Small to medium sized businesses need company vehicles to do everything from delivering mail to picking up products to meeting with prospective customers. Although the vehicles and employees may be carefully monitored, the weather, road conditions and unsafe drivers are out of the business owner’s control. The liability for any bodily injury or property destruction caused by an employee or company vehicle will ultimately rest with the business owner.
When it comes to business vehicle insurance, personal cars cannot be used for business purposes. That is, almost all personal auto insurance policies do not cover vehicles that are primarily used for business. A business auto policy is necessary when the company owner is an independent entrepreneur working out of their own home. Business auto insurance covers any legally liable costs resulting from bodily injury or property damage. Business auto insurance isn’t sold in standard packages because the individual coverage terms will ultimately depend on certain variables.
In order to receive the most effective coverage, business owners should assess their own business needs, financial resources and current assets. Before searching for auto insurance, they should prepare for typical questions that will be asked. For example, insurance will want to know who owns the property, how many employees work on-site and whether customers enter the work site. They will ask how many people are employed and what training, if any, that employees have received. They will also ask how many vehicles will be covered, the total number of vehicles used and what kind of inventory or special equipment will be transported.
Conduct a Risk Assessment
Before business owners start shopping among different insurance carriers, they need to take a hard look at their business and employees in order to lower their financial risks and costs. First, having an excellent credit score and good reputation with creditors is a good start. Be sure to clean up any questionable problems in the company’s credit history. Any company that transports hazardous or dangerous items must follow OSHA guidelines in order to prepare their vehicles. For example, a company that sometimes must transport chemicals should have a portable spill kit, first aid kit and fire extinguisher in the vehicle.
Next, driver evaluations must be performed because the easiest way to obtain inexpensive business auto insurance is to designate the right employees as drivers. Similar to personal auto coverage, insurance companies base their quotes and premiums driver histories. Business owners who randomly select internal employees or hire new drivers may quickly regret these decisions. Before designating any driver, request a copy of their driving record from the local DMV, which will include a history of tickets, accidents and driving restrictions. An employee in a business vehicle who has a sketchy driving history will yield a higher premium.
According to the National Safety Council (NSC), the leading cause of employee fatalities is car crashes. Recognizing why insurance companies are so concerned over driver safety and how these fears impact premiums is important. An easy way to allay the concerns of insurance companies is through requiring that employees who drive company vehicles successfully complete an accredited defensive driving course or program. Defensive driving and safety training will have measurable benefits for companies. It will reduce insurance premiums, car repair bills and any liability costs associated with work-related car crashes. It will also decrease workers’ compensation claims, improve productivity by keeping employees safe and on the job.
OSHA recommends that employers set up a safe driving program through creating a handbook, setting up a program and training employees. Doing so will reduce insurance costs and protect the company’s brand by improving the public perceptions of the company’s driving practices. OSHA recommends that a business driving handbook include driver agreements, written procedures and a clear disciplinary action system. It should also include policies related to vehicle inspections, crash reporting and investigating and DMV record checks. A front page that firmly defines the commitment of the business owner and senior management to driver safety will impress insurance companies.
As a final tip, be sure to carefully select the vehicles that will be insured. Just like with personal auto coverage, the more expensive vehicles will result in higher premiums. Also note that bigger insurance companies will be better equipped to cover assets and claims, but smaller companies may lack the capital resources.