When your business relies on hired and non-owned drivers, it’s crucial to establish proper insurance coverage to protect your employees, your brand and your bottom line. By taking the necessary steps before these drivers get behind the wheel, you can mitigate the risks associated with their activities. In this blog post, we will explore four key considerations and measures that can be taken to ensure appropriate hired and non-owned auto insurance coverage.
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What is Hired and Non-Owned Auto Insurance?
Hired and non-owned auto insurance (HNOA insurance) is a type of insurance coverage that provides liability protection for businesses when they leverage vehicles they do not own. It typically applies to situations where employees use their personal vehicles for business purposes or when a business rents vehicles for company use. Below, we explore the high-level differences between hired auto coverage and non-owned auto coverage.
Hired Auto Coverage
This aspect of HNOA insurance applies when a business rents or leases vehicles for short-term use, such as for client meetings, business trips or deliveries. Hired auto coverage protects the business against liability claims if a crash occurs while an employee is driving a rented or leased vehicle for business purposes.
Non-Owned Auto Coverage
Non-owned auto coverage comes into play when employees use their personal vehicles for business-related activities. If an employee is involved in a crash while driving their personal vehicle for work purposes, non-owned auto coverage can provide liability protection for the business. It typically applies when the employee’s personal auto insurance policy doesn’t cover business use or when the liability limits are insufficient.
4 Ways to Ensure Proper Coverage for Hired and Non-Owned Vehicles
1. Set Minimum Liability Coverage Requirements
To safeguard your business adequately, it is recommended that employees carry a combined single limit coverage between $300,000 and $500,000. This coverage level offers a strong layer of protection against potential liabilities. If there are cost differences between compulsory liability limits and your company’s requirements, you can consider including the difference as part of the assigned allowance to ensure all employees have the necessary coverage.
2. Avoid Personal Auto Policies with Business-Use Exclusions
It’s best practice to ensure that your employees’ personal auto insurance policies do not contain a “business-use” exclusion. If such an exclusion exists, it means that the driver’s liability insurance may not cover incidents that occur while they are performing business-related activities. It’s advisable to ensure that employees’ personal auto insurance policies explicitly cover their vehicles for business use that aligns with your company’s operations. This is pertinent for all employees that drive personal vehicles for work, receive a car allowance or are reimbursed for mileage. Employees should discuss their business operations with their insurance providers to explore the possibility of expanding their current policies.
3. Consider Purchasing Hired and Non-Owned Auto Insurance
As we mentioned above, HNOA insurance provides coverage for liability expenses arising from incidents involving vehicles that your business uses for work purposes but does not own. This insurance kicks in after the employee’s personal auto insurance is exhausted.
It is important to note that HNOA insurance generally does not cover collision damages for hired or non-owned vehicles, so businesses may need to consider additional coverage options for physical damage protection. The specific coverage and policy terms may vary depending on the insurance provider and the policy itself. It is recommended to consult with an insurance professional to understand the scope of coverage and select appropriate limits for your business’s needs.
4. Require Additional Coverage for Hired Vehicles
In cases where employees rent cars on behalf of the business, it is always advisable to require employees to purchase insurance through the rental car company. By doing so, if an employee gets into a crash while traveling in a rental car and has purchased rental car insurance, the employer receives an extra layer of coverage before the costs are borne by their own insurance.
Dive Deeper into Your Responsibilities as an Employer
Hired and non-owned auto insurance is essential for protecting your employees and your business from potential risks. By implementing the strategies above, you can establish more comprehensive protection for your business.
To gain valuable insights into your role as an employer regarding the risks associated with hired and non-owned auto, download our exclusive white paper. This comprehensive resource explores your responsibilities and provides practical strategies to effectively safeguard your business.
