Your business needs commercial auto coverage as a part of its business insurance plan if it operates any vehicles. Even if you operate a small business and your vehicle doubles as the "business vehicle," commercial auto coverage or a very close reading of your personal insurance policy is necessary. In most cases, your personal auto policy will not cover a loss when the vehicle is being used for business purposes.

The same is true of your employee's personal auto policy. If your employee uses their automobile for company business and an accident occurs, your business could face liability. In that case, non-owned auto coverage is insurance coverage that can be used to protect you or your company.

Hired auto coverage is similar to non-owned auto coverage. In general, this type of business insurance is also to protect your business from liability claims from third parties injured as a result of an accident involving a vehicle you or your business does not own.

What is the difference?

Non-owned auto coverage is for the situation when an employee occasionally uses the employee's personal automobile for you or your business. Hired auto coverage is different it provides liability protection when you are driving a vehicle that you, or your business, does not own or that is not registered to you. A good example of this is if you rent a vehicle, hired auto insurance will protect the rented vehicle.

Hired auto coverage and non-owned auto coverage may be a part of a comprehensive commercial auto liability policy - but, more often, commercial auto policies are built "ala carte" and it may be necessary to add the coverage to the policy.

You should review with your insurance professional whether this coverage is a part of your commercial auto policy or whether it must be added. This is critical coverage to your business if it uses employee automobiles or other automobiles that it does not own.

It is critical coverage for two reasons:

1. Automobile liability claims for injuries are very expensive. While drivers and occupants are safer in modern vehicles, medical expenses in recovery have skyrocketed. For a small business, automobile liability may be the single most significant risk faced by the business.
2. It is inexpensive coverage in comparison to the risk insured against. Typically, this coverage can be added for less than $250 per year depending upon the amount of hired auto risk (contractors or long-term renters would be more, for example).

It is important to audit and budget for commercial auto coverage on at least an annual basis. In so doing, the business owner can also determine the extent that it relies upon "rented" vehicles or those not owned by the business. It is not simply enough to point to other parties as the ones that "should" be insured. Rather, the business owner purchasing commercial auto insurance should consider hired auto coverage precisely because those operating or owning the rented vehicle may not have all the proper coverage in place or an insufficient amount in place. If an accident occurs when the "hired" vehicle is being driven for the company, liability can follow. Hired auto coverage can help limit that risk.

There are a number of business scenarios that many small businesses face that can involve "hired" autos where the business does not recognize a "hired auto" risk:

1. Does the business employ haulers or sub-contract delivery vehicles?
2. Does the business employ a group of workers who traditionally get "taxied" to a job site (for example, migrant workers, immigrants, students, or the Amish)?
3. Does the business have seasonal changes or peak periods where there is a period of relying on rentals or lease vehicles?
4. Does the business employ sales representatives who fly and then travel by a rented automobile?

These are all potential liability scenarios faced by the business. The business owner should discuss and identify every use of automobiles or vehicles on behalf of the business by subcontractors, employees, or temporarily during peak periods, with their insurance professional and be prepared to identify all owned autos and potential "hired" auto risk.