Do You Need New Auto Insurance for your Business?
You may have to add an item on your checklist for starting your new business: updating your auto insurance.
Find out what’s involved in work use of a personal vehicle: if and when you would need business or commercial auto insurance, what it covers, how those rates are determined, and how you can get it affordably.
Using Your Vehicle for Work
Whether you’re assuming all the financial risk or you’ve found investors, money matters when you’re starting a new business. As in saving money, especially until the world realizes how much they need your product or service.
So you may be inclined not to even consider a need to update your auto insurance, whether it’s because you didn’t realize you needed to, or you don’t want to deal with an additional expense. But if you use your vehicle for work purposes, you will need to get business or commercial auto insurance coverage.
A standard auto insurance policy only provides coverage for social use (pleasure) and commuting.
And if you just occasionally drive your personal vehicle to a business meeting, or you commute to a single job site daily, your standard auto insurance policy should be enough.
But anything more calls for additional insurance coverage.
Business Auto Insurance
If you use your vehicle for personal and business purposes, then a personal policy that covers occasional business use may meet your needs.
But be sure to designate that your vehicle is used for business on your personal policy. If you don’t, and you have an accident on the way to a work event, your coverage may not apply.
Examples of the types of occupations that would fall under business auto insurance include:
- Real estate agents
- Assessors or surveyors
- Road salespeople or tradespeople
- Community service workers
Business use auto insurance covers you for third-party property damage, third-party fire and theft, and comprehensive, which encapsulates a wide range of other damages to your vehicle including storms, hit-and-run, and even damage you cause.
The average price for business use auto insurance is $304 a month. But, just as with standard auto insurance, your rate can vary by several factors, including your age, your occupation, the type of vehicle you drive, the age of your vehicle, and your ZIP code.
Commercial Auto Insurance
If you use your vehicle solely or primarily for business purposes, you may want to consider a commercial auto policy that provides protection for work-related uses.
You should have commercial auto coverage if:
- Your job requires you to drive daily to meet multiple clients at different places
- You haul commercial goods related to the business
- You transport passengers for work reasons
- Your vehicle has permanent work equipment
- You allow employees to drive your personal vehicle for business purposes
- Your vehicle is a pickup, work van, or utility vehicle that weighs over 10,000 pounds
- You travel with expensive equipment and tools for your business
- You need commercial auto liability coverage to perform certain duties on job sites or at a client’s residence
As you can see, commercial auto insurance covers a range of business uses that carry greater potential risk. If you don’t have this coverage, your personal auto policy provider may deny coverage for work-related incidents and could even cancel your policy.
A commercial policy extends coverage of property damage or theft so job-related equipment is covered. It also includes more liability coverage so the clients you’re transporting are covered.
You can tailor your commercial auto insurance to your company’s specific driving habits. Talk to your current insurer about policies about how you use your vehicle to see that your particular business needs are covered.
Since there are so many variables involved in commercial auto insurance, pricing is a bit harder to pin down. For a ballpark figure, the rate could be up to $2,000 annually.
Uncertain About Business or Commercial Auto Insurance
You still may not be sure which auto insurance coverage category you fall into with your business. For example, you’re not delivering pizzas all day or transporting a busload of clients, but you also may not be parked at work all day either.
It can be a gray area. But don’t get overwhelmed. An experienced insurance agent deals with these issues full time, so they can help guide you to the right coverage — from additional liability on your personal policy to cover occasional business purposes, to a full commercial policy — and not pay for more than you need.
But you can take part in being proactive about that decision: Keep a driving log. Note your location, cargo, and any clients in the vehicle, and your number of stops. Observing your daily business-related driving habits can make your auto insurance needs clearer.
How to Lower your Business Auto Insurance Rates
If you’re starting your own business, you’re either already a savvy business person or you’re on your way to becoming one. So you know there are always ways to save from paying full price. Let Uncle Sam and insurance carriers help you with that extra auto insurance cost.
Business Use of Tax Deductions
Tracking the miles driven on your auto is a smart tax move if you run your own business.
There’s the Actual Expenses method, based on the expenses you incur in the operation of your vehicle, such as gas, oil changes, tires, car washes, insurance, and even vehicle depreciation.
Divide your total business miles by the total number of miles you drove for the year (business plus pleasure). Then multiply the total of your actual expenses by this percentage to get your actual expenses deduction.
Or there’s the Standard Mileage method. Just multiply your business miles by the amount per mile allotted by the IRS (57.5 cents per mile).
Do both, and see which method gets you the biggest deduction.
If you lease a vehicle, you can deduct the business portion of your lease (the percentage you use the vehicle for business). If there’s an upfront cost for down payment for the lease, you may also deduct that — but you have to spread out the deduction over the entire portion of the lease.
You can claim mileage for a leased vehicle, but only through the Standard Mileage method.
Finally, you can also deduct the cost of your business parking and tolls, the interest on an auto loan, and personal property taxes you pay on a business vehicle.
Auto Insurance Discounts
If your new business has you working from home or in a space that has shortened your commute, look into either a low-mileage discount or pay-per-mile auto insurance.
Low-mileage: This discount is usually for those who drive from less than 7,500 miles per year to less than 5,000 miles per year. Most insurance companies offer this discount, with variations, and it can save you anywhere from 5 percent to 15 percent off of your insurance rate.
Pay-per-mile: This auto insurance is not as widely available, but through the use of a mobile app or a plug-in device tracking your mileage, you could discount your insurance by 5 percent at the lowest up to 40 percent at the highest.
So far there’s Allstate’s MileWise, Esurance’s Pay Per Mile, Liberty Mutual’s ByMile, and Nationwide’s SmartMiles, but expect these to expand to more states and for more major insurance companies to come on board. There’s also Metromile, an online company that exclusively sells pay-per-mile insurance policies.
Pay-how-you-drive: If you’re a safe driver with a good driving record, you could also save by going with this version of usage-based insurance, which tracks your driving habits.
There’s State Farm’s Drive Safe and Save, Geico’s DriveEasy, Progressive’s Snapshot, Allstate’s DriveWise, USAA’s SafePilot, Liberty Mutual’s RightTrack, Farmers’ Signal, Nationwide’s SmartRide, Travelers’ IntelliDrive, and American Family’s KnowYourDrive.
There’s also Root Insurance, the country’s first auto insurance company that can be entirely mobile/app-based, which ensures only safe drivers. The amount of savings from this usage-based insurance is on par with pay-per-mile insurance.
Other Discounts: There are dozens of additional possible auto insurance discounts, depending on the insurance company — for example, State Farm has 19; Liberty Mutual offers 38.
So also ask about any applicable discounts among the following: early signing, full payment, homeowner, anti-theft devices, anti-lock brakes, green vehicle, new vehicle safe driver, defensive driving course, multi-policy, multi-car, student away, good student, alumni/university, military, memberships, passive restraint, paperless/e-bill, and garaging.
Taken separately, they are a small percentage, but since you’re usually eligible for multiple discounts, this can add up to a tidy bit of additional vehicle insurance savings for you.
Comparison Shop for Your Auto Insurance
For auto insurance write-offs, you can’t really comparison shop the Internal Revenue Service.
But you can most definitely comparison shop for the best auto insurance rates. As we noted differences in auto insurance discounts by carrier, there are also differences in rates for the same types of coverage.
So check at least three insurance companies, including your existing company since you may already have loyalty discounts and even accident forgiveness with them that you would not receive with a new carrier. The top commercial auto insurance providers are State Farm, Nationwide, Progressive, Geico, and GMAC.
Much success to all aspects of your new business!
Karen Condor is an insurance expert who writes and researches for the auto insurance comparison site, AutoInsurance.org.