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Trevor Tarpinian, CEPA®, CIC                                                                                    
Licensed Insurance Counselor                                                                             
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trevor@tfi4insurance.com

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Insuring Your Company Car

You’ve finally landed the promotion that gets you the company car or the chance at leasing one of the corporate fleet. After you’ve gotten past the important decisions of choosing color, transmission type, and body style, what should you be asking about the company’s insurance coverage? Or perhaps you’ve been driving the company’s vehicles for two decades, but it’s been that long since you actually thought about their insurance. Here’s a quick checklist on what to review.

First, let’s use the following sample of policy language from a real company auto insurance policy.

Authorized drivers of company-owned vehicles are covered by vehicle accident insurance as follows:

1) “the employer” self-insures all company-owned vehicles for collision and comprehensive (physical damage), subject to a $500 employee-paid damage fee.
 
2) “the employer” carries a business auto liability policy covering bodily injury and property damage to others up to $1,000,000, uninsured/underinsured motorist up to $250,000 and medical payments up to $5,000.

Deductibles for Damage to the car:

Do you know what deductible you’re responsible for if there is damage to the car? The above sample states a $500 deductible. Do you have that money saved and set aside for such an event?
Further, what happens if someone else is driving the car? The policy addresses this as the following sample shows:

However, if it is determined that an unauthorized driver was operating a “the employer” vehicle at the time the vehicle sustained damage, the employee or retiree will be held responsible for actual damages to the company-owned vehicle up to $1,000.

Know that unauthorized drivers could cost you a higher deductible. You’re ultimately responsible for the vehicle. Check with HR or the leasing office to discuss how they define authorized drivers.

Liability Coverage


Notice again the liability limit in the sample policy language above.

“The employer” carries a business auto liability policy covering bodily injury and property damage to others up to $1,000,000, uninsured/underinsured motorist up to $250,000 and medical payments up to $5,000.

In general, we want to see the liability coverage higher than what you can be sued for. What if your company’s policy has a lower limit of $500,000 but you have at least $1M in exposed assets? What if the $1M in coverage, like the policy above, isn’t enough. This is an area of the policy that needs to be assessed. If the coverage isn’t sufficient, outside solutions may be available to remedy this, such as a personal umbrella or excess liability coverage.

Uninsured Motorist/Underinsured Coverage

Note also from the main example the following language:
 
“the employer” carries a business auto liability policy covering... uninsured/underinsured motorist up to $250,000 and medical payments up to $5,000.

This coverage benefits YOU if someone with no coverage or minimum coverage hits you. Let’s say you're in a collision, you’re not at fault, and the injuries you incur result in 10 years of lost income and rehabilitation costs. The person that hit you doesn’t have coverage (or maybe they have state minimum coverage of $40,000). You can’t make a claim against their company for all your lost income. If that person isn’t worth much anything, you may not be able to sue for much. So where do you go?

The uninsured/underinsured coverage (UM/UIM) is a safety net for you in extreme cases like this. You’d be able to make claim on your policy to provide for yourself. Notice that in the corporate auto policy the UM/UIM is lower than the $1M in liability coverage. You don’t have control over changing that, but if the UM/UIM is not enough coverage, you may be able to look for outside solutions to increase this coverage for you.

Exclusions:

Further, there are exclusions to the policy. Again, take a look at sample language:

“the employer”-provided insurance does not extend to non-Company owned vehicles rented or leased for personal use.
   
If you drive another car you and don’t have a personal auto insurance policy, this company policy above is not covering any of your liability. This might not be a big deal if you or a family member have other cars and you have a personal auto policy on those vehicles. But if the company car is your sole vehicle, you don’t have coverage in the event you use another non-company car, such as a friend’s car to get groceries, a rental car, or a family member’s vehicle. Now each of those specific examples may have means to address covering your liability, but your company car policy will not if the policy language reads like the sample above.

Roadside and Rental Reimbursement

These common policy features on a personal auto insurance policy may or may not be present on your company’s policy. Look for language like the following in the policy:

“the employer” Roadside Assistance Program is to be used by eligible drivers for towing and other incurred roadside emergencies.

If the policy does not cover roadside assistance, and you want this type of service, you may need to look for a solution in a auto club association like AAA.


Additionally, rental reimbursement (reimbursement for a “loaner” when your car is in the shop due to a claim), may be part of the policy. Many times company plans will swap out vehicles and let you drive another car while the first one is in the shop. Knowing this up front would be wise so there are no surprises at time of claim. You don’t want to be surprised by the fact that you’re short a vehicle, or on the hook for paying $60/day in rental costs.

Take a few minutes to pull up your company’s auto policy, or call HR to email you a copy, and use this blog to review the following features to ensure the coverage aligns with your financial goals. This can help alleviate inconvenient surprises (like being stranded on the side of the road without roadside assistance) or more importantly, plan against serious circumstances making a major impact on your financial plan (like an uninsured driver hitting you, or a lawsuit going above the limit of your company’s liability). Contact me by clicking the link below to send me any questions or help review your current coverage.

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