What Is a Hired Auto in Insurance?

Understanding ‘hired auto’ is important for businesses and individuals. This term defines how vehicles are classified for coverage when not directly owned by the entity using them. Recognizing this distinction helps ensure appropriate insurance protection and addresses potential liability exposures from temporary vehicle use for business activities.

Defining Hired Autos

A hired auto, in insurance terms, refers to any vehicle that a business leases, hires, borrows, or rents for its operations. This includes vehicles rented from commercial rental companies for short-term use, such as a van for delivery or a car for a business trip. The key characteristic of a hired auto is that the insured entity has temporary possession or control of the vehicle without holding ownership. This classification applies to cars, trucks, vans, SUVs, and trailers used for business purposes.

For example, a construction company renting a specialized piece of equipment, like a boom lift, with an operator for a project would be utilizing a hired auto. Similarly, a catering business that rents a refrigerated truck for an event would classify that vehicle as a hired auto. The insurance definition focuses on the temporary nature of the vehicle’s use and the fact that it is not owned by the business.

Distinguishing Hired Autos from Other Vehicle Classifications

Hired autos are distinct from other vehicle classifications in commercial auto insurance, primarily based on ownership and control. Owned autos are vehicles titled and registered directly to the insured business entity. These are vehicles the business holds a direct financial and legal interest in, such as a company fleet or a vehicle purchased outright for business use. Commercial auto insurance policies are designed to cover these owned vehicles.

In contrast, non-owned autos are vehicles not owned, leased, or hired by the insured, but are used for business purposes. A common example is an employee using their personal vehicle to run company errands. The business does not own or rent these vehicles, but it can still incur liability if an accident occurs while the employee is performing work-related tasks. Personal rental vehicles, such as those rented for a personal vacation, typically fall under a personal auto policy and are not considered hired autos in the commercial sense. This differentiation is important because personal auto policies usually exclude coverage for vehicles used for business purposes, creating a gap in protection.

Insurance Coverage for Hired Autos

Commercial auto insurance coverages are designed to address the risks associated with hired autos. Hired Auto Liability Coverage provides protection for third-party bodily injury and property damage that results from the use of a hired auto. This coverage helps protect the business if it is sued due to an accident involving a rented or borrowed vehicle. It acts as a form of liability insurance, paying for medical costs, property repairs, and legal expenses up to the policy’s limits.

Hired Auto Physical Damage Coverage addresses damage to the rented or leased vehicle itself. While Hired Auto Liability covers damage to others, Physical Damage coverage helps pay for repairs or replacement of the hired vehicle if it is damaged by collision, fire, theft, or other covered perils. These coverages are typically added as endorsements to a commercial auto policy or as part of a business owner’s policy. They are crucial for businesses that frequently use vehicles they do not own, ensuring that potential financial burdens from accidents are managed.