Fleet Vehicle Insurance: What to Know about Insuring Company Cars
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Fleet Vehicle Insurance: What to Know about Insuring Company Cars

Headshot of a man with a blurred background By Ben Reiland October 30, 2023

Categories: Mobile Workforce Vehicle Reimbursement

Businesses rely on employees who drive for work, whether they’re selling, transporting goods, performing services, etc. Many companies provide these mobile workers with company vehicles for business-use. More company-owned vehicles means more company responsibility. With motor vehicle crashes costing employers nearly $60 billion a year in medical expenses, legal bills, property damage and more (according to the Occupational Safety and Health Administration) there has never been a more crucial time to consider fleet vehicle insurance options.

Fleet vehicles must always be covered by insurance and compliant with IRS standards. Insuring a fleet of business vehicles can be a considerable expense, but it comes with the territory. Learn more about fleet vehicle insurance trends and how they impact your company.

Fleet Vehicle Insurance: How It Works

Companies who have fleets of vehicles for business-use can opt for an auto insurance policy that insures the fleet as a whole, providing an easy alternative to insuring each vehicle individually. The entire fleet is covered under one policy. The company pays a premium that assures any catastrophe will not result in financial ruin. And since it is all one policy, the vehicles don’t have to be the same and it is not on a person-by-person basis.

Fleet vehicle insurance ensures the vehicles do not need to be uniform. This allows coverage of any vehicle for business-use, like large shipping trucks, construction machinery, passenger vehicles and cargo vans.

Fleet Vehicle Insurance Requirements

The basic requirements for fleet vehicle insurance are simple: be a business and have a fleet of two vehicles or more. A typical fleet can range from two to five hundred vehicles. The fleet size and industry determine how much coverage is needed. It’s important for businesses to discuss coverage with their insurance provider. The provider should ensure companies have the coverage needed for the business, and that they are staying within state specific requirements.

Any company, regardless of their industry, can obtain fleet insurance, but certain industries will have their own specific type of fleet insurance, such as taxi fleets.

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Fleet Vehicle Insurance Basic Coverage

There are two areas of basic fleet vehicle insurance coverage. The first is bodily Injury. If a fleet vehicle causes injury to a person, fleet insurance will cover the damages and will usually include compensation for legal entanglements. The second is property damage. Property damage insurance generally covers costs for legal defense if the organization is sued over the damage that a fleet vehicle has caused.

Fleet Vehicle Insurance Additional Coverage

As with most insurance plans, there are additional add-ons that can be incorporated depending on the needs of the business and the level of protection they prefer.

Uninsured Motorist: If a fleet vehicle is involved in an accident with an uninsured driver or motorist, the company will likely need to pay for all damage, including all medical expenses from accident-related injuries. This coverage can help avoid paying these out-of-pocket expenses.

Personal Injury Protection: Personal injury protection ensures financial assistance for medical bills in the event of an accident, no matter who is at fault. For companies with large fleets, this is a must, as, “chances of getting into a motor vehicle accident are one out of 366 for every 1,000 miles driven,” according to Esurance.

Collision Coverage: Collision coverage protects businesses against costly replacements and repairs if a fleet vehicle is involved in an accident. For companies with large fleets, this is a must.

The Cost of Fleet Vehicle Insurance

Various factors will affect the cost of fleet vehicle insurance. The specifics on vehicles within the fleet are all determinants, such as the vehicle’s age, its condition and resale value. What the fleet is used for is also a major contributing factor. While fleet vehicle insurance is essential, companies must also be aware of their employees’ driving habits. An employee with a poor driving record can raise premiums significantly.

Outside of these factors is the rate of insurance itself. This rises with the price of vehicle repairs and the amount of payouts. According to a report by Insurify, vehicle insurance rose 17% in the first half of 2023. And that rate is projected to rise further.

What will this look like for your company?

Depending on the size of the company, smaller companies operating in smaller areas have less to pay, while larger companies with hundreds of vehicles in their fleets will pay more. However, regardless of company size, the worse the accident, the more expensive it will be for companies. This is why it is important for business leaders to stay connected with their insurance provider to analyze their size and risk profile to ensure the correct coverage plan.

Alternatives to Fleet

Offering company-provided vehicles is a popular path, however, the cost of this program adds up quicker than one may realize. The first step in finding the right alternative is learning more. Companies should know the vehicle program options they can choose from like fixed and variable rate (FAVR), cents-per-mile or car allowance. Businesses will likely be surprised at the benefits to fleet alternatives than cost savings and risk mitigation.

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Take a Smaller Step Toward Insight

Transitioning a vehicle program, let alone a fleet, is a big undertaking. With concerns over change management and efficacy, companies can have a hard time making the switch. However, one way companies are gaining a better understanding of how their vehicles are being used by driving employees is with a fleet mileage tracking app.

Fleet vehicles are a taxable benefit. If employees aren’t keeping track of their personal travel and paying employers for that usage, they expose themselves and the company to audit risk. To ensure employees are paying the appropriate amount for personal use, companies can implement a fleet mileage tracking app. This ensures companies charge employees appropriately for personal use. And it has the additional benefit of sharing how much employees drive fleet vehicles for business or personal reasons.

Interested in learning more? Check out our article on the benefits of a fleet mileage tracking app today.

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