What is hired and non-owned coverage?

Hired and non-owned auto insurance provides liability coverage for vehicles that a business does not own but uses for commercial purposes. This type of coverage is important for companies that have employees driving rented, borrowed, leased, or personal vehicles for work activities.

Here’s an overview of what hired and non-owned coverage includes:

Hired Auto Coverage

Hired auto coverage provides protection when a business rents, leases, or borrows a vehicle that is used by employees for business operations.

For example, if your company needs to rent a van to transport equipment to a job site, hired auto coverage would pay for injuries or damage caused by an at-fault accident involving that rented van.

Without hired auto coverage, the business might not have coverage for that rental vehicle. A commercial auto policy only covers vehicles registered to the business.

Key details about hired auto coverage:

• Covers bodily injury and property damage liability for rented, leased, and borrowed vehicles
• Provides coverage when employees drive the hired vehicles for business purposes
• Acts as secondary coverage above the rented vehicle’s primary insurance
• Does not cover damage to the rented vehicle itself

Hired auto insurance gives businesses important protection for rental cars, vans, trucks, or other vehicles that are not owned by the company but used for commercial activities.

Non-Owned Auto Coverage

Non-owned auto insurance provides coverage when employees use their personal vehicles for business purposes. For instance, if an employee has to drive their own car to visit a client, non-owned auto coverage would apply.

This coverage acts as supplemental liability insurance above the employee’s own car insurance policy. If they cause an accident while driving for business, it provides additional protection for injuries or damage.

Key aspects of non-owned auto coverage:

• Applies when employees drive personal vehicles for business activities
• Provides additional liability coverage above the employee’s personal auto policy
• Covers bodily injury and property damage caused by the employee to others
• Does not cover damage to the employee’s vehicle itself

Non-owned auto essentially fills gaps between personal and commercial auto policies when employees drive their own cars for work.

What’s Covered

Hired and non-owned auto insurance provides third-party liability coverage only. This means it covers bodily injury and property damage caused by an at-fault collision involving a hired or non-owned vehicle.

Typical coverages include:

• Bodily injury liability – covers medical treatment, lost wages, pain and suffering for injured parties, and sometimes funeral costs
• Property damage liability – pays to repair or replace property belonging to others that is damaged
• Legal/court costs – covers legal fees and court costs if the business is sued

Hired and non-owned policies generally provide coverage on an excess basis above any other insurance. It kicks in after the primary policy limits are exhausted.

What’s Not Covered

Hired and non-owned coverage does not include:

• First-party coverage – does not cover injuries to drivers or damage to the vehicles themselves
• Personal items – does not cover theft or damage to personal belongings in the vehicles
• Regular vehicle maintenance – does not pay for repairs due to normal wear and tear

To be protected against these exposures, businesses need to carry other types of insurance in addition to hired and non-owned coverage.

Why It’s Important

There are two main scenarios where hired and non-owned coverage becomes essential:

Rented vehicles – Rental cars rented for business use are not covered by a commercial auto policy or personal auto policy. Hired auto coverage fills this gap.

Employee vehicles – If an employee has an accident while driving their own car for work, their personal auto insurance may deny the claim if the vehicle is being used for business. Non-owned auto coverage provides backup protection.

Bottom line – hired and non-owned coverage can save businesses from major liability expenses when rental or personal vehicles are involved in a work-related accident.

How Much Coverage to Buy

Experts recommend buying enough hired/non-owned coverage to match or exceed your existing commercial auto liability limits. This ensures seamless protection.

Typical amounts range from:

• $300,000 bodily injury per person
• $500,000 bodily injury per accident
• $100,000 property damage

A $1 million combined single limit for bodily injury and property damage is also common.

You want to make sure the limits are sufficient to cover potential lawsuits. It depends on your business activities, number of drivers, and state requirements. An insurance agent can help assess the right amount of coverage.

Adding Hired and Non-Owned Coverage

In most cases, hired and non-owned coverage is added by endorsement to a commercial auto policy or part of a business owner’s policy. There are a few options to obtain this coverage:

Commercial auto policy – Add hired/non-owned coverage by endorsement to your existing commercial auto policy. Provides the broadest coverage.

General liability policy – Some general liability policies allow hired/non-owned coverage to be added by endorsement. Provides liability protection only.

Business owners policy – BOP packages often include the option to add hired/non-owned coverage for light-duty vehicles. Provides basic coverage.

Standalone policy – Insurers may offer standalone hired and non-owned policies, but this is less common.

Talk to your insurance agent about the best way to secure this coverage for your business based on your risk profile and existing insurance.

Average Cost

The cost of hired and non-owned coverage depends on many factors, including:

• Number of employees driving personal or rented vehicles
• Frequency vehicles are used for business purposes
• Employees’ driving records
• Claims history
• Coverage limits and deductible selected

According to various estimates, average annual premiums range from $600 – $2,000 for hired/non-owned coverage between $500,000 to $1 million. But costs vary widely based on individual risk characteristics.

Shopping around for quotes and comparing options from multiple insurers can help find the best rate.

Is It Worth It?

Purchasing hired and non-owned coverage is smart for businesses that:

• Frequently rent cars, vans, trucks for business use
• Have employees regularly driving personal cars for work purposes
• Want to fill in potential coverage gaps between commercial and personal auto policies

Going without this coverage can leave businesses exposed if an employee or rented vehicle is involved in an at-fault accident while being used for commercial purposes.

Hired and non-owned insurance can provide an extra layer of protection at a relatively low cost for most businesses that operate vehicles they don’t own. For small companies with employees driving for business activities, it’s usually a worthwhile investment.

Finding the Right Policy

Here are some tips for finding adequate hired and non-owned coverage:

• Determine how much liability coverage you need based on your exposures and state requirements
• Ask insurers about adding hired/non-owned to your commercial auto or BOP policy
• Compare quotes from multiple carriers to find the best rate
• Look for an insurer that has experience providing commercial auto coverage
• Consider any discounts you may qualify for as a low-risk business
• Work with an agent who can explain coverages and help customize your policy
• Review policy terms to ensure rented vehicles and employee vehicles are both covered

Hired auto and non-owned auto coverage fills a crucial gap for businesses operating cars they don’t own. Evaluating your risks and securing the right policy provides peace of mind in case the worst happens.