Here's a scenario that catches business owners off guard: Your employee runs to pick up office supplies in their personal car. On the way back, they rear-end another vehicle at a stoplight. The other driver suffers injuries, and suddenly you're facing a lawsuit that could cost your business hundreds of thousands of dollars. Your employee's personal auto insurance? It might deny the claim entirely because the trip was work-related. This is exactly the gap that hired and non-owned auto coverage is designed to fill.
If your business doesn't own vehicles but your employees occasionally drive for work—whether that's running errands, meeting clients, or picking up supplies—you need to understand hired and non-owned auto insurance. This often-overlooked coverage protects your business from serious financial exposure, and the good news is that it's one of the most affordable business insurance add-ons available.
What Is Hired and Non-Owned Auto Coverage?
Hired and non-owned auto insurance (often called HNOA) is liability coverage that protects your business when you or your employees drive vehicles that your company doesn't own. Despite the single name, this coverage actually addresses two distinct situations.
Hired auto coverage applies to vehicles your business leases, rents, borrows, or hires for business purposes. Think of the rental car you grab at the airport for a business trip, or the truck you rent from Home Depot to pick up equipment. When you're driving these vehicles for work, hired auto coverage protects your business from liability for bodily injuries and property damage you might cause to others.
Non-owned auto coverage protects your business when employees use their personal vehicles for work-related tasks. This includes everything from driving to the bank to deposit checks, meeting clients at their offices, picking up lunch for a business meeting, or running to the store for office supplies. The key word here is business-related—if the trip has anything to do with your company's operations, you could be liable if something goes wrong.
The Coverage Gap That Could Cost You Everything
Most business owners assume their employees' personal auto insurance will cover accidents that happen during work errands. That's a dangerous assumption. Personal auto insurance policies frequently exclude business use, meaning the insurance company can deny coverage if the accident occurred while the employee was driving for work purposes. Even if the employee just made a quick detour to drop off a work package during their commute, that business element could void their personal coverage.
But here's where it gets worse: even if your employee's personal insurance does cover the accident, those policy limits are often woefully inadequate. Many people carry only the state minimum liability coverage, which in some states is as low as $25,000 per person for bodily injury. If your employee causes a serious accident—say, a multi-car pileup or an injury to someone who requires extensive medical care—damages can easily reach six or seven figures. Once your employee's personal policy limits are exhausted, guess who's on the hook for the rest? Your business.
This is where the concept of vicarious liability comes into play. Courts have consistently held that employers can be responsible for accidents caused by employees who are acting within the scope of their employment—even if the employee was driving their own vehicle. You don't get to sidestep liability just because you don't own the car. If your business benefits from the employee's trip, your business shares the risk.
How This Coverage Actually Works
Hired and non-owned auto insurance typically functions as excess or secondary coverage. For non-owned autos, this means it kicks in after your employee's personal auto insurance limits are exhausted. Let's say your employee has $100,000 in liability coverage on their personal policy, but they cause an accident that results in $300,000 in damages. Their personal insurance pays the first $100,000, and your hired and non-owned coverage picks up the remaining $200,000 (up to your policy limits).
It's crucial to understand what this coverage does and doesn't protect. Hired and non-owned auto insurance covers bodily injury and property damage liability—meaning injuries or property damage your employee causes to other people. What it doesn't cover is physical damage to the hired or non-owned vehicle itself. If your employee totals their personal car while running a work errand, this coverage won't pay to replace their vehicle. Similarly, if you rent a car for a business trip and it gets damaged, you'll need to rely on the rental company's collision damage waiver or your credit card benefits—hired auto coverage won't help with that.
Most businesses add hired and non-owned coverage as an endorsement to their general liability insurance or business owners policy (BOP). This keeps things simple and costs down. You're typically looking at less than $150 per year for this coverage—a bargain compared to the potential liability you're protecting against. Some insurers offer policies with limits ranging from $500,000 to $1 million or more, and given how quickly accident costs can escalate, higher limits are usually worth the modest additional premium.
Who Needs This Coverage?
If you're thinking this coverage is only for businesses with mobile workforces like sales teams or delivery services, think again. Any business where employees occasionally drive for work-related purposes should seriously consider hired and non-owned auto insurance. This includes consulting firms where partners visit clients, retail businesses where managers make bank runs, restaurants where employees pick up supplies, real estate agencies, non-profits where staff attend off-site meetings—the list goes on.
Ask yourself these questions: Do you ever ask employees to run work errands? Do team members drive to client meetings or off-site locations? Do you rent vehicles for business purposes? Do employees ever drive to the post office, bank, or office supply store for work? If you answered yes to any of these, you have exposure that hired and non-owned auto coverage addresses.
Some industries face heightened scrutiny. If you operate in professional services—like consulting, accounting, or legal services—clients and contracts often require proof of hired and non-owned coverage before you can begin work. Similarly, if you're a contractor or subcontractor, general contractors frequently mandate this coverage as a condition of your agreement.
Protecting Your Business: Beyond Just Buying Coverage
Buying hired and non-owned auto insurance is a smart first step, but it shouldn't be your only line of defense. Smart business owners implement additional safeguards to minimize risk. Start by establishing a clear policy about when and how employees can use personal vehicles for work. Put it in writing, make sure everyone understands it, and have employees acknowledge the policy.
Next, verify that employees who regularly drive for work carry adequate personal auto insurance. Many businesses require employees to maintain at least $500,000 in liability coverage on their personal policies and to provide proof of insurance annually. Yes, this adds an administrative step, but it's far easier than dealing with a lawsuit where you discover too late that your employee was driving with minimal coverage.
For employees who regularly use their personal vehicles for work, consider requiring them to add a business use endorsement to their personal auto policy. This relatively inexpensive addition ensures their primary coverage won't deny claims based on business use exclusions. Your hired and non-owned policy will still provide excess coverage, but you'll have better protection overall.
Getting Started: What to Do Next
Adding hired and non-owned auto coverage to your business insurance is straightforward. If you already have a general liability or business owners policy, contact your insurance agent or broker and ask about adding a hired and non-owned auto endorsement. They'll ask you questions about how many employees you have, how frequently they drive for work, and whether you regularly rent vehicles. The process typically takes just a few minutes, and the endorsement can often be added immediately.
When selecting coverage limits, don't automatically choose the minimum. Given how quickly accident costs can escalate—especially when serious injuries are involved—opting for $1 million in coverage is often wise. The difference in premium between $500,000 and $1 million is usually modest, but the extra protection could save your business from catastrophic financial loss.
The bottom line is this: if anyone drives for your business in a vehicle you don't own—whether it's an employee running a quick errand in their personal car or you renting a vehicle for a business trip—you have liability exposure. Hired and non-owned auto coverage closes that gap affordably and effectively. Don't wait until after an accident to realize you needed this protection. Talk to your insurance professional today about adding this essential coverage to your business insurance portfolio.
