Assessment of Skills and Knowledge(ASK) in Fundamental Business Concepts Practice Test

Why is it necessary for businesses to carry automobile insurance for employees using their own cars on company business?

1. It protects employees' personal assets

2. Businesses are liable if an accident occurs

3. Insurance reduces employee accidents

4. It is required by law

The correct answer is: Businesses are liable if an accident occurs

Carrying automobile insurance for employees using their own cars on company business is essential because businesses can be held liable for accidents that occur during the course of work. When an employee uses their vehicle for job-related activities, the company may be responsible for any damages or injuries that result from an accident. This legal principle, known as vicarious liability, places the burden of compensation on the business, which underscores the importance of having appropriate insurance coverage. This insurance protects the business financially in the event of an accident, covering potential damages to third parties or property and providing legal defense if necessary. Without this coverage, a company could face significant financial loss from claims and lawsuits arising from employee vehicle accidents connected to their work duties. The necessity of insurance extends beyond just protecting the company's financial health. It also ensures that employees feel secure while conducting business activities, knowing that both they and their employer are protected against unforeseen circumstances that could arise during travel for work purposes.