Many major companies carry some
form of basic commercial vehicle
coverage. However, there are some gaps or extensions in commercial vehicle
coverage of which many business owners
are unaware, but without them, can be seriously affected. Business owners often look
for ways to cut costs, but ignoring all necessary coverage is not the best business plan.
There are many other ways to reduce costs
and carry adequate coverage.
Third-party lenders and/or investors
require that businesses carry basic commercial vehicle coverage, but they do not require
extensions of coverage that are necessary for
most companies, says John Harper, commercial insurance broker for Westland Insurance
Brokers. It is important to evaluate the company’s risk potential and all the vehicles that
are used to conduct business in order to
determine adequate coverage.
Smart Business spoke with Harper about
determining adequate commercial vehicle
coverage and how to reduce costs without
reducing coverage.
How can a business owner determine what,
if any, commercial vehicle insurance policy
is needed?
Any entity operating a business, whether it
is a sole proprietor or other legal form, which
owns autos and has exposure to loss,
requires a commercial vehicle policy. Even if
the business owner does not own autos for
specific business use, there still may be exposure and risk due to hired autos and autos
operated by employees.
Proper coverage is often overlooked for
any employee driving a noncompany-owned
vehicle for business actions. Such coverage is
referred to as employers’ non-ownership
coverage. If you work in an office where you
are asked to perform any business-related
task, such as taking mail to the post office in
your personal vehicle, your company must
carry the appropriate coverage. If you were
in an accident on the way to the post office,
your company is responsible for the operation of that auto. It is important for business
owners to identify all potential risks and seek
the necessary coverage.
Extensions of commercial vehicle insurance, such as lease gap coverage and rental reimbursement, should also be utilized when
necessary. Lease gap coverage is necessary if
a vehicle is totaled and the insurance company does not pay you enough to pay off the
lease. Lease gap coverage then covers the difference. Rental reimbursement coverage is
utilized if your car is damaged and it requires
you to rent a vehicle.
Are there preventive measures in which business owners should invest to reduce risk and
overall cost?
There are many prevention methods that
should be used to help reduce the risk potential, therefore reducing costs without cutting
coverage. Investing in driver selection and
training is key. Training and monitoring programs increase education and reduce overall
risk and cost. Underwriters look favorably
upon such prevention.
Studies show that selecting drivers with
good driving records reduces overall risk of
accidents. Underwriters will look to see that
the vast percentage of your drivers have little
or no activity on their driving record.
Underwriters also look at the ages of drivers.
They do not like to see a larger percentage of
younger drivers in a fleet.
Regular vehicle maintenance is also a crucial method to reduce risks. With proper maintenance, the likelihood for vehicle malfunction decreases dramatically.
Safety programs and training may be
offered by your insurance company. This
training and service can be provided on a fee
basis. External companies can also provide
such training that underwriters deem acceptable. Insurance companies can also help
screen driving records to ensure new hires
have the type of driving record for which a
company is looking. Employers should
review laws for screening driving records, as
they vary from state to state.
What is the risk of reducing coverage if you
reduce costs?
An employer should make well-educated
decisions from a risk management standpoint with the help of an experienced broker.
If you choose to select a higher deductible,
you will want to know how many claims you
have each year and the price difference for
the different deductible options. There is a
plan with appropriate coverage in the market
for every consumer. It simply takes a little
research to determine what plan gives you
the best cost with the best coverage for your
company.
How can an employer research its insurance
history to determine what plan meets its individual needs?
It is beneficial for a business owner to utilize a broker who can become a member of
the employer’s team and become the central
point of contact. A consumer’s loss history
and loss trends should be researched to
determine which deductibles are suitable for
its situation. Brokers should help a business
owner identify claims scenarios, such as rear-end accidents, accidents caused by lack of
driving experience or even excessive cell
phone usage. Once the causes of claims are
determined, an owner can select the appropriate coverage and implement a tailor-made
education, training and monitoring program
to prevent such claims in the future.
JOHN HARPER is a commercial insurance broker for Westland Insurance Brokers. Reach him at [email protected] or
(619) 641-3208.
