Winding Down a Business With a Work Truck or Van: The Insurance Checklist

Why the order matters

A business vehicle is usually titled to the business and insured on a commercial auto policy written for the business, often with drivers, equipment and limits chosen for the work rather than for family use. Closing the company does not move the truck into your personal life on its own. If the commercial policy is cancelled the day the doors close while the truck sits in your driveway, it is an uninsured vehicle; if the truck is driven on a personal policy while still titled and used as a business vehicle, the facts on the policy are wrong. Both problems come from doing the steps out of order.

The week the business stops operating

1. List every vehicle the business owns or leases, with the title holder and any lender for each.
2. Decide each vehicle's future: sell, return to a lessor, keep parked, or transfer to you or a family member.
3. Tell the commercial insurer what is coming, but do not cancel coverage on a vehicle until its new arrangement is in place.
4. If a vehicle will sit unused, ask about reducing coverage rather than ending it. A registered vehicle with no insurance on record has its registration suspended by the DMV.

Within 30 days

• Selling a vehicle. The business, as seller, files the Notice of Transfer and Release of Liability within 5 calendar days under Vehicle Code section 5900. Remove the vehicle from the commercial policy once the buyer has it.
• Keeping a vehicle yourself. Transfer the title from the business to you, and file the release for that transfer too. Put the vehicle on a personal policy effective on the transfer date, then remove it from the commercial one.
• Parking a vehicle for good. If it will not be driven, towed, stored or parked on public roads for the entire registration year, planned non-operation may fit, filed within the DMV's window around the expiration date.
• Financed vehicles. A lender on a business loan must stay listed until it is paid, whichever policy the vehicle moves to.

If you have never had a personal policy

Owners who drove only business vehicles for years sometimes worry that a missing personal insurance history will count against them. Insurance Code section 1861.02(c) says the absence of prior automobile insurance coverage, in and of itself, shall not be a criterion for Good Driver Discount eligibility, rates or insurability. Your driving record, annual mileage and years of experience are the factors that come first.

At your first personal renewal

• Use type. California's regulation lets insurers rate by type of use, such as pleasure, commute, business or farm. If the truck now runs errands instead of jobs, say so; if you still do occasional paid work with it, say that too.
• Mileage. A work truck that becomes a weekend vehicle usually drives far less. Give an honest new estimate.
• Drivers and address. Employees who drove the truck are no longer drivers of it, and if it was kept at a shop or yard, its garaging address is now your home. Update both.
• Equipment. Tool racks, ladders and installed equipment were often covered as business property. Ask how the personal policy treats them, or remove them.

When you know which vehicles you are keeping, you can get the personal policy quoted here to start on the transfer date.