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HomeInfographicBusiness Vehicles and Insurance: Employee Owned vs. Business Owned

Business Vehicles and Insurance: Employee Owned vs. Business Owned

If you need a vehicle to do business for your company, you must decide whether it’s more beneficial to you to own the car yourself or have the company take on that responsibility. You will want to make sure you have the appropriate insurance coverage in case of a car accident.

You will want to understand the difference between pleasure vs. business use of your car. If you are only using your car to commute to and from work, your personal auto insurance policy will cover you. If you have a shorter daily commute, your auto insurance will be cheaper.

If you are using your car to drive for business purposes, you will need business or commercial auto insurance. A personal auto insurance policy may not cover you if an accident occurs. You should understand the policy to ensure you have the appropriate auto insurance coverage.

If the company or business owns the vehicle, you are not responsible for the auto insurance on that vehicle. If you own a business, you should work with an insurance agent to make sure you have commercial auto insurance coverage. For personal auto insurance policies, you can compare auto insurance quotes online or work with an insurance agent to find the best rates and proper coverage for your vehicle.

We’ll help you decide whether it’s more beneficial to use your personal car or have the company take on that responsibility. We will look at factors including taxes and insurance.

What are business-owned vehicles?

Business-owned or company vehicles are those owned by the company or business and driven for business purposes. These vehicles are on the road more often than personal vehicles which increases the chance of an accident. They should be covered under a commercial auto insurance policy which is the responsibility of the company.

Most states require businesses to have minimum adequate coverage for their company vehicles. This offers financial protection for the business in case of an accident involving a company vehicle.

Specialty vehicles or heavy-duty vehicles used only for business will need to be covered by a commercial auto insurance policy. These vehicles may need higher coverage and liability limits than a commercial policy can provide.

Benefits of Business-Owned Vehicles

Some insurance providers offer discounts on commercial auto insurance for experienced drivers, multiple lines of insurance, multiple policies, or the length of business. You should ask your insurance agent about these discounts for your commercial insurance policy.

One of the most significant benefits of using a business vehicle is the tax deductions. The cost of commercial auto insurance and the costs of driving the car for business are tax deductions.

Another tax deduction is the cost and depreciation of the vehicle as well as general auto expenses like maintenance and fuel.

Tax deductions for company vehicles do not include a personal commute to and from work. You also cannot deduct personal travel expenses. It’s important to keep good records of business travel using a log or business travel app.

If you are a business owner, you can also include your personal vehicle on the commercial auto insurance policy. This is helpful if you transport business equipment or have business travel purposes using a personal vehicle.

Owned Vehicles

What about using a company vehicle for personal use?

An employee may need to use a company vehicle for personal errands from time to time. The commercial auto insurance policy will provide liability coverage for damages to other vehicles if there is an accident. You also must document and report the personal use of a company vehicle as taxable income.

The driver’s auto insurance policy will provide liability coverage for the business vehicle. If the driver doesn’t have a personal auto insurance policy, the business may want to add coverage to the company policy or have the employee get a non-owner policy.

Using a Personal Vehicle for Work

Personal auto insurance is important to protect you in case of an auto accident. If you are a sole proprietor and use your vehicle for minimal travel, your auto insurance policy may cover this use. This would include travel to 1 business location daily or an occasional business meeting.

However, many personal auto insurance policies do not cover damages when a personal vehicle is used primarily for work. This includes delivering goods, purchasing supplies, or other business operations while using your vehicle. If you are in an accident, the insurance company may deny the claim.

There are no individual tax benefits for using a personal vehicle like the benefits for a company owning and using business vehicles. In the past, taxpayers could deduct unreimbursed business expenses but that is no longer allowed.

Some insurance companies may also consider a vehicle for pleasure use when the annual mileage is low, which can save money on auto insurance. This low-mileage discount is cheaper because the vehicle spends less time on the road which means a lower risk of an accident.

Many insurance companies use a benchmark of 7,500 miles annually to determine whether a vehicle should be classified as a pleasure vehicle. Pleasure vehicle insurance is anywhere from 1% to 5% cheaper than for a vehicle that averages over 7,500 miles annually.

Is commercial auto insurance cheaper than personal auto insurance?

Commercial auto insurance is typically more expensive than personal auto insurance. One reason is because of higher liability limits to financially protect your business from legal expenses. You are also usually covering more vehicles and the risk is higher for damages when transporting people, equipment, or other goods for your business.

Multiple drivers, specialty vehicles, and the risk of property damages or liability claims also make commercial auto insurance more expensive than personal auto insurance. There are discounts available for commercial auto insurance so ask your insurance agent about this when writing the policy.

commercial auto insurance

What is a hired and non-owned auto (HNOA) insurance policy?

Businesses should consider a hired and non-auto insurance policy to cover vehicles that are used for business purposes by employees that the company doesn’t own. This can be used to prevent someone from suing your business because an employee caused an accident in a personal vehicle.

An HNOA policy is a liability policy that covers damages to other vehicles if an accident occurs. This type of policy does not cover the vehicle of the employee that caused the accident. HNOA covers personal, leased, and rented vehicles used for business.

The Bottom Line

Just like businesses are unique, the auto insurance coverage you need for business vehicles and your personal vehicle is unique. You will want to make sure that you have the minimum state-required liability coverage plus additional coverage in case of an accident.


Melissa MorrisMelissa Morris writes and researches for the auto insurance comparison site, She is a university professor and enjoys traveling and working out in her spare time.

IEMLabs is an ISO 27001:2013 and ISO 9001:2015 certified company, we are also a proud member of EC Council, NASSCOM, Data Security Council of India (DSCI), Indian Chamber of Commerce (ICC), U.S. Chamber of Commerce, and Confederation of Indian Industry (CII). The company was established in 2016 with a vision in mind to provide Cyber Security to the digital world and make them Hack Proof. The question is why are we suddenly talking about Cyber Security and all this stuff? With the development of technology, more and more companies are shifting their business to Digital World which is resulting in the increase in Cyber Crimes.


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