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Using your personal car for work could increase your liability risk

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According to the Bureau of Labor Statistics, delivery drivers have one of the most dangerous jobs in America.

Not only do they spend a lot of time on the road, but there is usually an incentive to get to the next stop quickly, and that can lead to accidents.

Most of these workers use their own vehicle, and so do a lot of sales professionals and taxi drivers.

If you are thinking about getting a job that requires the use of your personal vehicle, and you think the company you will be working for will cover the cost of any vehicle crash while working – think again.

Using your personal vehicle for work is often risky business.

Whether you deliver flowers, newspapers, pizza or people in your personal vehicle, if you're on the clock – you may not be adequately insured.

"Many people are unaware that if you are a delivery driver, most of the time your insurance company does not cover you if you get into an accident," said Angela Daley with AAA Carolinas.

Nathan Hinson found this out the hard way. He was driving his personal car to deliver a pizza when he crashed with another vehicle.

"It was too late to do anything about it," Hinson recalled.

Hinson was working for Papa John's Pizza. Neither his employer's insurance carrier, nor Hinson's personal auto insurance carrier paid the damages.

"Most people don't read their insurance policy and discover what's covered and what's not covered until they get into an accident," Daley said.

According to AAA, more than half of all small businesses do not have a policy to cover employees who use their personal vehicle for work.

Instead, the worker's personal insurance policy is the primary insurer.

"Once you start using it [your personal vehicle] for business it's considered commercial, so you need a commercial policy or an add-on to your personal policy," Daley recommended.

Without it, your personal auto insurer will likely deny your claim if an accident is your fault.

Before you start a delivery job, make sure you find out who will be insuring your personal vehicle, and whether your personal policy provides the best coverage.

"Insurance companies always like to argue over who has to pay," said Attorney Martha Ramsay, founder of Ramsay Law Firm in Charlotte, NC.

Ramsay recommended the following things should take place when an accident occurs.

  • Make sure you have a police report filed to confirm the legitimacy of the accident and who caused it. 
  • Give the officer your insurance information, but make sure to tell them you were driving for your company.
  • Take pictures to document any damage as evidence.

Michael A. DeMayo is the president and founder of the Law Offices of Michael A. DeMayo, L.L.P., located in Charlotte, NC.

DeMayo suggested buying an umbrella policy if you use your car for work-related travel.

"Most people have no concept or understanding of the coverage they have, the liability or responsibility someone else has towards them, and the fact that insurance coverage is really paramount to recovering on their behalf," DeMayo said.

Umbrella policies can offer millions in liability coverage. In most cases, this policy is added onto your current automobile coverage.

Typically, this adds another few hundred dollars per year onto your insurance bill, but it gives you an extra layer of protection that kicks in after you've exhausted your auto policy.

When using your car for work, an accident could result in injury or death to you or another driver, so prepare for a worst-case scenario before a tragic event occurs.

If someone hits you and the accident is their fault, in most states their insurance should cover the damages. Of course these rules vary depending on the state where you live.

In no-fault states, each driver's insurance pays for their own medical damages no matter who caused the accident.

So know what your policy covers and it's limitations, and know how the laws in your state are written.

Copyright 2013 America Now. All rights reserved.

Additional Information:

Martha Ramsay is an attorney and founder of the Ramsay Law Firm in Charlotte, NC. She is Board Certified in worker's compensation in North Carolina. She says if another vehicle hits you while on the job, you may have two separate claims: worker's compensation and personal injury against the other driver. Ramsay also points out that laws vary by state and by company. Talk to your employer about whose insurance covers your personal vehicle while on the job. If you ask for the employer's insurance to be primary, Ramsay recommends that you get this in writing.

Michael A. DeMayo is the President of the Law Offices of Michael A. DeMayo in Charlotte, NC. In most states, DeMayo says worker's compensation covers medical bills and a percentage of your wages after a certain time should you be injured while working. In most states, the person at fault for the accident pays with their insurance and pays for property damage. DeMayo says these rules change in "no fault" states.

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Angela Daley is the director of communications for AAA Carolinas. She says businesses can purchase coverage for their employees when they are using their personal vehicles. Daley says you should read your personal policy for "Exclusions" which should outline the commercial use and coverage of your vehicle.

Nathan Hinson is the delivery driver mentioned in our story. When Nathan called his insurance company following his accident, the agent asked him whether or not he was using his personal car for business. The agent informed him that he would not be covered because he was making deliveries in his personal car, and he was at fault for the accident. His employer, Papa John's Pizza, does not cover their delivery drivers because they require all drivers to use their personal auto insurance.

This following information is from Insure.com in an online article entitled, "Using your personal car for business." (Source: http://www.insure.com/articles/businessinsurance/personal-car.html)

  • If you use a company car, the employer pays to insure it.
  • If you get direct compensation from the use of your car (deliveries, taxi, livery) then you may need to buy a commercial auto policy.
  • Not telling your insurance agent you were using the car for work reasons when filing a claim may cause your claim to be denied, should the agent discover you withheld that information.
  • If you use your car for work more than 50% of the time, you may need a commercial auto policy.
  • If you rent a car for business reasons tell the rental company. Give your company's name along with yours when making a reservation.

The following information is from Business.com and discusses the subject of commercial insurance (Source:

http://www.business.com/guides/knowing-when-you-need-commercial-auto-insurance-29078/)

  • If your vehicle is registered under a business then you definitely need commercial auto insurance.
  • If the vehicle is registered under you name but used primarily for business, you will need commercial insurance.
  • If more than one employee drives the same car, commercial insurance allows you to list them all so that the insurance company can properly underwrite the risk on the vehicle.
  • If the vehicle is used to travel to clients or job sites, depending on how often you do this, you may need commercial insurance.
  • You may need a commercial policy if your vehicle is carrying equipment, hazardous/flammable materials, housekeeping equipment, towing, delivering goods, delivering newspapers, trucking, chauffeuring, or acting as a taxi.
  • If you need to add 3rd-party coverage, a waiver of subrogation, non-owned vehicle liability coverage or mobile equipment liability coverage, it is probably best to get a commercial policy.

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The Department of Motor Vehicles officers the following key points regarding "no fault" states (Source: http://www.dmv.org/insurance/no-fault-states.php).

  • The goal of "no fault" liability insurance is to lower legal costs by assuming that each party involved in an accident is automatically reimbursed by his/her OWN insurance company. This system reduces the need for claims adjusters to go to court to determine who is responsible for damages.
  • No fault states include: Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania, Utah.
  • No fault policies general cover the personal injury protection (PIP) portion of your auto insurance policy. So, for example, each driver's auto insurance company would cover medical bills and lost wages for days missed from work.
  • Some states allow drivers to purchase additional PIP insurance which pays for bodily injuries regardless of who caused the accident.

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The following information is from a New York Times article exploring the topic of umbrella policies (Source: http://www.nytimes.com/2008/03/18/business/businessspecial3/18insure.html?pagewanted=all&_r=0)

  • Umbrella and excess coverage are extensions of home and auto insurance.
  • Typically, buying umbrella coverage does not greatly increase the overall cost of home and auto insurance.
  • The first million in coverage is usually the most expensive at around $150 to $300 annually. Each additional million could cost around $100 to $125 annually. Rates per million decline as coverage increases but that is not always the case.

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The following information is from Kiplinger.com in an article entitled "Why you need an umbrella policy" (Source: http://www.kiplinger.com/article/insurance/T028-C001-S001-why-you-need-an-umbrella-policy.html)

  • A $1-million umbrella policy provides liability coverage beyond the limits of auto and homeowners insurance policies even if you have less than $1 million in assets.
  • If you are sued, you could be forced to pay a legal judgment from your current assets AND future earnings.
  • Umbrellas pay for defense costs.
  • Some CPAs recommend getting more than $1 million in umbrella coverage if you earn more than $100,000 per year or have more than $1 million in assets.
  • Price varies by risk, but a person with one house and two cars would generally pay about $200 a year for the first $1 million in umbrella coverage.
  • Umbrella policies are inexpensive because they kick in after you've exhausted your liability coverage under your auto or homeowner's policy.
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