Car Insurance
A small business owner’s guide
By Paul Robinson
Insurance is meant to cover a loss that the insured cannot afford to bear. Most companies have insurance - they can’t afford not to buy it. If you’re looking into buying insurance for your company, the objective should be to keep the cost as low as possible without leaving yourself inadequately insured.
Consider your auto insurance needs if your business has multiple vehicles. There are generally two parts of your insurance coverage: damage and injury to your property, and damage and injury to everyone else’s.
For your own property, there are also two parts: collision and comprehensive. Collision is when your vehicle strikes something; comprehensive is everything else. If you run into a tree, your collision coverage (minus the deductible) pays for the damage to your vehicle. If a tree strikes your car because it fell on it or a storm uprooted it, your comprehensive (again minus the deductible) pays for the damage to your vehicle.
Exactly What You Need
What you want to look at is the most important part of your coverage, and the one that is most usually mandatory: public liability. In some states, all you’re required to carry is the state minimum, which might be as low as $15,000. This amount is often considered so low as to be ridiculous. In fact, most common carriers are required to carry at least $5,000,000 in public liability per accident, and in some localities, if you do business with a government agency it may require you to carry that much on your vehicles.
In all probability if you look at a small company, you’ll find the owner has trucks that have collision coverage that is never used, because rather than file a claim and maybe see the rates go up or have the insurance canceled, he or she has the repairs done out of pocket, and has the minimum liability coverage. So if something goes wrong, there will be trouble.
The owner can afford a $1,000 or $2,000 repair bill. However, he or she cannot afford a $200,000 judgment if one of the company trucks is involved in a serious accident. So it turns out, this owner is over-insured for the damage to his or her own vehicles - which isn’t being used - but is under insured for public liability - which is what is really needed - and doesn’t realize not only how dangerous a position this is to be in, but also how unnecessary the risk is.
With the increased litigiousness of today’s society, you might be better off raising your total liability coverage to at least $1,000,000 or more per accident unless your state has a law on the books that limits the amount someone can get in damages. Those limits, however, usually apply to non-economic damages like punitive damages or pain and suffering; if the damages are actual, that won’t help you.
For example, if your state had a limit of $50,000 for non-economic damages and one of your trucks rear-ends and totals a brand-new Mercedes, your liability (or hopefully, your insurer’s liability) is the full $85,000. And if the other guy was driving a $400,000 Maserati and your public liability isn’t high enough, well, prepare to close up and go out of business!
How to Find the Right Insurance
You may wish to try an insurance broker rather than your typical agent; they may be able to get you better coverage or a better rate. Also, you may wish to consider an insurance audit, to find out where you have unnecessary or overlapping coverage and where you need to boost coverage. Remember, the purpose isn’t so much to save money, but to correctly spend money where you need it most.
