No matter the size of your business, if you own or operate a fleet of vehicles, it is essential to have adequate insurance coverage. Large scale plans, however, are more complicated than average single-driver policies. Suppose you’re looking for a reliable insurance company that caters to work vehicles. In that case, there are several fundamental designations to consider: pleasure use, personal use, business use, and commercial use.
Each designation has specific requirements and premiums; indeed, collision coverage will inevitably come with different fees when you are a business owner looking for the perfect commercial auto insurance policy instead of someone looking to protect themselves and their family from the price of physical damage. In this regard, employees who regularly use their vehicle for business purposes typically require a “Business Use” designation and commercial car insurance.
Understanding these designations is crucial for companies looking to insure their commercial fleets. This article will explore the cost of commercial fleet insurance and how it can vary based on different factors. Fleet insurance is a type of commercial insurance that covers multiple vehicles and drivers under one policy. It can protect you from the financial consequences of accidents, thefts, vandalism, bodily injury, lawsuits, and other risks that come with managing a fleet comprising employees with a range of driving records.
Are there alternatives to the costly premiums so prevalent in the world of business auto insurance? How can you lower these costs while protecting your small business against property damage? Do fleet business insurance rates always need to be a headache when balancing your books?
What Does It Cost to Insure a Fleet of Vehicles?
Fleet insurance premiums are costly, and deductibles can be quite a hassle. Commercial auto insurance can be the most expensive type of insurance for businesses. Fleet vehicles are unique in that they may need to be used more frequently than a typical car would in someone’s daily life.
Consequently, it can be challenging to gauge the pricing involved in commercial vehicle insurance compared to personal vehicles. This is where commercial auto insurance comes in; it is a type of service that provides peace of mind by covering vehicles driven for commercial purposes; this includes, but is not limited to, delivery trucks, taxis, and other kinds of company cars. Given the breadth of coverage needed to undertake goods and services, this kind of auto insurance usually has higher liability limits than those applied to personal vehicles and particular types of coverage suited to the diverse needs of commercial vehicles.
The price of commercial auto insurance is highly contingent. It could cost $110 a month per vehicle; this number, however, depends on factors such as the type of vehicle, the driving record of whoever is operating the car, and the amount of coverage chosen. However, this may also vary depending on the provider and the location of the business.
Business owners who use commercial vehicles want to be confident that their coverage is more than adequate so they don’t have to worry about potential liability for accidents while their employees use a motor vehicle. If a salesperson drives a company car to visit clients during the day and then uses it for personal errands in the evening, the business may still be responsible if the salesperson incurs bodily injury or property damage. This is why some companies, depending on the type of business, may opt for comprehensive commercial auto insurance to protect their vehicles from damages caused by a collision.
How do Fleet Management Companies Charge for Fleet Insurance?
FMCs (fleet management companies) typically charge a specific amount per car. The insurance cost of each vehicle is featured as a single line on an invoice. This is a common practice among FMCs because it provides their clients with a clear and concise breakdown of general pricing. On average, fleet owners can expect to pay $1,000 per year for a small fleet of commercial vehicles and $1,500 per year for larger companies. The cost of fleet insurance depends on several factors, such as:
- The number and type of vehicles in your fleet.
- The driving records and experience of your drivers.
- The location and usage of your vehicles.
- The level and type of coverage you need.
On average, fleet owners can expect to pay between $1,000 and $2,000 per vehicle per year for small to medium-sized fleet vehicles and between $2,000 and $3,000 per year for large fleet vehicles. However, these are just estimates, and the actual cost may vary depending on your situation.
You can reduce your fleet insurance costs by working with an FMC that offers comprehensive fleet management solutions. An FMC can help you:
- Negotiate better rates with insurance providers.
- Implement safety programs and driver training to lower your risk.
- Monitor and maintain your vehicles to prevent breakdowns and accidents.
- Track and optimize your fuel consumption and mileage.
- Manage your claims and repairs in case of an incident.
By outsourcing your fleet management to an FMC, you can focus on your core business while enjoying the benefits of lower insurance costs and improved efficiency.
Why Do You Need Insurance for a Fleet?
There are many reasons for a company to pay top dollar for liability insurance. When a motor vehicle endures physical damage, be it from accidents or vandalism, the costs are outrageous at the best of times. Commercial auto insurance usually includes liability coverage for medical payments for bodily injury and lesser expenses, like towing fees. When it comes to large groups of cars, the little things can quickly add up.
Fleet vehicles need to meet all kinds of business needs, and because of that, they are often on the road for extended periods. Delivery vans, semi-trucks, and various types of commercial trucks require some of the most airtight damage coverage. This is why truck insurance can be pretty costly. Given that these vehicles regularly navigate busy city streets, making frequent stops, the likelihood of an accident is much higher than that of other business vehicles. Increased risk puts insurance providers in a highly leveraged position; the more risk involved, the higher the auto insurance rates will rise.
The average cost of commercial auto insurance and employee motorist coverage can be significant. But, without insurance, the company would be responsible for covering the costs of any damages and medical expenses that result from an accident involving one of their vehicles. These costs can quickly add up and significantly impact the company’s bottom line. That’s why, if you’re a small business owner and feel you must go the fleet route, it’s worth it to pay for insurance claims with a higher deductible and an array of exclusions rather than to subject your employees and vehicles to the possibility of damage or bodily injury without commercial auto insurance coverage and some personal injury protection.
What’s the Alternative to Fleet Insurance?
One alternative to fleet insurance is for a company to create a pool of cash to cover accidents and general liability. This means setting aside funds to cover the costs of any accidents involving fleet vehicles. The company would create its own insurance fund with hopefully enough cash to cover any accidents that occur. But will that be enough? No one can know, and insurance agents relish this uncertainty, increasing industry demand.
There are too many contingencies to be self-reliant when property damage liability is at issue. To be sure, an out-of-pocket approach can take time for most businesses to implement. A single accident can cost hundreds of thousands or even millions of dollars, and most companies do not have the financial resources to cover such sizable expenses. Additionally, managing an insurance fund can be complex and time-consuming and may require additional staff to handle the extra workload. A commercial auto insurance plan is undoubtedly more accessible and cheaper than increasing the size of your team.
Is Car Insurance Cheaper on Commercial Vehicles? No.
In general, commercial auto insurance costs more than personal auto insurance. This is because commercial policies tend to have higher limits, which means more coverage in the event of an accident. A personal auto policy usually covers one person driving their car, but a commercial policy covers an entire business.
According to Insureon, commercial auto insurance costs an average of $147 monthly. 37% of Insureon small business customers pay less than $100 monthly for their policies. The cost is calculated based on several factors, including the number of vehicles, vehicle type, value, risk level, claims history, employee driving records, and policy deductible.
Car insurance is not cheaper for commercial vehicles. Commercial auto insurance generally costs more than personal auto insurance due to the higher coverage limits and the fact that it covers an entire business rather than just one person driving their own car.
Fleet Insurance vs. Vehicle Reimbursement Insurance
Fleet insurance and vehicle reimbursement insurance are two different approaches to managing the insurance needs of a company that operates a fleet of vehicles. On the one hand, fleet insurance provides coverage for all the cars in the fleet and is typically purchased by the company that owns the fleet. The company pays 100% of the insurance cost, providing comprehensive coverage for all fleet vehicles. This approach can be expensive in its breadth and thoroughness, especially for larger fleets comprising different types of cars.
On the other hand, vehicle reimbursements are programs where employees bring their cars to work and are reimbursed for their expenses. With this approach, the company shares the insurance risk and cost with its employees. The employee’s personal insurance policy would cover accidents during off-hours. At the same time, the company would provide coverage for accidents that occur while the employee uses their vehicle for work purposes. The advantage of vehicle reimbursement insurance is that it can be less expensive than fleet insurance because the company is not responsible for covering 100% of the insurance cost.
However, this approach can also be more complex to manage because it involves coordinating with multiple employees and their personal insurance policies. The best option in this case is to retain a vehicle reimbursement partner like Cardata to verify insurance for you.
Having discussed various aspects of fleet insurance and vehicle reimbursement insurance, the pros and cons of each approach and how they can impact a company’s insurance needs are significant. Given the high stakes, it’s clear that the decision between fleet insurance and vehicle reimbursement insurance will depend on a company’s specific needs and circumstances. For more information on fleet management and insurance, please visit Cardata’s Complete guide to Fleet.
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