Hired Car Coverage and Non-Owned Auto Liability Insurance

As you might suspect, commercial insurance can be quite a bit more complicated than personal insurance.

There tend to be more coverage options as there are many more liability and property damage risks associated with operating a commercial business.

This often leads to business owners questioning charges on their policy for coverage they don’t understand.

Two of the most misunderstood coverage types available (and necessary) on a commercial auto policy are hired and non-owned auto liability insurance, also referred to as symbol 8 and 9, respectively, on policy documents.

Many insured question the need for this coverage because they are not familiar with what it protects them against.

Let’s look at this coverage in detail to help explain why they are indeed necessary.

What’s the difference between commercial and personal auto insurance?

Before we dive into the specifics, you may be wondering about how commercial coverage differs from personal auto insurance.

Commercial auto coverage is designed to protect your business from liability claims. It covers vehicles for business purposes, such as delivery trucks or construction equipment. A personal auto policy protects a vehicle that belongs solely to you, and that you use throughout your personal life.

A personal policy will not cover accidents that occur while you are working, even if you just have a side hustle like delivering food for DoorDash. Anytime a vehicle is used to conduct work, it must be covered by a commercial auto insurance policy. It doesn’t matter if you’re driving a company vehicle or your own personal car.

Otherwise, the two policies are similar. Both generally involve liability coverage meant to protect the driver (and/or the business) from lawsuits related to accidents. Liability insurance covers both bodily injury and property damage claims.

What is hired car coverage?

One important aspect of operating a profitable business is being able to continue your operations regardless of the seemingly endless, ahem, roadblocks that present themselves on a day-to-day basis.

And there are very few businesses that do not require the use of a vehicle of some sort.

From company sales vehicles to service or delivery vans to long haul trucking operations, if you are “down” a vehicle due to maintenance, an accident, or simply growing faster than you can purchase a new one, you will likely need to “hire” or rent a vehicle to maintain your business.

Of course, you will need to insure these vehicles as well…at least for liability, which may not be automatically covered by your commercial vehicle insurance policy.

Remember, commercial auto coverage is not identical to personal auto insurance when it comes to liability insurance (who and what is covered on a personal auto policy).

Some insurers will offer physical damage coverage for hired vehicles, although that is usually covered by the policy of the person or entity who actually owns the vehicle.

Hired Car coverage protects you from liability claims arising from the use of a rented, leased, borrowed or “hired” vehicle up to the chosen liability limits of your policy.

Note: Hired Car coverage does not cover autos leased, hired, rented or borrowed from your employees or family members.

Make sure you recognize that distinction when hopping into your employee’s car to deposit a check at the local bank during your lunch hour! Personal errands will not be covered.

However, there is a coverage type designed to protect you from liability arising out of situations not covered by Hired Car coverage. Enter Non-Owned coverage.

What is non-owned auto insurance coverage?

Pay close attention to this one, as this is where most insured and insurance agents drop the ball on coverage for their business.

And wind up a named party in a liability lawsuit for which they have no insurance coverage (pull out the checkbook now if a judgment for damages is levied against you or your company here).

It is common for employees to use their own vehicle in the course of your business operations.

This may happen when your employee drops that check off at the bank during lunch or uses their own vehicle to pick up the five foot sub you bought the crew for lunch.

Example: If Sally causes an accident while operating her vehicle for YOUR business, you (or your business) can expect to be named as a negligent party in the ensuing lawsuit.

Any attorney worth their salt will likely follow the money trail for their client back to your business…it happens more often than you think.

Non-owned auto insurance provides coverage ONLY for autos you DO NOT own, while they are being used in the course of your business operations.

There is no coverage for when your employees are operating their vehicles for their own purposes, including driving back and forth to work for the day.

Don’t confuse non-owned auto as coverage for your employees during their everyday lives. It only covers non-owned vehicles being used for work. Your employees will need to have their own personal auto policy to cover themselves for non-business activity.

What’s the bottom line?

Don’t bury your head in the sand on this one if you are a business owner…

Especially if you’re a small business owner, as small businesses are most often hurt by these types of losses when trying to save money on insurance costs.

Your business will benefit from adding hired and non-owned auto coverage to your existing policy if you don’t already have it.

This coverage will likely cost less than $100.00 per year and protect you against a few types of liability you may not have been aware you are subject to.

Contact your independent agent or insurer if you are not certain your policy contains this coverage.