Newsletter Articles

iNews Articles 2010

Wellness Awareness

Glossary of Terms

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Nonprofit Resources is a wholly owned Subsidiary of Colorado Nonprofit Association

Business Auto Policy -4-

The previous issues of iNews have discussed coverage under a Business Auto policy. To review that information or any of the previous issues, please click here.

Tips for Purchasing Business Auto Insurance

Nonprofit buyers should keep these tips in mind when buying insurance for their business vehicle:

• Consider the vehicle’s age. If the agency-owned vehicle is seven years old or greater, it may not be cost effective to carry physical damage coverage. Autos older than seven years are typically fully depreciated; it may cost $400 a year for physical damage coverage on a vehicle that has a value of only a few thousand dollars. This is a rule of thumb and the nonprofit organization must be comfortable with self-insuring the auto (putting aside enough money to pay damages if they should occur), if it decides not to purchase physical damage coverage on older owned autos.

• Buy the highest UM/UIM limit the nonprofit can afford. Uninsured/Underinsured motorist insurance protects the nonprofit. It is a wise risk management practice to buy the highest limit the nonprofit can afford. The premium difference between a $60,000 limit and a $1 Million limit is often insignificant. Considering how many vehicles on the road are uninsured, it is wise to carry a high UM limit.

• Make certain that the umbrella policy follows form. Confirm that the nonprofit’s umbrella policy follows form over the auto liability and uninsured motorist coverage. This means that the umbrella will provide the same coverage provided in the underlying form. Note however, it is unlikely that the umbrella will follow form over the auto liability or uninsured motorist coverage if the limits are less than $1 Million.

• Buy non-owned and hired auto liability coverage. Even if the nonprofit does not own any vehicles, it probably should buy an auto policy because it probably has paid staff or unpaid volunteers using their own vehicles on agency business. The intent of the non-owned and hired auto liability coverage is to provide protection to the nonprofit if an employee or volunteer uses his or her own vehicle on agency business. The coverage is typically excess over the employee’s or volunteer’s personal auto policy. The coverage is affordable.

Choosing a Policy

Many nonprofits with owned autos compare the coverage simply on price. However, this may be shortsighted. There are other considerations to contemplate when selecting an auto insurer:

• Claims management. What is the insurer’s reputation for claims handling?

• Nonprofit expertise. Does the insurer readily provide insurance for the nonprofit sector?

• Driver training. Does the insurer provide free or low-cost driver training?

• Coverage comparison. Make sure the coverage between insurer A and B is the same. Your broker should be able to assist you with the comparison.

• Exclusions. Make certain you understand the exclusions on the policies you are comparing.