Buying Commercial Auto Insurance
Commercial auto insurance is one of the most important aspects of your business insurance program. If your business uses a vehicle, or many vehicles, you need commercial auto insurance and you will want to ask your business insurance professional some important questions. You will also want to provide your business insurance professional with a complete picture of your vehicle use.
Consider the following points and ask the following questions.
How Many Vehicles and Drivers Will the Business Insure?
Commercial auto insurers often separate coverage types based on the number of vehicles and drivers to be insured. Fleet insurance is an option for businesses that will have a number of vehicles and drivers. The number of vehicles differs with each insurer and may depend on the class of vehicle. But, fleet insurance may be a less expensive alternative than individual, per vehicle policies.
What is the Policy Definition of Commercial Use?
Your personal auto policy will exclude coverage for commercial uses of your vehicle. A commercial policy will establish a definition of commercial use as well. It is important that you read the definition and discuss this with your insurance professional. If there is any question, it is better to obtain a commercial auto policy so that, in case of an accident, there is no chance of being uninsured.
How Can You Lower Premium Costs?
Commercial auto business insurance premiums can be lowered by:
- Business Location – the location of the vehicles determines premiums for theft.
- Driver Records – hire only qualified drivers with safe driving records.
- Choice of Vehicle – sales people may want sports cars, but five-star safety rated, domestic, mid-sized sedans have the lowest premiums.
- Deductibles – can your business afford part of the risk and maintain a high deductible? If so, your premiums will be lower.
- Safety and Anti-Theft Devices – alarms, GPS tracking, air bags, seat belts, and other such devices can significantly lower premiums.
Special Commercial Coverages and Considerations
Certain businesses must adhere to federal and state regulatory standards in the operations of their vehicles. For example, if your business will be hauling cargo interstate, there are specific Department of Transportation requirements for insurance that must be met. You will need to make sure you and your insurance professional have a thorough understanding of those requirements. Also, if you will be delivering or hauling for others or using other’s equipment such as leased trailers or rental equipment, you will need hired or non-owned vehicle coverage.
Who is the Insured?
Make sure you know the insured. Sound simple? Maybe. But, all to often businesses set up a leasing company to lease equipment to the main company and the leasing company is the titled owner of the vehicles. A common mistake is to identify the main company and not the leasing company as the titled owner on the policy. Or, the dba of the company and not the full name of the company is listed. You want the full name of the company as an insured, the titled owner, any affiliates, and dba, and all employees as insureds on your commercial auto policy.
Running a small business involves a significant investment. Business insurance protects your investment by minimizing financial risks associated with unexpected events such as a death of a partner, an injured employee, a lawsuit, or a natural disaster. Unless you are an employer, business insurance is generally not required by law, however, it is common practice to purchase enough insurance to cover your assets. If your business is an LLC or a corporation, your personal assets are protected from business liabilities; however, neither business structure is a substitute for liability insurance, which covers your business from losses.
Your state government determines insurance requirements for businesses. Most states require businesses with employees to pay for workers’ compensation insurance, unemployment insurance, and state disability insurance. Specifically, every Massachusetts employer is required to provide workers’ compensation insurance coverage for their employees. Refer to M.G.L. Chapter 152, Section 25A. An employer may be an individual, partnership, joint venture, corporation, limited liability company, association, or a fiduciary such as a trustee, receiver or executor, or other legal entity. Your state may require insurance of specific business activities. For example, if you own a car or truck and use it for business purposes, you may be required to purchase commercial auto insurance. Finally, your financial lender or investors may require you to maintain life, business interruption, fire, flood or other types of insurance to protect their investments.
Tips for Buying Business Insurance
Assess Your Risks
Insurance companies determine the level of risk they’ll accept when issuing policies. This process is called underwriting. The insurance company reviews your application and determines whether it will provide all or a portion of the coverage being requested. Each underwritten policy carries a premium and a deductible. A premium is the price you pay for insurance.
Premiums vary widely among insurance companies, and depend on a number risk factors, including your business location, building type, local fire protection services, and the amount of insurance you purchase. A deductible is the amount of money you agree when making a claim. Generally, the higher deductible you agree to pay, the lower your premium will be. However, when you agree to take on a high deductible you are taking on some financial risk. So, it’s important to assess your own risks before you go shopping.
The National Federation of Independent Businesses provides information for choosing insurance to help you assess your risks and to make sure you’ve insured every aspect of your business.
Consider a Business Owners’ Policy
Insurance can be purchased separately or in a package called a business owners’ policy (BOP). Purchasing separate policies from different insurers can result in higher total premiums. A BOP combines typical coverages into a standard package, and offered at a premium that is less than if each type of coverage was purchases separately. Typically, BOPs consist of cover property, general liability, vehicles, business interruption and other types of coverage common to most types of businesses. BOPs simplify the insurance buying process and can save you money. However, make sure you understand the extent of coverage in any BOP you are considering. Not every type of insurance is included in a BOP. If your business has unique risks, you may require additional coverage.
Find a Reputable, Licensed Agent
Commercial insurance brokers can help you find policies that match your business needs. Brokers receive commissions from insurance companies when they sell policies, so it’s important you find a broker that is reputable and is interested in your needs as much as his own. Make sure your broker understands all the risks associated with your business.
Finding a good insurance agent is as important as finding a good lawyer or accountant. You should always look for one that has a license. State governments regulate the insurance industry and license insurance brokers.
ASSESS YOUR INSURANCE COVERAGE ON AN ANNUAL BASIS
As your business grows, so do your liabilities. You don’t want to be caught underinsured should disaster strike. If you have purchased or replaced equipment or expanded operations, you should contact your insurance broker to discuss change in your business and how they affect your coverage.