I’m Driving My Own Car For My Business

Nov 3, 2022 | Business Insurance, Personal Insurance

There are some people who, in their daily grind, don’t usually do the usual desk job. Specific 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. It would be wonderful if your company provided a vehicle for such functions. In smaller or start-up companies, the employee must spend it first and submit expense reports or receipts later. 

Having an employee drives a company vehicle for personal use may not be a big deal. But, this presents some legal risks. Where there are DUIs, for example, this can affect the image of your business and could have financial implications. In such situations, businesses must acquire different insurance to protect the company. 

Reimbursing Employees for Business Mileage

When you talk about business mileage, this 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 spend using their personal car for different business purposes. 

The IRS sets a standard reimbursement rate of $0.575 cents per mile. The reimbursements based on the federal mileage rate are not 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 is driving as part of the job. Within the second risk, the employee drives his vehicle daily because it is part of his job. 

  • Incidental Use

Typically, incidental use situations are part of the auto insurance policy. If you use your vehicle 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 have drive-for-business exclusions that require a person to advise their insurance agents that the vehicle for the job is within working hours. Also, you need 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 an estimated 40-50% of your time for the company
  4. Also, 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. In addition, general liability insurance will ensure that you have coverage for claims related to bodily injury and damages on your property.  Sometimes referred to as commercial liability insurance, this type can also help with legal and medical expenses. 

When getting insurance, a business owner should weigh the protection needed to cover their bases. Here’s how you can find out: 

Understanding Your Business Needs 

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

  • What is the nature of your business?
  • What is the size of your business? 
  • Who are your clients or customers? 
  • Where is the location of your business? 
  • How many employees are there in the company? 
  • What kind of experience do they have? 
  • 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 will likely grow with the company and require more extensive coverage. It is crucial 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. An excellent 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 you currently have is not enough for the business anymore, you have to consider having add-ons that are endorsements. 

These additional coverages may vary depending on what you need. It will protect you from fire damages, employment practices, exposure, and liquor liability. 

A Note for Low-Risk Companies

If your company is low-risk, you may opt for a business owner’s policy that combines different kinds of coverage 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. 

Carrying general liability insurance shouldn’t mean paying more for the best coverage. A licensed insurance agent can help you make decisions and determine the best policy for your business needs. 

To know more, contact us now!

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 as 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 your vehicle gains, 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 for business or personal use. This is your evidence, especially regarding business travels, and it would make it easier when you are filing your taxes. 

Additional Info to Think About

  • Non Deductibles

This is about your personal expenses. Also, this is not deductible and should not be noted as business mileage. 

  • Policies on Accident Prevention 

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

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

How do I Benefit from Driving the Company Car? 

Choosing to drive your personal vehicle or the company car comes down to risk and how much you can 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 on the same plane. If you are the type of employee, who feels much more comfortable driving their own cars, 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 more appealing than the former option. Company vehicles typically have commercial auto insurance, ensuring that the driver and the vehicle are protected and covered by unforeseen events.

Final Word

In conclusion, having company-dedicated vehicles for personal errands and reasons is risky for any business. If you think about it, there are so many options and steps to ensure you get the right amount of coverage to help you and protect you as your business grows. Call us here at Advantage Insurance Solutions, Denver, CO or sign up with us now to get your insurance needs!

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