Business insurance: coverage for owned and leased business vehicles

Businesses offering vehicles to employees for work or personal use must first arrange appropriate insurance. Whether the business owns a single company car, a truck or a whole fleet of various vehicles, there are a few insurance options to consider.

Insurance for owned and leased vehicles

Deciding whether to purchase or lease business vehicles can be a major decision faced by the business owner. There are benefits and drawbacks to both options:

Owned vehicles

Pros

• Vehicles that are owned by the business will be easier to insure as you are free to choose the level of coverage and it is not contingent upon the leaser
• Although initially more expensive, vehicles are assets to the company.

Cons

• Purchasing vehicles can be extremely expensive without even considering the cost of insurance.

Leased vehicles

Pros

• Leasing vehicles relieves the amount of immediate cash outlay as you only have to pay the lease installment instead of the full purchase price
• As a general rule the company who leases out the vehicles will have their own insurance, meaning that you may not have to insure them.

Cons

• Leasing increases your general business liabilities as there is more cash going out of the business
• You will not own the vehicles at the end of the lease period unless specified in a contract by the leaser
• Although some leased vehicles will come with insurance, it may only be compulsory third party (CTP) insurance, which means you will still have to pay for any damage to the vehicle and any third party property unless you take out additional insurance.

Insuring business fleets

Most insurers will offer fleet rates. The number constituting a "fleet" varies according to the insurance company, but the general consensus is more than 11 vehicles.

Available fleet coverage includes agreed value cover, liability cover to $20 million, new vehicle replacement, personal effects cover and compulsory third party cover.

Many insurers do not require a list of drivers or have a driver age threshold. They cover all age groups as long as they are suitably licensed and authorised by the company to be driving the vehicle. Most will tailor their policies to suit your needs and offer a discount for fleets. Even after the fleet discount it may work out cheaper for you to purchase insurance individually.