Commercial Auto Insurance Rates
Are Higher Than personal Auto Rates
By and large commercial auto insurance rates are higher than personal auto rates for a
comparable vehicle. Clearly, some commercial vehicles can't go on a personal auto policy.
Even in my best day, I couldn't convince an insurance company underwriter that an 80,000
pound dump truck is used by me and the missus for running around town and family outings.
For vans and pickups, the premium will almost always be lower on a personal auto policy.
I am not recommending this, in fact, later I will tell you this is a colossally bad idea.
The point I want make is that the reason commercial auto rates are higher than personal
auto insurance is simple - the claims and losses are far worse on a commercial auto policy
than on a personal auto policy.
Your Assets Are At Risk
In fact, when you look at your entire contractors insurance portfolio, the business auto is
one of the areas where you can truly get crushed and, unfortunately, many contractors have
their insurance portfolio designed to offer the greatest protection for what those that are
requesting Certificates of Insurance from you are honing in on. This is a bad practice.
You may think nothing of tossing the company's pickup trucks key to one of your employees
and sending him off to the lumber yard or out for supplies. In reality, what you have done,
is taken your company's assets, your personal assets, money for the kid's college fund and
orthodontics and loaded into your pickup truck and sent your driver off into the world with
your entire nest and eggs. Each time your vehicles go down the road everything you own is
chugging down the highway along with it.
As such, you have to, repeat - have to - take the highest limits of liability you can afford.
When you have limits of liability of $1 million or so, the insurance company clearly has a
helluva big reason to stand by your side.
Your business auto liability is divided into three main types of exposure:
-
Liability for vehicles you own
-
Liability for vehicles that are not-owned by your business
-
Vehicles you borrow
Owned Auto Exposure is the more straightforward of the concepts:
-
If you go out and buy or lease a car, a pickup or van,
etc. and use it or title it to the business you have an exposure. You are on
the hook for the liability. Liability follows the vehicle . You lend your new pickup
to your brother-in-law on the weekend to move. He causes a serious accident with
injuries. You weren't there, you weren't driving but lucky you - you are responsible.
When the lawsuit comes in, you will be the first person named in the suit, and have to
defend it until it winds its way through the courts. Your brother-in-law will get
dragged in, but he is not the one with the bull's-eye on his back. That honor is yours.
-
Non-owned vehicles are vehicles that, as the name
implies, are not owned by you. Normally included in this category are vehicles you hire
as well. The issue with non-owned vehicles is this. You send one of your employees to
the Home Depot to pick up supplies in his own truck. You are not driving, he is. It's
not your truck - but you are going to be held liable for the accident. The reason is
that if you drew a straight line from what ultimately caused your employee to be in the
accident - you are the starting point - you sent him to the store. You and your employee
will both be named. You are a company - he's an individual you - you will get much more
of the plaintiff counsel's love and time to express it. Deeper pockets get more attention.
-
Borrowed Autos - These are autos such as specific
equipment for a job. Be careful who you borrow from. If they have low limits or no insurance,
if there is a claim - you will be in the soup. The liability limits follow the vehicle - if
there is not enough coverage - it rolls down to you.
Honesty - The Best Policy - The Only Policy
In all the years that I have been selling insurance, I can tell you first hand that the underwriting and
the back end fraud investigation has changed dramatically. Night and day dramatically.
Somewhere on every insurance application ever written from the beginning of time there is a question about
previous claims. When I was young and green in insurance, an agent I had known for years told me in his
entire 30 year career - nobody had ever had a claim on the application. Why make a problem for yourself
and the client was his philosophy. That proverbial cherry tree - he would never admit to knowing who cut
it down.
That was then - this is the real world now. There is a system called CLUE - which stands for Comprehensive
Loss Underwriting Exchange. Think of it as a massive insurance company claim pool where insurance companies
deposit and pull claim information about you, me, Batman & Robin - everybody. The application process is so
sophisticated now that some insurance companies will be able to pull not only your cars but also the VIN
numbers of your exact cars just from your name and address. Big Brother is definitely watching.
Here's The Point
You used to be able to tell an awful lot of fables. Now, let's say you hide a driver or tell the agent and
the company you park your truck in a more favorable location but don't in actuality. The term for this is
either "rate evasion" or "insurance fraud" and both are ugly. Let's say you get away with it from the jump,
but then you have a claim.
Let's say it's a small claim - say $5,000 or so. More than likely nobody is going to investigate it too
terribly much.
Let's say it's a policy limit hit - the insurance company is looking at a $1,000,000 claim payout. On a
claim of this magnitude a lot of very serious folks are going back all the way to the beginning to see if
there is any way to possibly duck the claim. If you lied on the application, congratulations are in order,
as you have now become your very own insurance company. The next thing that will happen is that retired
cops, generally, head up the SIU Department - the Special Investigation Unit. They are looking 1) for
insurance fraud 2) to deny coverage 3) to prosecute for fraud. So now you have no coverage, a big fine and
are quickly moving into the realm where you are a guest of the state and have secured your "3 hots and a cot".
Don't Give The insurance Company A Way To Deny Any And All Coverage
While I am on my soap box of Don'ts.
DO NOT EVER PUT YOUR WORK VEHICLE ON A PERSONAL AUTO POLICY.
Let's say you are a carpenter with a pickup truck. You are a one man band and doing work in your own name.
You register the vehicle in your own name and call your agent for a quote on commercial auto insurance. He
runs the numbers and tells you it will be $1,800 for the year.
That number seems way too high as you are only figuring on paying $900 or so as that's what you pay for your
other car on your personal auto policy. You figure - why the hell should I pay double, screw that - I am not
going to have a claim, and I sure as hell need the money more than the insurance company.
Here's The Problem
The insurance companies have all been burned on these claims over the years and cut out the loopholes.
Generally, vans, pickups and panel trucks used in business kept on a personal auto policy - No Coverage of any type.
Say you are driving your 2009 Ford pickup back from the lumber yard and its loaded with tools and lumber.
You rear end a family on their way to soccer practice. Mom, and the 2 kids are all injured. They sue you in
your name, as that is how the vehicle is registered.
And Now You Have:
No coverage for your injuries - No PIP Coverage - your medical bills are on you
No coverage for the damage to your vehicle - Collision coverage denied - you are on the hook
No coverage for a rental vehicle - On you as well
And
No Coverage for the other vehicle - No Property Damage Coverage
Plus
No Coverage for the Bodily Injury to the other Family - It is on you again
Still
No Duty to Defend you - You pay the lawyers yourself
And
Everything you own is now at risk - your assets, your house, your income for the next 20 years.
This is real world - don't risk everything to save a couple of bucks. You could be sorry beyond
your ability to even comprehend what tidal wave just took the life you used to know away.
Many agents may not tell you all of this. It is all true and that is why you absolutely need
a Pennsylvania contractor insurance specialist.
Call us at (717) 533-0207 or
contact us for answers to your Pennsylvania
Contractors Commercial Auto Insurance questions.
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