Small business owners often ask employees to use their personal cars to deliver goods, run errands, or meet with clients. But unless you have the right insurance, you could be exposing your business to costly liabilities and leaving your workers financially vulnerable.
Non-owned car insurance, together with a commercial auto policy—if your situation warrants it—covers auto accidents that happen during business deliveries. Large companies like Uber and Lyft provide liability insurance to their drivers, and it makes even more financial sense for small businesses to do the same.
Is It OK for Delivery Drivers to Insure Themselves?
There are many reasons why you might ask an employee to use their car, such as when delivering:
- Food from your restaurant
- Cakes from your bakery for events
- Supply orders to customers
- Groceries from your market
- Flowers to a local establishment or residence
- Dry-cleaned clothes back to the customer
But the personal auto policy your employee has is meant to cover individuals and their family when they’re using their own car for non-business purposes. As a result, if your driver gets into an accident in any of the above scenarios, their personal car insurance won’t cover them. Even worse, you might be responsible for accident-related costs in certain no-fault states, even if your employee's role in the accident is as small as 5%. Like at-fault accidents, the bill might get passed on to employers in these instances.
Most states require you to purchase bodily injury and property damage liability protection if you or someone from your company drives for the business. Many also ask for additional coverages like uninsured/underinsured motorists and medical payments.
What Insurance Should I Get Delivery Drivers?
Having someone drive for work is risky business. The U.S. Bureau of Labor Statistics’ latest report showed delivery and other sales work involving driving as the sixth most dangerous job in the nation in 2018, the most recent data available. Moreover, delivery drivers are easy targets because thieves know many leave keys in the car when making quick pickups and deliveries. From 2013 to the end of 2018, the incidence of stolen vehicles for this reason increased by 88%.
If you have a fleet of cars belonging to the business, or even just one or two, you’ll need to get a Business Auto Policy (BAP). Business auto policies protect the company car and the driver, and usually include:
- Liability coverage for damage to the other person in a wreck and legal fees
- Physical damage to the company car
- Medical payments to the driver and passengers, regardless of fault
- Uninsured/underinsured motorist coverage
Suppose your employee only occasionally drives their own car for business, such as making a rare bank deposit or dropping off some documents with a client. In that case, you can add a Non-Owned Auto Liability Endorsement to your existing commercial policy or purchase a standalone Hired and Non-Owned Auto (HNOA) Insurance policy. You’ll get additional coverage beyond your worker’s personal auto liability policy, which is crucial if their private insurance only satisfies minimum state requirements.
If you’re unsure whether your situation warrants business auto coverage, Allstate has a checklist to help you decide.
Any employee-owned vehicles used regularly for business should also be listed on your BAP, or Business Auto Insurance policy.
Is This Different From Commercial Auto Insurance?
Insurance Services Office Inc. (ISO) is the organization that provides the standard policy forms for insurance businesses. The ISO commercial auto policy is also called the Business Auto Policy, so they are one and the same. A BAP is different from a Business Owners Policy (BOP), which doesn’t provide vehicle coverage. BAPs most commonly use the Business Coverage Form (BACF) to provide business auto liability insurance. Its versatility means it’s able to insure all sizes of businesses in a multitude of industries.
Commercial auto insurance provides coverage for any vehicles owned and used for the business, not just larger commercial autos like box trucks. An HNOA policy or endorsement only covers vehicles your company hires or borrows for business operations.
Using a Company Car for Personal Reasons
Some employees only have a company vehicle, and are allowed to use it outside of work. They don’t have a personal car or their own insurance. Because a BACF doesn’t cover personal auto use, you’ll also need to add a Drive Other Car Coverage Endorsement onto your BACF to extend insurance to the individual or a family member regularly using a company car.
How Much Does It Cost?
Commercial auto insurance with a typical $1 million policy limit costs an average of $1,704 per year for small businesses. Factors influencing premiums include:
- Vehicle weight and value when new
- Vehicle make, model, and year
- Vehicle use and risk
- Claims history
- Number of autos being insured
- Driving records of drivers
HNOA insurance costs about $100 per year. HNOA is much cheaper because it only includes liability coverage and doesn’t cover vehicle damage or repairs. Rates depend on factors like:
- The number of employees operating non-owned vehicles in your company
- Location of business operations
- Average number of miles driven
- Driving records and demographics of drivers
- Vehicle use
You can get both types of insurance from companies like Progressive Commercial and Hiscox. Others, like Vouch, work with startups to provide standalone HNOA policies.
- Any time an employee is doing business deliveries, you need to shield your company from liabilities by purchasing insurance.
- If the business owns the car, you’ll need commercial auto insurance. If your driver regularly uses their own vehicle for deliveries or other business errands, you must list the car on this policy.
- A Non-Owned Auto Liability Endorsement or standalone HNOA policy protects your business if an employee occasionally uses their personal car for work purposes.