Are you picking up your boss' dry cleaning on a regular basis or running other work-related errands in your own car? Before you hop behind the wheel, auto insurance professionals want you to know one piece of information.
“Depending on the type of errands or their frequency, this time behind the wheel might not be covered by your personal auto insurance policy,” says Arthur Jennings, owner of Insurance Associates of Central Connecticut and a former underwriting manager and product manager for Farmers Insurance.
Buried within your personal automobile policy’s "declarations" section is language that typically excludes coverage for a personal vehicle loss that stems from business use. A personal auto policy is solely for drivers who commute to work or school, go to church, head to the mall or visit Grandma Dorothy.
Exceptions to the rules
“There some exceptions that apply to occupations like real estate agents, accountants, lawyers and even insurance agents who need to log business miles in their personal vehicle,” Jennings says. That mileage may fall under the commuting umbrella.
However, you can't regularly chauffeur co-workers to and from the airport. That's considered "livery," and that's not eligible for coverage under a personal auto insurance policy, says Marie Curran, a retired claims manager for Allstate.
You also can't count on your personal policy covering the regular hauling of work-related equipment, materials or goods. This includes earning some extra dough by delivering pizza.
“Pizza places want their employees to use their personal vehicles because it cuts the business owner's insurance cost, reduces their liability … and, instead, places those burdens on the delivery driver," Jennings says.
So, are there any work-related tasks you can do while driving your own car? Running to the deli to pick up lunch for the office or dropping off the company's mail at the post office are OK. “If you’re in an accident while doing that type of business driving, your personal policy should cover the claim,” Jennings says.
Just be cautious about bringing a co-worker with you on those “allowed” errands. If you’re in an accident, Curran says, a co-worker passenger can sue you.
If a co-worker passenger is injured, he or she can file a claim through the driver’s personal auto policy, according to Curran. That could send the driver's auto insurance rates soaring. Worse yet, the auto insurer may decide to not renew your policy.
The business of driving
Unfortunately, there are no clear lines between personal and business use of a car. But as a rule of thumb, if your job requires driving more than 50 company-related miles a week (as many sales jobs do) outside your regular work commute, or if you'd like to deliver pizza on the side, you may want to expand your auto insurance policy to cover business use, says Mark Carrasquillo, an account executive at insurance brokerage E.G. Bowman Co.
Jennings notes that receiving a car allowance or gas reimbursement for work use of your own car is a sign that you may want to look at "business use" coverage. Updating your policy is as simple as calling your auto insurance agent or company.
An auto insurance policy that’s written to include business use is essentially the same as a traditional personal policy, with a few minor exceptions. “The medical coverage for the driver and passenger is reduced because it is assumed that the driver’s company is also providing workers' compensation to cover employees’ wages lost as a result of injuries sustained while in the course of their job,” Carrasquillo says.
While "business use" coverage can help cover all your auto insurance bases, it does come at a cost. On average, expect to pay 10 percent to 25 percent more for a personal auto policy that includes business use than a policy without the added coverage. How high your premium will climb depends on how many company-related miles you rack up.
“If you’re in sales and drive all day, every day, to many different appointments, that rate will be higher than a driver who uses a personal vehicle for business once a week,” Carrasquillo says.
The consequences of dishonesty
Many consumers try to sidestep a rate increase by “forgetting” to tell the insurance company that a personal car is being used for business. That constitutes a type of insurance fraud known as "rate evasion," Carrasquillo says.
Rate evasion also could mean that if you're involved in an accident while driving a personal car for business, the insurance company might pay the claim but also slap a retroactive -- and expensive -- “business use” premium on the policy. If the claim is big, the insurance company may even drop you as a customer, Curran says.
To make sure you’re properly covered, check with your insurance agent or company whenever you switch jobs or your work duties change. In addition, tell your agent or company when you're no longer using your personal vehicle for business use. That way, you can save some money.