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You probably run errands all of the time for your business, whether it’s dropping off a deposit at the bank or meeting clients for coffee. But did you know that if you get into an accident while conducting work-related business — even while driving a car your business does not own — you may be putting your entire company at risk? That’s why it may be wise for you to purchase hired and non-owned auto insurance (HNOA).
Here’s the situation: If you get into an accident while driving for your business, regardless of who owns the vehicle you’re driving, the other driver can sue your business for expenses related to the crash, including vehicle damage, property damage and bodily injury-related medical costs. That may be eye-opening for many. However, with hired and non-owned auto insurance coverage, you can help protect your company from the financial consequences. Let’s dig a little deeper.
Why do you need hired and non-owned auto insurance?
Hired and non-owned auto insurance is liability coverage for personal autos and trucks or rental vehicles that are used for work but are not owned by the business. For example, if an employee causes an accident while driving their personal vehicle to the bank to deposit business funds, the other driver could sue your company for expenses related to the crash. Hired and non-owned auto insurance can cover those costs.
Hired and non-owned auto insurance is available to businesses that want to protect their company from third-party liability for vehicles that they:
Typically, hired and non-owned auto insurance is split up into two categories:
- Hired autos — Autos that you lease, hire, rent, or borrow, though not from an employee, business partner, or family member. For example, should your business rent a car to take a team from the airport to a meeting, it would be covered.
- Non-owned autos — The vehicle is owned by an employee or borrowed from a friend. For instance, should your employee use their car for a work errand, it would be covered from an accident since it was being used for business purposes. That is, so long as they weren’t found negligent.
What does hired and non-owned auto insurance cover?
Now, you may assume that your personal auto insurance is all the coverage you need. Unfortunately, that’s not the case. Personal auto policies don’t cover lawsuits resulting from commercial use.
So, what does hired and non-owned auto insurance cover? HNOA coverage helps pay for the damages in a work-related accident, including:
- Property damage — Your business hires a moving van to transport supplies to a new office. Should an employee who is driving the moving van get into an accident and damage a third party’s vehicle, it would cover the costs of repairing or replacing it.
- Bodily injury — Your employee drives their vehicle to pick up lunch for a meeting. Should they crash into another vehicle, your HNOA coverage could cover the costs of the other driver’s hospital bills and physical therapy.
- Defense and investigation of claims — You rent a vehicle for a work trip and total another car. Should the other driver take you to court, HNOA coverage will also arrange a legal defense for you.
If you’re sued over injuries or damages from a car crash, your hired and non-owned auto insurance would help protect you from the financial consequences of third-party liability. That said, your HNOA policy will not cover damage repairs for your owned vehicles, nor damage claims for your owned property while it’s being transported. For those coverages, you’d need commercial auto insurance. This leads us to the following section.
What does hired and non-owned auto insurance not cover?
If you or an employee are driving your own car and get into an accident, hired and non-owned auto insurance won’t cover vehicle repairs to your or your employee’s owned vehicle. First-party damages would have to be handled by a personal insurance policy or by rental insurance. And this coverage does not cover accidents that occur during normal work commutes or personal errands run during business hours.
Also, If you or an employee is found negligent, and that negligence resulted in an accident, you may not receive coverage under hired and non-owned auto insurance. Examples of negligence include:
- Driving while intoxicated
- The vehicle is improperly maintained
- The driver’s record is substandard
- Your employee’s personal auto insurance lapsed
And remember, hired and non-owned auto insurance only applies to damages and injuries sustained by the other party. For vehicle damages to your own vehicle or injuries that you sustain, you’d turn to your personal or commercial auto policy.
HNOA on short-term vs. long-term leases
Similarly, only certain types of leases qualify for hired and non-owned auto coverage. Specifically, only short-term leases are covered. But how do you distinguish between a short-term and long-term lease? Short-term leases are defined as rental periods shorter than six months.
Long-term leases, as you might expect, are vehicles that are rented for a period longer than six months. Since many people wind up purchasing a vehicle after a long-term lease, this delineation was made to prevent confusion or loopholes.
How much does hired and non-owned auto insurance cost?
Several factors will impact the cost of hired and non-owned auto insurance. Typically, it’s an inexpensive addition, but the cost depends on:
- The number of vehicles that need to be insured
- The type and value of the vehicles
- The business’s claims history
- Employee driving records
- Policy limits
- Policy deductible
- Level of risk involved
If you regularly rent, lease, borrow or hire a vehicle for commercial purposes, there are easy ways you can reduce your risk exposure — and possibly your policy costs. For example:
- Regularly perform vehicle record checks on employees
- Enforce requirements such as driver age or driving experience
- Use technologies that monitor driver behavior
- Make sure that employees have personal auto insurance coverage
How to add an Additional Insured on hired and non-owned auto insurance
Sometimes, a business might need to hire another business to perform work on its behalf. This happens frequently in the construction industry, when a general contractor hires a subcontractor to perform a specialized service, like plumbing, or electrical work.
When this type of business relationship occurs, it is customary for the subcontractor to extend its general liability insurance coverage to the general contractor by making them an Additional Insured.1 This ensures that the general contractor will be covered should the subcontractor cause any damages to a third party while working on the job.
However, some general liability insurance policies contain exclusions on auto-related claims for additional insureds, which means the claim might not be covered. So, in the above scenario, if the subcontractor is using a vehicle that is not owned by the business for work purposes, it might be necessary for the subcontractor to also make the general contractor an Additional Insured on its HNOA coverage to make sure they are covered on auto-related claims.
Examples of business relationships that typically require an Additional Insured include:
- Contractor and subcontractor
- Vendor and product manufacturer
- Property owner and contractor
- Governmental agency and permit holder
- Lease to own purchase arrangements
How to mitigate auto risk for your small business
Hired and non-owned auto insurance protects your small business from having to pay for property damage and bodily injury claims when you rent, lease, hire, or borrow a vehicle for work-related purposes.
If you want to reduce the risk exposure for your business, we’re here to help. Thimble offers hired and non-owned auto insurance as an optional additional coverage on our business owners policy (BOP), which conveniently bundles two types of coverage together: general liability insurance and commercial property insurance.
We’re all about keeping it simple. We ask fewer questions and provide more options. Buy a policy online, on our app, or over the phone — with support from actual human beings. How refreshing is that?