I recently received the following question from one of our insureds:
I am the majority owner of my business. My accountant has suggested it is a good idea tax-wise for the business to own all of my vehicles – including those used by me and my family – and to insure those vehicles on the auto policy purchased for the business. I asked my attorney about this and he said it also sounded like a good idea from a legal standpoint. Is this a good idea from an insurance standpoint?
That is a great question, and one that our customers ask frequently.
We realize there are a number of reasons why a business owner might want to insure all vehicles on the business auto policy. However, there are a number of good reasons why we recommend against doing this. Your business auto policy may not provide the protection you or your family members need for accidents that aren’t related to the business. The business auto policy is designed to cover vehicles owned by the business, or leased to the business by a commercial leasing company, and to cover the business owner and employees while engaged in business activities.
The arguments against insuring vehicles used by the owner and family members on the business auto policy are mostly technical in nature. Remember that an insurance policy is a legal contract containing precise wording designed for a specific purpose, and you hired us as your independent insurance agent to guide you in selecting an insurance policy that suits the needs of your business. Your attorney or accountant is not necessarily professionally equipped to provide advice on your insurance policies.
Your business policy could be changed to add you as an “individual named insured,” but such a modification still does not adequately address all of your coverage needs, especially when you or your family members are using vehicles for non-business activities.
Going beyond the coverage issues, is it really a good idea to subject your business insurance program to the potential exposure presented by the personal activities of you and your family members?
The best solution is to insure personally-used vehicles on a personal auto policy. If you want to pay the insurance cost for such vehicles from business accounts when they are used in your business, this can be accomplished in other ways that don’t expose you and your family to unintended consequences.