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What type of insurance do I need for my work vehicle?

It’s easy to appreciate why we need to purchase vehicle insurance for personal-use vehicles. Not only does it protect us from potentially expensive damage and liability but it’s also the law in Canada. The same applies to vehicles used for business—but choosing the right vehicle insurance coverage for business vehicles isn’t as straight-forward.

Knowing when you need business-use coverage when to upgrade to commercial vehicle insurance and at what point you require fleet insurance coverage can make the difference between total coverage protection or a big dent in your company’s balance sheet.

But here’s the thing: insurance for vehicles used in business activities can be a bit of a grey-zone. The best way to know what coverage you need is to call and talk to your independent insurance broker. By telling them what you do and how you use your vehicle they can offer coverage that won’t see you stranded without the option to file an expensive claim.

To help you better appreciate the advice your independent insurance broker will offer here is a snapshot of the difference between business-use commercial and fleet insurance coverage.

Business-Use Coverage

Many small business owners—particularly home-based business owners—will use their personal car insurance policies to cover them for business-related travel. What they don’t realize is that this leaves you open to expensive litigation and the potential of no coverage under your current personal vehicle policy.

Say for example you need to drive to a client’s home. You end up using your personal vehicle for a business use. If you were to end up being involved in a collision your personal auto insurance probably won’t cover any of the repair expenses and potential medical and legal costs because you were using the vehicle for a business-related reason. Most personal auto insurance policies exclude coverage if you use the vehicle for business-use purposes. Not only could this wipe out your business but also your personal finances.

As soon as you start to use a vehicle for business purposes you need to upgrade your personal car or truck insurance policy to include business-use coverage. Expect to pay a bit more but this increased premium reflects the added risk. Upgrading to business-use policies can usually be done with a quick call to your independent insurance broker who will guide you through the best options for you your vehicle and your business.

Commercial Vehicle Insurance

Business-owners that use their vehicles as part of their commercial activity will require commercial vehicle insurance. Unlike business-use policies commercial coverage is specifically created to cover the vehicle you need to conduct your business. For example if you ran a taxi service you would need insurance coverage that not only covered you for any damage or liability if you were in an accident but also reflected how often you drive and took into consideration how necessary this vehicle is to your business activities.

A commercial policy is necessary if you’re using your vehicle to transport goods or people for a fee; you use your vehicle to conduct a service; you require higher limits of liability because of the nature of your work (for instance you operate a food truck); you’re hauling a considerable amount of tools or equipment or towing a trailer that is used in your business activities; or employees operate the vehicle or the vehicle ownership is under the company’s corporate name or jointly owned by a partnership.

Fleet Insurance

Typically a business start-up will have one perhaps two vehicles but as your business grows managing multiple policies across all vehicles can not only be time-consuming but not cost-effective. If you’re in this situation it may be time to consider fleet insurance.

Quite often fleet policies can be used once a company operates five or more vehicles for commercial use. Fleet insurance allows for better rates since most of the vehicles will be similar in type and use. In other words fleet insurance is the commercial coverage equivalent of a volume discount.

The other significant advantage of a fleet policy is that you can either restrict who drives the vehicles or set it up so that all employees can drive all business vehicles covered under the policy.  Keep in mind though that insurance providers may impose restrictions for high risk or high value vehicles as well as for high risk drivers. For more assistance talk to your independent insurance broker who will be able to help you find the most appropriate policy.

Choosing the Right Type of Insurance for Your Business Needs

To choose the right insurance here are a few factors to consider:

#1: What name is the vehicle registered under?

If the vehicle is registered to a corporation or if the vehicle is required to complete your company’s commercial activities then you’ll need probably need to get a commercial insurance policy. If however the vehicle is registered in your personal name and depending on the type of business you operate you could probably end up with a business-use or personal auto policy. To be sure talk to your independent insurance broker for some guidance.

#2: Who drives the vehicle and why?

If other employees at your company drive the vehicle or vehicles and you need these employees to drive the vehicles so they can do their jobs you’ll probably need a commercial insurance policy. If however your employees drive the company trucks but only as a perk or as a way to reign in costs and not because they require the vehicles to complete their tasks then you will probably only require a business-use policy. For example if the company’s crew supervisor is given a truck to drive from site to site but he doesn’t carry tools or materials you could probably insure the vehicle and driver under a business-use policy. If however that same site supervisor was responsible for picking up and dropping off material and transferring tools from site to site you would probably need to look into commercial insurance coverage.

#3: How is the vehicle used?

The answer to this question will determine what policy is right for you and your company vehicles. If the vehicle is used to help you perform business activities but the use of the vehicle is not integral to those activities and you don’t have a commercial exposure related to the use of that vehicle—like transporting goods or people or selling items from the vehicle—then your insurance broker will probably help you find business-use coverage. If however you need the vehicles to carry people equipment or material or you use the vehicle to tow or deliver goods or because you operate a business from the vehicle then you need to protect your assets with commercial vehicle insurance. To better understand all your options talk to your insurance broker.