One sad fact becomes obvious to all start-ups. No matter what you want to help get your business up and running, it never seems to come cheap. In part, this is because you don’t know where to find the discounts. But, more often than not, it’s a problem caused by your past experience. Take auto insurance as an example. You may have owned a vehicle of some kind for several years and, with multiple quotes available online, you can see what the average rates are for the standard makes and models. Except, these are the rates for non-commercial use.
The problem starts because of the number of people insured. The majority of drivers do not use their vehicles for commercial purposes so they make a big group when it comes to dividing up the expected cost of loss. With a smaller number of commercial drivers, you have higher costs divided among a small number of insureds.
OK, so why are there higher costs? As a careful owner-driver, you remember the last premium hike and drive more carefully to get through the next couple of years without another accident. But if you sit in a vehicle insured by your employer, there’s no incentive for you to drive carefully. Any premium hikes will not be passed on to you. This is a big management problem. You may rely on a fleet of vehicles for your business. If there are too many off the road being repaired, you cannot make deliveries or meet your other commitments. That means your insurance cover must include not just all the liability costs to repair the damage your negligent drivers cause, but all the costs of maintenance and repair, and for hiring replacement vehicles while yours are off the road. In a perfect world, all your fleet drivers would have excellent driving records and never pick up tickets while driving for you. So how are you going to encourage them to keep their perfect records for you?
Now let’s think about what you are carrying around in those vehicles. Are these goods likely to catch fire, leak dangerous chemicals or cause any other injuries if there’s an accident? This is the time to sit down with your insurer and give full details of your business use. This is not just to get all your operational uses covered, but also to avoid any unnecessary cover that might be included in the standard package. Insurers depend on you to make a full disclosure of the risks. If your reputation for truthfulness is not good, the premiums are likely to be set higher. Affordable small business insurance rates are earned by running a good business in a transparent way. Insurance companies have detailed models for all the major business types and they will quickly spot anything “unusual” about your business. This puts you in the catch-up position, having to explain and justify. Although it may be more expensive when you start, you will earn lower small business insurance rates over the years by running an efficient operation with a only small number of claims.