Posted On 07 Sep 2019
We are a very mobile society. We drive every day for some reason, work, school, shopping, and vacations. Most families own more than one vehicle. When you add the farm business now, we have multiple vehicles and in some cases very large trucks.
Most insurance companies will offer you two types of auto insurance policies. We have the personal auto insurance policy (P.A.P.) and the business auto policy (B.A.P.) sometimes called the commercial auto policy. There are similarities and differences between the two types of auto insurance policies. When and where do I insure a vehicle on a personal auto insurance policy vs. a business auto insurance policy is a very important consideration.
Some vehicles can only be insured on a personal auto insurance policy and some vehicles can only be insured on a business auto insurance policy. In some cases, we have vehicles that could actually be insured on either of the two types of insurance policies.
Let us review the basic coverages and similarities:
- Bodily injury liability
- Property damage liability
- Uninsured/underinsured motorist coverage
- Personal injury protection (also known as “No Fault coverage” in New York State)
- Other than collision coverage (previously known as comprehensive coverage)
1. Bodily injury liability.
This is the coverage and the amount of money your insurance company will pay another person or persons when hurt in an accident that is caused by you and is your fault. This includes medical expenses for bodily injury as well as pain and suffering.
2. Property damage liability.
This is the coverage and amount of money your insurance company will pay to another person or persons for damage caused when you hit another car, building or another object.
You will see your liability coverage described in two ways. First is what we call split-limits such as, $250,000/$500,000/$100,000. The first number is the amount of money your insurance company will pay any one person when the accident is caused by you. The second number is the total amount of money your insurance company will pay for any one accident that you caused. The third number is the total amount of money your insurance company will pay for all property damage that is caused by you. Second, is what we call combined single limit such as, $500,000. This is the total amount of money your insurance company will pay for an accident caused by you. It could all go to one person, it is also the total amount of money available to pay out for the accident and it will include all property damage to others.
3. Uninsured/underinsured Motorist.
This coverage provides payments to you for medical bills when you are hurt in an accident caused by someone else. You are allowed to come into your own policy for payment when the other person has no insurance at all or has lower liability coverage and you have uninsured/underinsured motorist coverage.
Example: Let’s say you carry $250,000 of uninsured/underinsured motorist coverage on your personal auto insurance policy. You have a car accident and get hurt being hit by another vehicle and it is their fault. You have $200,000 of medical expenses related to the accident. The other vehicle has $50,000 of bodily injury liability coverage. The $50,000 of bodily injury liability coverage would pay first and you could come into your own policy for an additional $150,000 of underinsured motorist coverage.
4. Personal injury protection.
In New York State this is also known as “no fault coverage”. This coverage pays your medical expenses and lost wages when you are hurt in an accident no matter who is deemed to be at fault for causing the accident. You can be hit head on by a drunk driver and hurt and your own personal injury protection in your own personal auto insurance policy will pay first. New York State requires a minimum of $50,000 of personal injury protection. You have the option to increase this coverage up to $75,000, $100,000, or $150,000.
This is a very important coverage because your New York State personal injury protection coverage:
- Follows you into another state.
- Follows you as a passenger in someone else’s car.
- Follows you as a pedestrian walking down the street.
I had a client who had a daughter attending college in Florida. She was riding as a passenger in a friend’s car. This car was T-boned by another car. She was seriously hurt with multiple broken bones and a broken pelvis and was hospitalized for an extended period of time. 100% of the medical payments for the hospitalization came from her father’s personal injury protection on his personal auto insurance policies in New York State. It did not come from the liability on her friend’s car or the liability coverage from the car that hit them. Luckily her father carried the maximum amount of personal injury protection of $150,000 in the policy and the insurance company paid the full amount.
5. Other than collision coverage.
When I first came into the insurance business, this coverage was called comprehensive. This covers damage to your vehicle caused by specific named perils. Such as fire, theft, vandalism, falling trees from a storm, flood, and collision with an animal such as a deer or dog. The insurance company will pay the actual cash value of the damage to your vehicle minus the deductible in your insurance policy.
6. Collision coverage.
This covers the physical damage to your car from hitting another car, another object or rollover. Your insurance company will pay you first even when the other car is at fault. The insurance company will pay the actual cash value of the damage minus your deductible. When the other car is at fault you will be reimbursed for your deductible when your insurance company is reimbursed by the other car’s insurance coverage.
Three additional optional coverages are:
- Full glass coverage. This pays 100% of the cost to fix or repair broken glass without you paying a deductible towards the claim.
- Rental coverage. This pays you to rent a car when your car is in the shop being fixed from a covered loss. This coverage usually has a per day maximum limit and a per accident maximum limit.
- Towing coverage. This coverage will pay to have your car towed after an accident. This too will have a maximum limit. Some people may be paying twice for this coverage when people have a membership in A.A.A., that membership could include towing coverage.
Did you know when you go on vacation and rent a car, your New York State personal auto insurance coverages cover the rented car? If you have $250,000/$500,000 of bodily injury liability limits on your New York State personal auto insurance policy, then you also have $250,000/$500,000 bodily injury liability coverage on that rented car. If you have collision coverage and other than collision coverage with a $500 deductible on your New York State personal auto insurance policy, then you also have a $500 deductible collision and other than collision coverage on the rented car.
Many financial gurus on television and or on radio will advise you to lower your underinsured/uninsured motorist coverage and minimize your personal injury protection as a way to save insurance premiums and build personal financial success. Nothing can destroy your personal financial future more than by having a serious car accident without the proper insurance coverages in place.
Now let us look at some of the differences we may find in a business auto insurance policy.
- The liability limit is usually written on a combined single basis including both bodily injury liability and property damage coverage.
- The personal injury protection coverage is written to interact with New York State’s worker’s compensation rules and coverages. When you have an employee get hurt in a vehicle accident operating one of your vehicles on a business auto insurance policy, your New York Workmen’s Compensation policy will pay first.
- Hired auto liability coverage. This is a liability coverage covering you when you hire a common carrier to haul something for your farm. You could be drawn into a third-party lawsuit when the common carrier gets in a vehicle accident while hauling for you and that accident is the common carrier’s fault.
- Employee’s non-owned liability. This is a liability coverage covering you when an employee operating his own vehicle is running an errand for you. Again, you could be drawn into a third-party lawsuit when your employee gets in an accident that is his fault.
- Full glass coverage. In most business auto policies this coverage is not available. Broken or cracked windshields are covered but, they are subject to the other than collision deductible in the policy. There may be an insurance company that offers full glass coverage by a specific endorsement but it is not common.
- Rental and towing coverage. Again in most business auto insurance policies, these are not available coverages. An insurance company may offer it by a specific endorsement but it is not common.
- Business Rental. Your insurance coverage from your business auto policy following you for a vehicle you rent on a business trip is also not an automatic coverage. An insurance company may offer this coverage by endorsement.
You can find more information about auto coverage in Mike’s book The Ultimate Guide to Simplifying your Farm Insurance.