Covering Family Members Under a Commercial Auto Policy

As a general rule, autos owned by a business should be insured under a business auto policy, and vehicles owned by an individual should be insured under a personal auto policy. However, it gets more complicated for sole proprietorships. Here’s what to know about insuring cars under a commercial auto policy.

Key Takeaways

  • It’s best to avoid covering the same vehicle under two different policies.
  • Sole proprietors may be able to insure personal cars under a commercial policy.
  • Individual Named Insured endorsements may provide some coverage for your family, but not in all situations.

Avoid Duplication

If you are a sole proprietor, you may own both commercial vehicles (like trucks and trailers) that you use in your business and private passenger autos that you use for non-business purposes. Commercial autos owned by business entities must be insured under a business auto policy.

Note: While you could insure your personal-use autos under a separate personal auto policy, this is a bad idea.

Both commercial and personal auto policies provide automatic coverage for vehicles you acquire after the policy inception date. Both provide auto liability coverage for a vehicle used as a temporary substitute for a covered auto that is out of service. The policies may overlap.

Coverage overlaps may also occur between rented and non-owned autos. Most personal policies afford liability coverage to insured parties while driving autos they don’t own, including rental vehicles. A commercial auto policy covers hired autos (rental vehicles) and non-owned autos for liability (depending on the insurance symbol).

Duplicate coverage is a waste of premium dollars and can lead to coverage disputes, particularly when the business and personal policies have been issued by different insurers. If an accident causes injury or damage that either policy could cover, the insurers might disagree on which one is liable for the loss.

Individual Named Insured Endorsement

If you are a sole proprietor, your personal-use vehicles can be insured under your commercial auto policy via a standard ISO endorsement entitled Individual Named Insured. The endorsement adds personal auto coverage to a commercial policy. It is available only if your business is a sole proprietorship.

Who’s Covered?

The endorsement amends the definition of you and your to include your spouse. Your spouse qualifies as a named insured as long as he or she is a resident of your household. However, your spouse is not entitled to receive notice of cancellation. If your insurer cancels your policy it will send notice to you only.

The endorsement covers your family members as insureds while they are using covered autos you (or your spouse) own that are private passenger-type autos. This term means cars, vans, and pickups not used for business purposes (other than farming or ranching). 

Your family members are also covered while driving autos you don’t own. For example, your teenage son borrows a neighbor’s car to run an errand and is involved in an accident in which another driver is injured. If the injured driver sues for son for bodily injury, your policy should cover the claim. Your liability insurance applies as excess coverage over any insurance available under the neighbor’s policy.

Note: The term family member means anyone related to you by blood, marriage, or adoption who is a resident of your household. It includes wards and foster children.

No Fellow-Employee Exclusion

The Individual Named Insured endorsement eliminates the fellow-employee exclusion with regard to injuries sustained by your fellow employees or those of your family members. The exclusion is eliminated because most personal policies do not exclude suits by fellow employees of insured parties.

Autos Not Covered

The Individual Named Insured endorsement does not cover your family members while driving any of the following types of vehicles.

Autos Owned by Family Members

For example, your 20-year-old daughter owns a car that is registered in her name. Neither she nor any other family member is an insured under your commercial auto policy while driving her vehicle.

Auto Furnished or Available for Your (or a Family Member’s) Use

For instance, your wife’s employer provides her with a company car. Neither she nor any other family member is insured under your commercial auto policy while using her company car.

Auto Used To Sell, Service, Repair, or Park Autos

For example, your teen-aged son works part-time at a garage that provides valet parking. Your son is not an insured under your commercial auto policy while parking customers’ cars.

Autos Used for Other Business or Occupations

For example, your daughter owns a two-ton truck that she uses in a landscape design business she owns. Your daughter is not insured under your commercial auto policy while using the truck.

Physical Damage

The Individual Named Insured endorsement makes one important change under physical damage coverage. If you own a private passenger-type vehicle that is covered for physical damage, then physical damage coverage applies to any non-owned auto.

The term non-owned auto has a different meaning in the endorsement than in the commercial auto policy. In the endorsement, it means any private passenger vehicle, pickup, van, or trailer that is being operated by, but is not owned, by you or any family member. The definition excludes any vehicle that is furnished or available for regular use to you or a family member. The most your insurer will pay for physical damage to any non-owned trailer is $500.

To see how this coverage applies, suppose that you own a private passenger vehicle that is insured under your commercial auto policy for liability, comprehensive, and collision. Your teenage daughter is driving a car she has borrowed from a neighbor when she skids on a patch of ice and hits a tree. She isn’t hurt but the car is damaged.

Because a private passenger-type vehicle you own is covered for physical damage, that coverage extends to autos you don’t own. However, this physical damage coverage is excess over any coverage afforded by the vehicle owner’s policy. If the owner of the vehicle hasn’t insured it for physical damage, your physical damage insurance should cover the loss (subject to the applicable deductible).

Frequently Asked Questions (FAQs)

How much is car insurance for a 4-person family on average?

The average premium per insured vehicle in 2019 was about $1,200 in 2019.2 This rate varies significantly by state, so check localized data before estimating your insurance costs.

How do you get proof that you are on the family policy for car insurance?

Your insurer should provide proof of insurance coverage. This can be a physical card (similar to an ID) that is issued to policyholders. It can also be a digital card accessed through a mobile app.

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