Car insurance for a home-based business

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Last updated April 7, 2010

Not all business owners need to buy commercial car insurance coverage. In most cases, if you use your vehicle to deliver goods, services or to transport equipment from job to job, you need only a personal auto policy. For example, an Avon sales representative who uses her car to deliver products once a week may only need a personal insurance policy.

But if you own a home-based business that requires you to provide frequent transportation to employees or clients, a personal insurance policy will not be adequate. An operator of a home-based livery service, for instance, will need a commercial auto policy. It will cover his or her business assets in the event of an accident.

If you have an employee, your commercial auto policy will cover him or her. However, if your employee is injured in an accident, he or she will not be covered by your auto policy — this would be covered by workers compensation. Also, if you want your husband or wife to be able run errands with your business vehicle, your commercial auto policy will cover him or her. In addition, your commercial policy will cover you and other drivers or family members if you use your vehicle to go on vacation.

Auto insurance costs

Your auto insurance quote for your home-based business policy is calculated much like your regular car insurance. Insurance companies look at the number of miles you drive, who will be driving the vehicle and your driving record and claims history. Other major factors include your liability limits and comprehensive and collision deductibles. The higher your coverage limits, the more your premium. Lower-amount deductibles will cost more as well.

However, make certain that your liability limits are enough to cover both your personal and business assets. If you cause an accident, the injured parties can sue you as an individual and as a business owner. The level of your liability limits will depend on the size and nature of your business.

Loretta Worters, spokesperson for the Insurance Information Institute, recommends that a small home-based business have minimum commercial car insurance liability limits of $250,000 for bodily injury coverage for one person, $500,000 for bodily injury for all persons and $100,000 for property damage coverage. But if the company is larger, these liability limits may be woefully low.

Pete Moraga, spokesperson for the Insurance Information Network of California, says that businesses are often targets for lawsuits because of the “deep pocket syndrome” that plaintiff attorneys follow.  Also, commercial policies may cover transportation operations that handle very expensive or dangerous cargo, he adds.

Insure what you haul

Many home-based businesses need to shuttle equipment from job to job, like power washers and ladders for house painters, or lawn mowers and other gardening equipment for landscapers. If you own a home-based business, you may already have property and liability coverage under a business owners policy, or BOP.

Keep in mind, though, that if you permanently attach a piece of equipment — like a generator — to your vehicle, that generator won’t be covered under your BOP. You’ll have to increase your insurance on the vehicle itself in order to cover items that are permanently attached.