The Bureau of Labor Statistics reports that resignations rose steadily in 2011, with nearly 2 million American workers giving notice last September – the highest number since November 2008. Since we doubt that all those folks won the lottery, it’s probably a safe bet that many decided to start their own home-based businesses. In fact, people who track these things predict the home office market will add nearly 2 million new home-based businesses by 2015. If you’re planning to be your own boss, one of things you need to understand is the impact of using your personal vehicle for business-related purposes. So, here are the auto insurance basics for home-based business owners.
One of the biggest mistakes home-based business owners make is assuming their personal car insurance will cover the use of their vehicle for business. That can be a costly assumption, especially if you’ve failed to inform your insurance company that you use your car for business. Misrepresenting usage can result in denial of claim, leaving you to pay all the costs associated with an accident.
Do you need dedicated (and more costly) commercial auto insurance for your small business, or can you get by with a simple rider to your existing personal policy? It will depend on the nature of your business and exactly how you use your vehicle in conducting it.
If you only use your car to visit clients, or occasionally drive clients around in the course of doing business, your personal auto policy may be sufficient. Ask your insurer to be on the safe side, and don’t neglect to indicate that business usage on your application or at renewal. You might pay a few dollars more for the added mileage but you won’t have to worry about the aforementioned denial of claim.
On the other hand, if you’re operating a shuttle service transporting neighbors to the airport or grocery store, or you’re delivering products from your home to a vendor, you’re probably going to need a commercial policy.
Insurance companies generally divide vehicle usage into three types: pleasure, commuting and business. If you use your car or truck more than half the time to conduct business, you should consider a commercial policy.
If you go with personal car insurance for your small business, give serious consideration to upping your liability limits to protect both your personal and business assets. The minimum limits required by most states could leave you and your business dangerously exposed if someone decides to sue you in the event of a car accident. You can always carry a higher deductible to help keep the premiums low.
If you haul cargo or equipment around in the course of doing business (tools or a computer, for instance), your personal auto policy won’t cover the loss. Your homeowners’ or renters’ policy will provide some coverage if property in your car is stolen or damaged, but it may not be sufficient. In that case, consider a rider on your homeowners’ or renters insurance. Or consider a business owners policy (BOP) to cover property damage and liability risks at your home as well as off premises. BOPs typically cover up to $10,000 to replace any damaged or stolen equipment that is permanently attached to your vehicle. Keep in mind these auto insurance basics for home-based business.