I’m Driving My Own Car For My Business

Oct 29, 2021 | Business Insurance, Personal Insurance

There are some people who in their daily grind don’t normally do the usual desk job.  Certain business requirements involve mingling with clients, attending meetings and fundraisers, or company-hosted events. In these instances, it may be unavoidable for you to use your own vehicle if the company doesn’t provide any.

The costs are usually reimbursable like gas expenses and parking fees and it would be wonderful should the company you are working for provide a vehicle for such functions. In the case of smaller or start-up companies, the employee assigned for these things may need to spend it first and submit expense reports or receipts later on. 

It may not seem like a big deal at all to have an employee drive a company vehicle for personal use or the other way around, but this actually presents some legal risks. In cases where DUIs are involved, for example, this can affect the image of your business and could have financial implications. It is in situations like these that businesses are advised to acquire different insurance to protect the business. 

Reimbursing Employees for Business Mileage

When you talk about business mileage, this actually refers to the trips you have taken during work or within your working hours that do not include your daily commute to work. Employees are reimbursed the amount they spent in using their personal car for different purposes of the business. 

There is a standard reimbursement rate of $0.575 cents per mile set by the IRS. The reimbursements which are based on the federal mileage rate are not considered as income so they become non-taxable for the employees and as for the businesses, they can take these costs out of their business taxes. 

What should qualify for mileage reimbursement? 

Businesses can take out mileage reimbursement costs for business trips that should not include a worker’s commute to and from work.  These reimbursement costs may include the following: 

  • Out-of-office or off-site business meetings with clients and prospects
  • Business trips – out of state or out of the country
  • Errands and 
  • Deliveries

Assessing Risk 

There are two different kinds of risks that we can tackle here. Incidental use would be the first and the second one is driving as part of the job. Within the second risk, the employee drives his vehicle every working day because it is part of his job. 

  • Incidental Use

Normally, incidental use situations are covered by the auto insurance policy. Should the vehicle be used around 40% of the time for company purposes you may discuss reviewing your policy with your provider. Incidental use includes: 

  1. Driving and attending a company-hosted event
  2. Errands like taking the mail to the post office, hauling supplies, etc. 
  3. Client meetings that are away from the physical location of the business
  • Driving as part of the Job 

Auto policies do have drive-for-business exclusions that require a person to advise their insurance agents that the vehicle is used on the job within working hours. You are also asked to acquire an endorsement. This endorsement helps you with your claim; without this, insurance companies may refuse to cover you. 

Work-related situations that may require adjustments on your insurance may be as follows: 

  1. Being an outside sales professional 
  2. Being a real-estate agent
  3. Driving at an estimated 40-50% of your time for the company
  4. If you are receiving allowances for your vehicle use
  5. Tax deductions are taken from you when it comes to work-related driving 

In cases where you might be using your vehicle for deliveries or in the business of landscaping, you may want to consider getting a commercial policy. 

How Much Liability Coverage Does My Business Need?

Business owners need to protect not only their business but also themselves. General liability insurance will ensure that you are given coverage for claims that are related to bodily injury and damages that would occur on your property.  Sometimes referred to as commercial liability insurance, this type of insurance can also help with legal and medical expenses. 

When it comes to getting insurance, a business owner should weigh the amount of protection needed to cover all of their bases. Here’s how you are able to find out: 

  • Understanding your Business Needs 

While it may be hard to foresee the future and the problems that your business might face, you may be able to assess the amount of general liability insurance it is that you need. Understanding your business is key and before buying your policy, you may consider the following questions: 

  1. What is the nature of your business?
  2. What is the size of your business? 
  3. Who are your clients or customers? 
  4. Where is the location of your business? 
  5. How many employees are there in the company? 
  6. What kind of experience do they have? 
  7. How many proprietors are there? 

Having more risks means that you may need to take on more coverage. With the growth of every business comes the changing insurance needs which are likely going to grow with the company and would require a bigger coverage. It is important to observe your business needs to find out where you could have a higher liability. 

  • Upgrading your basic policy 

After a risk assessment for your business, you now have a much clearer view of things and would have a greater understanding of what you want to include in your insurance package. A good example of this is if you have commercial liability insurance. This type of insurance covers a lot but it does not protect you on all claims. When the insurance that you currently have isn’t enough for the business anymore, you may want to consider having add-ons which are referred to as endorsements. 

These additional coverages may vary depending on what you need. It will protect you on a variety of things like fire damages, employment practices, exposure, and liquor liability among others. 

A Note for Low-Risk Companies

If your company is considered low-risk, you may opt for a business owner’s policy that has a combination of different kinds of coverages together with general liability insurance. 

Businesses with a higher amount of liability could opt for umbrella insurance that extends the limits of the current policy. 

  • Discuss it with a Licensed Agent 

Deciding to carry general liability insurance shouldn’t mean paying more for the best coverage. A licensed insurance agent can help you in the decision-making and in sorting out the best policy that is applicable to your business needs. 

More to Think About 

It is highly likely that as a business owner, you may be using your personal car at work. This is a trickier decision if you are an employee. There is insurance to think about and liability, miles, and a lot of risk analysis. Weighing how it can save you money, in the long run, is the total goal that is why it may be good to look into these factors too: 

  • Vehicle Market Value

For every mile gained by your vehicle, it also wears it down and as the years go by the value of your vehicle depreciates which is why it is good to think about this and the maintenance costs.

  • Taxes and Records

For all vehicle-related use, there is great value in keeping track of all the gas expenses, mileage, and maintenance costs for tax purposes. Without this, you won’t be able to check the miles that were for business or for personal use. This is your evidence especially when it comes to business travels and it would make it easier when you are filing your taxes. 

  • Non Deductibles

This is about your personal expenses. Considered as not a deductible and should not be noted down at all as business mileage. 

  • Policies on Accident Prevention 

Every company has its own ground rules and all employees must adhere to them. So when it comes to using the vehicles, you are a lot more likely to get coverage from the company if you are seen as lower risk. 

If you are using your own vehicle for work-related errands then you should be getting insurance on your vehicle. Business-owned vehicles on the other hand are covered and protected by commercial auto insurance which may be very similar but are written differently and cater to different levels of risks.

How do I Benefit from Driving the Company Car? 

Choosing to drive your personal vehicle or the company car all comes down to risk and how much of it can you afford. Driver safety is number one when it comes to considering the coverage and the interest of the business should be taken into consideration almost in the same plane. If you are the type of employee who feels a lot more comfortable driving their own cars then talk to your manager about it and get your vehicle the proper coverage.

If driving a vehicle can impact the business image especially when driver behavior is involved or when an accident occurs, lawsuits are better handled at the company level and could be a more appealing choice than the former option. Company vehicles normally have commercial auto insurance which ensures that the driver and the vehicle are both protected and covered by unforeseen events.

Final Word

In conclusion, having company-dedicated vehicles that are being used for personal errands and reasons is risky for any business. If you think about it, there are so many options and steps that you can take to make sure that you get the right amount of coverage to help you and protect you as your business grows.