What Is a Business Automobile Policy?

A business automobile policy (BAP) provides coverage for a company's use of cars, trucks, vans, and other vehicles in the course of carrying out its business. Coverage may include vehicles owned or leased by the company, hired by the company, or employee-owned vehicles used for business purposes. A BAP covers both liability and damage. A business automobile policy is also known as a business auto coverage form (BACF).

Understanding Business Automobile Policy

A business automobile policy provides coverage for any company use vehicle which drives on public roads. BAP coverage is chosen individually for each vehicle insured, and different transports owned by the same company may carry different amounts and types of coverage.

Businesses should get a business automobile policy even if it does not own vehicles if at any time they may use personal vehicles for business purposes. This coverage is vital in the cases of employees who use their private cars for conducting business duties. In the situation of a severe accident, the employee may not have enough liability coverage to protect the business adequately.

Agents will use the business auto coverage form to create the policy for the business owner. A business coverage policy will identify the number and type of vehicle insured, the causes of and types of damage covered, and obligations of the insurance provider and the business. 

Policyholders should pay careful attention to the numerical symbols listed in the policy declarations, which indicate the autos insured for each various coverage. These symbols, called covered auto designation symbols, include the numbers 1 through 9 plus 19. Each symbol represents a category of covered autos. For instance, symbol 1 means "any auto," while symbol 2 means "owned autos only."

Coverage Available in Business Automobile Policies

BAP coverage should include both property damage and liability insurance. Also, in cases where the vehicle is a lease, or the company is making regular payments, specific levels of coverage may be necessary.

  • Collision coverage can be bought only in conjunction with liability and comprehensive coverage. This provision reimburses the insured for damage sustained to the automobile due to the fault of the insured business driver. It does not cover damage due to theft or vandalism, and also does not cover damage paid from another at-fault driver's policy
  • Comprehensive coverage includes damage to the car from causes other than a collision. The loss may come from many sources and include acts of nature such as a tornado, dents from a run-in with a deer, vandalism and theft damage, and other causes. 
  • Specified perils coverage provides coverage on losses incurred to your property from hazards or events named on the policy. The burden of proof falls on the insured who must demonstrate through facts and evidence that a claim is valid.
  • Liability coverage gives protection against claims resulting from injuries and damage to people and property. Most state laws require drivers to carry liability insurance. Liability insurance has no deductible, so a driver can choose different deductibles based on perceived risk levels. If a driver is found guilty of reckless driving or driving impaired, a court may award punitive damages, and in some states, a BAP or BACF is not legally allowed to cover punitive damages.