Why You Should Never Insure a Personal Auto on Your Business Auto Policy

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The Business Auto policy (BAP) is the standard policy used to insure vehicles that are used in a business/for business purposes. The BAP can insure the vehicles to cover almost any liability that could arise, along with Comprehensive, Collision, Medical Payments, Uninsured/Underinsured Motorist coverage, cargo, and personal effects. A very sound risk management program can be created from this versatile policy, but all of the coverage could be compromised if personal automobiles are insured by the BAP.

Some accountants suggest to business owners that they should insure their personal autos on their Business Auto Policy because of the premium savings and tax deductions. While there may be a few scenarios where putting a personal auto on your BAP is a good idea, in most cases, personal autos need to be insured by a Personal Auto policy (PAP).

When you insure a personal auto on your BAP, the problems that could arise are nearly limitless, with small to severe consequences. Oftentimes the claim will be denied, or if there is coverage, the amount paid will be greatly reduced from what it would’ve been with proper coverage. These problems occur because of the rules outlined in the BAP. 

Most BAPs limit coverage to only designated individuals and vehicles. So when there is an auto that is titled in the name of an individual, that auto will not be covered under the BAP. Though there are endorsements for these scenarios, the endorsements still leave gaps in coverage.

Scenario: You are a small business owner with a couple of commercial vans. To save on taxes, you have insured your family’s autos on your Business Auto Policy instead of on a Personal Auto Policy.

Claim Example 1: Your son is driving to school and ends up causing a crash. Because the BAP insured vehicle was being driven by someone that wasn’t part of the business, and that the auto was being used for a non-business use, your carrier will deny the claim, leaving you to cover the crash out-of-pocket.

Claim Example 2: While on a family vacation, you rent a car. You know the BAP has some kind of coverage for rented cars, so you don’t buy the insurance offered by the rental company. You then cause a crash, and because the car wasn’t rented in the name of the business nor was it used for the business, the carrier denies your claim.

Various claim scenarios could be mentioned here, and almost all of them end in the claim being denied. In addition to denied claims, consider how long it might take for your insurer to settle the claim. If coverage has to be deeply speculated, it may take awhile before the insurer can decide if they’re paying, and if they’re paying, how much. Though it may save money now, properly insuring your autos will save you time and money in the long run.