So, You Have a Company Car...

Employees who are assigned a company car are able to avoid the substantial expense connected with owning and operating a vehicle.  The employee does not have to make the car payments, pay for repairs and maintenance, or fill it with fuel.  And, it is the employer who picks up the cost of insurance.  Unfortunately, there are limitations and exclusions with a business auto policy that may come into play at the time of an accident.

The Uncovered Claim

The employee’s use of a company car, insured under the employer’s corporate policy, may not be covered in the following circumstances:

·         The Coverage Has Lapsed

Whether through oversight or poor cash flow, when a premium is not paid on time, coverage lapses.  An accident during a lapse period will not be covered

·         Beyond Permitted Use

The employee signs an agreement that only he will be covered for use of the vehicle, but his wife is driving it at the time of the accident

·         Fellow Employee Exclusion

An employee hurt on business can collect for injuries under Workers Compensation.  But, if the injured employee sues another employee who was driving the company vehicle, the corporate auto policy may not defend the suit.  Most commercial auto policies contain this exclusion.

Covering the Exposure

Most Personal Auto Policies include coverage for a non-owned vehicle on an excess basis.  It provides coverage for certain people when they are driving a vehicle they do not own and the vehicle is uninsured, the limits are not adequate, or the accident is excluded.

If you have a Personal Auto Policy in the household, check to see if it will provide this coverage for you and others in your household who may be driving the company car.  If that policy contains an exclusion for a vehicle that is furnished or available for your regular use, you can add an inexpensive endorsement to remove that limitation.  Ask your agent for details.

If the company car is your only vehicle, you should consider obtaining a Named Non-Owned Personal Auto Policy.  It provides liability coverage only for driving a vehicle you do not own.  It will cover you in the situations just presented and also if you borrow a friend’s vehicle and then discover it is uninsured.  This policy also contains a furnished or available exclusion that can be removed by endorsement.

The Bottom Line

Use of a company vehicle is a significant employee benefit; however, the prudent employee would make certain that there is sufficient insurance on the vehicle.  Remember, proper automobile insurance protects both your current assets and your future earning ability.