If you're like most contractors, overhead is rocketing higher and higher. However, one operating expense that is going down is commercial business insurance.
In an effort to save a few bucks, it’s easy for contractors to say, “I’ll just keep my three trucks and trailers on my personal auto policy.” But that decision could come back to haunt you. And with historically lower commercial auto premiums, now might be the perfect time to make sure you have the coverage you need—so you can stop worrying if your personal policy will pay a claim when one occurs.
ARE YOU COVERED?
As a business owner, you need the same types of coverage for the vehicles you use in your business as you do for the vehicles you use in your personal life: liability, collision and comprehensive, personal injury, and coverage for uninsured motorists. However, while the coverage is similar, a personal policy differs greatly from a commercial one.
A personal auto policy, in some instances, will provide enough coverage for some businesses—but rarely (if ever) in the case of landscape contractors. Your clients expect you to have higher liability insurance limits when you transport people, equipment and materials.
Rick Bersnak is president of M.F.P. Insurance Agency in Lewis Center, OH. The company has long been involved in the “chemical applicator segment” of the landscape industry, but has recently begun to also work with lawn maintenance contractors. Bersnak says he’s surprised by the number of smaller operators (less than five trucks) who keep their vehicles on their personal policy.
In some instances, less-informed insurance agents tell contractors it’s OK to stay on a personal policy. “This is more prevalent with mowing contractors because they typically use smaller trucks for their crews,” Bersnak points out. In other instances, contractors simply tell their agent not to worry about it because they don’t want to deal with the higher premiums associated with a commercial policy.
However, commercial rates have come down quite a bit in the last few years because insurers have been posting higher underwriting profits, interest on their short-term investments has been going up and actual claim costs are down. “We’re in what’s referred to as a ‘soft market,’” Bersnak explains. “A lot of insurers are lowering rates to obtain more market share, and are reducing premiums to attract those businesses that shop their coverage regularly and are willing to switch for a lower price.”
LIMITATIONS OF A PERSONAL POLICY
Soft market or not, the limitations of a personal policy, coupled with the risks associated with the landscaping business, should be reason enough for you to secure the true commercial coverage your business needs.
The main reason to have a commercial policy is proper titling. Your business’s name, not your own, should be written on the face page of the policy. For instance, Taylor’s Lawn Care LLC, as opposed to Charlie Taylor. If the business is a sole proprietorship, it should be listed as Charlie Taylor dba Taylor’s Lawn Care.
Bersnak explains, “If there’s a claim against the company but the policy is for the individual, the claim could be denied. Plus, with a commercial policy, all pre-defined employees, partners and stockholders are also considered insured drivers 24/7 as long as they have permission to use the vehicle for whatever work the vehicle is classified to do.”
Trailer coverage can also be a tricky subject due to the gross vehicle weight (GVW) of the trailer and how it is titled, as liability coverage follows the power unit pulling it. More on this later.
LIMITATIONS OF GENERAL LIABILITY COVERAGE
In addition to a general resistance to commercial auto coverage, another thing Bersnak has noticed in the lawn maintenance arena is an almost frantic desire for general liability coverage—usually because a contractor’s customer requires it.