December 20, 2011

What To Know About State Auto Insurance Requirements For Businesses

Many businesses have company cars, which are defined as vehicles that are used primarily for business purposes. Company vehicles need to be insured, just as every vehicle needs to be insured. Auto insurance costs can be high for some businesses, as state auto insurance requirements can be very strict in some parts of the United States. Nevertheless, businesses who don't comply with state auto insurance requirements are violating the law and risking serious consequences, so it's important for business owners to understand their states' insurance requirements.

State auto insurance requirements for businesses can vary dramatically from state to state. In most states, businesses must insure their vehicles for any driver who operates them. Many states require businesses to carry personal injury protection coverage, although some states leave the decision of whether to buy PIP to the businesses, as many businesses prefer to use business insurance to cover any medical bills for employees who are involved in accidents. In any case, liability insurance coverage is required by almost every state. Liability coverage is split into two distinct types of coverage, bodily injury liability coverage and property damage coverage. Bodily injury liability coverage is usually declared per person and per accident, so state requirements might require something like $20,000/$40,000 coverage, which would mean $20,000 of bodily injury liability coverage per person for a minimum of $40,000 per accident. Every business owner should check with his or her state's Department of Motor Vehicles for more information about state auto insurance minimum requirements.

Buying state required minimums may not keep a business fully protected from the heavy costs associated with an accident. Most businesses choose to buy higher amounts of bodily injury liability and personal property liability coverage, particularly if their company vehicles are used on a regular basis. Some businesses also choose to buy additional collision and comprehensive coverage to protect their vehicles. This is especially important if a company vehicle is leased or purchased through a loan, as banks often require both of these types of insurance. Most banks will require the insurance policy to cover the cost of the vehicle with a reasonable deductible.

Businesses also need to get special commercial car insurance coverage, as standard insurance policies won't cover claims for a business vehicle. Business car insurance is often more expensive than personal car insurance, but it's also usually tax deductible, which helps to make auto insurance costs more affordable for businesses. In any case, a car accident can be extremely expensive for a business, so buying adequate insurance that complies with state auto insurance laws is an important part of owning a business with a company car.