Every day, at least one of our public livery clients asks us, “How much insurance do I need?” To provide a meaningful answer, we lead them through the following:
State DMV – Minimum Liability Limits
Each state sets liability insurance minimums, depending upon the type of business you operate (taxi, limo, NEMT, shuttle, etc.) and the seating capacity of your vehicles. For example, an NEMT vehicle in Virginia that seats seven or more people, including the driver, is required to carry $1,500,000 in liability coverage. However, coverage requirements vary widely from state to state, so talk to your state DMV regarding your business operations and what limits are required.
State Filings
Though not a direct affect to your insurance limits, state filings are an insurance reporting requirement. And since you will already be speaking with your DMV regarding your insurance limits, go ahead and clarify what filings they require. If filings are required, you need to inform your insurance carrier before coverage goes into effect. They will not know unless you tell them.
What Are Filings?
Since your business transports the public for a fee, the state ensures you maintain proper insurance coverage at all times. They want to be informed of certain policy information such as your limits and when your coverage expires. They also want to know should your coverage ever be cancelled or lapse. They accomplish this by requiring your insurance carrier to file specific reports (hence the name). The most common filings are the Form E or Form F.
Local Authorities – Minimum Liability Limits
In addition to the state DMV, other state and local authorities may levy insurance limit requirements. For example, in California, many transportation providers need to register with the Public Utilities Commission, obtain a PUC number, and comply with their insurance requirements. In Washington DC, the Washington Metropolitan Area Transit Commission (WMATC) manages their own requirements. Certain counties, cities, and even towns also levy them.
Contract – Minimum Liability Limits
If you are contracted with a transportation manager (Logisticare, Southeastrans, etc.), or if you have direct private contracts such as with an airport, retirement home, or municipality, those contracts will likely state their own minimum insurance limits. At times, these limits may be higher than the state limits. Although not a statutory requirement, if you enter into such an agreement, you are bound to carry the stated levels of coverage. In addition, many of these organizations require you add them as an additional insured.
How Much Insurance Do I Need?
As discussed above, insurance limits may be imposed by the state DMV, county, city, or by contract. You must carry at least those limits, but that does not guarantee sufficient coverage for claims that occur against your business. To determine how much insurance you need, you should consider A) all perils involved and B) what you have at risk.
Perils
Public transport is a risky business since auto accidents are a regular occurrence upon our roads. Consider it a question of when, not if an accident will happen. Keep in mind that you are transporting people. Vehicles can be fixed relatively inexpensively, but people cannot. The most expensive claims always involve injured passengers.
Consider your business’s worst-case scenario. Although such accidents do not arise frequently, they can still occur. Should your driver cause an accident with a high occupancy vehicle, a school bus for example, large claims become a real possibility.
At Risk
As your business grows, you have more assets and investment at risk. Thus, a new business may not need, or be able to afford, as much coverage as one well established. If a disastrous claim occurs and insurance limits not be adequate, a new business may decide to simply sell their vehicles and close up. However, that outcome becomes less desirable as a business grows. Thus, more coverage is necessary.
Conclusion
We recommend starting with at least $1,000,000 in liability coverage, no matter if your state requires less. As your business grows, we recommend the coverage be increased to an appropriate level that considers the risk involved with your operations, and your investment. Umbrella liability limits of $5,000,000 and greater are common for larger businesses.
Questions?
- Contact us at 888-436-4584
- NEMT Insurance
- Taxi Insurance
- Limo Insurance
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