than personal policies.
For individuals who use their car for their sole proprietor business, disclosure of the business use is vital.
Consult with your agent regarding the specific requirements of the insurer concerning the business use of a car. Some companies will not penalize you unless the car is used at least half the time for business use. Occasional use of a car for business is often regarded more like commuter use. However, if you are using your vehicle for heavy business use and not declaring, the insurance company may choose to not cover a loss if you have misrepresented its use to them. It is better to take a lump or two in the form of increased premiums than to find yourself uninsured when you need insurance the most.
If you plan to use the car to carry products or valuables, make sure that you have insurance that covers the contents of the car.
Comprehensive insurance normally covers against theft of the contents in personal cars. In business cars, the contents can be quite expensive. Since these items are technically not personal property, but are inventory, they need to be insured as such. This means another discussion with your agent to get the correct provisions included in your policy to cover inventory in transit.