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 JHarper@westlandib.com or (619) 641-3208.