Business Auto Insurance 101 – Do You Meet Mandatory Standards?
Putting an employee behind the wheel to deliver products, drive to a client meeting or perform other business activities also puts your organization at risk. If you’re assessing mandatory and optional business auto insurance coverage options and limits for your business, we can help.
Comprehensive and Collision Deductibles
Picking a higher deductible can help lower your auto insurance premium. However, the higher the deductible, the more you pay out of pocket if you have a claim. When deciding on your business auto insurance deductible, take into consideration your organization’s available cash, the value of the vehicle(s) and your tolerance for risk.
- Collision covers damage to your auto when your auto hits, or is hit by, another vehicle or other object. Collision pays to repair your vehicle, less the deductible you choose. For older autos, you may want to consider dropping this coverage, since it is typically limited to the cash value of your auto. This coverage is not required, but if you have a loan or a lease, the lien holder may require it.
- Comprehensive (Other Than Collision or OTC) covers your vehicle and sometimes other vehicles you may be driving, for losses resulting from incidents other than collision. This typically includes damage to your auto if it is stolen or damaged by flood, fire, falling objects or animals. No province requires that you purchase collision or comprehensive coverage, but if your organization has an auto loan or the vehicle is leased, your lender may insist that it is mandatory until your loan is paid off.
Business Auto Insurance Terms
Be aware that each provincial and territorial government has specific auto insurance requirements and minimums – an ALIGNED Advocate can help ensure you have the right auto insurance for where you live (In Ontario, see OAP1 for more details). Auto insurance coverage and policy language can be difficult to decipher. The following general terms apply to business auto insurance.
- Third-Party Bodily Injury Liability (BI) covers injuries that you, the designated driver or policyholder (i.e. your organization) is alleged to cause to someone else. Claims for bodily injury include medical bills, loss of income, or pain and suffering. It does NOT cover the cost of damage to your organization’s vehicle. It is mandatory in all provinces; however minimums differ from province to province. It also provides you with legal defence if another party files a lawsuit against you.
- Third-Party Property Damage Liability (PD) covers you or someone driving the auto with your permission if the vehicle damages someone else’s property. Typically the property is another vehicle but it could be a fence, telephone pole, a house, etc. It also provides you with legal defence if another party files a lawsuit against you.
- Accident Benefits coverage can provide medical expenses, income replacement and other possible benefits to you and your passengers injured in an accident. Depending on where you live, this coverage may be mandatory.
- Uninsured and Underinsured Motorist Coverage (UM or UIM) coverage will reimburse you, a member of your family, or a designated driver if one of you is hit by an uninsured or hit-and-run driver. UM coverage comes into play when an at-fault driver has insufficient insurance to pay for your total loss. This coverage will also protect you if you are hit as a pedestrian.