Who needs fleet insurance, what it covers , how to make sure the right people are on the policy and what it doesn’t cover.

Your fleet doesn’t have to be this big.

You may need fleet insurance even if your “fleet” consists of only one vehicle. More than anything insurance companies place emphasis on how a vehicle is used. Insuring the wrong vehicle for the wrong purpose can result in claim denial.

If you use your car for personal use (which includes driving to and from work, but not use for work-related activities), then you need a standard personal auto insurance policy.

Insure Your Fleet Right

Vehicles specifically used for work purposes should be placed on fleet or commercial auto insurance policies. The vehicle doesn’t have to be a large truck, a service van or any other vehicle specifically designed for commercial use.

It can theoretically be any vehicle. Indeed since he or she uses it to travel to and from appointments, chances are your insurance agent’s own vehicle is covered by a commercial auto policy.

Fleet insurance legal requirements are for the most part the same as for personal auto insurance, however there are exceptions. For example, some states require significantly higher liability limits on taxicabs than on other vehicles. There may also be different rules for commercial concerns that take their vehicles across state lines. Consult with your insurance agent for more information.

Liability insurance on trailers isn’t required because trailers aren’t self-propelling. Instead, the liability coverage on the vehicle towing the trailer typically covers the trailer too. However, trailers must have any comprehensive and collision coverage written separately from other vehicles. In a commercial setting trailers are typically insured on a stated value basis. This is particularly true of older trailers or more simply constructed trailers such as flatbeds.

List Your Drivers in the Fleet

Personal auto insurance policies list drivers, but these policies commonly extend coverage to other occasional drivers without you having to think about it. This isn’t the case with fleet insurance policies. If a driver isn’t listed, there’s no coverage in a claim. Therefore it’s extremely important to make sure your fleet driver lists are kept up-to-date.

On commercial fleet auto insurance policies drivers are typically either accepted or rejected without a whole lot of underwriting. While exact rules vary from company to company for the most part your drivers need to be over 25, properly licensed to drive the vehicle in question and have decent driving records. A ticket or two is usually not a problem, but a particularly poor driving record can disqualify a driver.

Most commercial insurance companies will not accept a driver under 25 on a fleet policy, regardless of record. Drivers over 74 may be categorically rejected as well.

The Vehicle is Only Part of Fleet Coverage

Remember fleet auto insurance only covers vehicles. It generally does not cover tools, equipment, aftermarket accessories or anything else not factory installed and permanently bolted down. Your valuable tools and equipment need to be covered separately from perils such as theft and vandalism.

This is accomplished by another line of commercial property or casualty insurance called “inland marine” insurance. Like trailers, tools and equipment are typically on a stated value basis. In addition to stated value, underwriters will typically want information such as a short description, year of manufacture and any serial numbers to cover tools and equipment.

Fleet auto insurance also does not cover damages caused by you or your employees. Instead, this is addressed by commercial general liability or GL insurance. While not all commercial concerns need GL, many contractors and clients, particularly in construction-related fields, require proof of a GL policy called a “binder” before they will hire you or your company. Your insurance agent can help you find the correct coverages you need to protect yourself on the job.

What is property damage, what property damage coverage does, it’s limits, and differences from full coverage.

I hope this guy had property damage coverage for his old beater.

Property damage is a fact of life. It’s one of the main reasons insurance exists. But property damage from an insurance company’s point of view might be different than how you understand it.

Insurers are interested in paying back policyholders back for property damage. It’s also called “indemnification”.

Indemnification is the replacement of items lost in a claim in such a manner that the insured neither gains nor loses in the process. Indemnification can come in the form of repairs, a payment equal to the value of the lost item at the time of the claim, or in some cases an actual replacement of the item.

In auto insurance, property damage coverage is inextricably linked to indemnification. As part of auto liability coverage, property damage shouldn’t be confused with full coverage collision and comprehensive insurance coverage. While these coverages ultimately do much the same thing, they are different and apply in different scenarios.

What Property Damage Coverage Does

Property damage auto insurance coverage covers you in an accident if you’re found at fault. In essence, it’s the coverage that fixes the other guy’s car (unless you’re in a no fault state, in which case it helps fix your car).

Property damage coverage can also apply to other tangible assets that could be damaged or destroyed in an auto accident, such as trailers, buildings, road signs or other items.

Yes, if you take out a speed limit sign in an accident, the government entity which owns it could bill you for it.

Property Damage Limits

In a traditional split limit liability insurance setup, property damage is represented by the third number. For example, if you carry a typical state minimum of 25/50/15 on your auto liability insurance, that means you have a maximum of $15,000 in property damage coverage for any single claim.

Given that most new cars are valued well in excess of $15,000 these days, it’s not hard to see how that can pose a problem in anything other than a minor accident. Many insurance professionals recommend carrying property damage coverage of at least $50,000.

If you are able to purchase an umbrella policy via your homeowner’s policy or other means, this can often apply to your auto insurance coverage as well. Umbrella policies provide liability coverage over and above the underlying policy limits.

If you have a $1 million umbrella with your auto insurance, in essence add $1 million to your policy liability limits. Although umbrella policies are relatively inexpensive, often times they need to be applied to underlying policies written by the same company. In addition, these policies need to carry certain underlying limits to qualify. Consult with your agent for more information.

Differences from Full Coverage

In a traditional tort auto insurance state, property damage coverage by definition doesn’t fix your car. Instead it provides for repairs to the other party’s vehicle. Full coverage protection fixes yours. Property damage coverage can help to fix your car in a no fault state, but if you’re found at fault in an accident you may be subject to a premium upcharge at renewal.

Also unlike full coverage, property damage coverage never carries a deductible. The insurance company pays for repairs up to the stated limit amount.

What is a renewal, what happens at a renewal, what doesn’t have to happen at renewal, and canceling coverage before renewal.

Change is good, renewals are good!

No auto insurance policy is forever. All must be renewed at a regular interval, usually every six months or one year.

Renewals are important times for any insurance policy. It is important to understand what can only be done at renewal as well as what can be done with a policy at any time.

What Must Happen at Renewal

As with other lines of insurance, what companies can and cannot do with auto insurance policies is determined by the renewal date. For example, by law a company cannot change auto insurance rates based on accidents, tickets or claims until the renewal date.

This fact can give you some time to shop for a new policy if you expect a significant rate increase without fear of being dinged before the appointed time. Conversely, it also means the company cannot reduce your rates if an accident or claim drops off until the renewal date.

A good insurance agent will review your policy with you at or around the policy renewal date. This is a good time for both of you to see if the coverages on your policy still make sense, or if changes need to be made.

What Doesn’t Have To Happen at Renewal

Many people are under the impression they can’t cancel an auto insurance policy or make changes until policy renewal. Some agents tacitly encourage this perception.

The fact is: it’s just not true.

As the policy owner you have the right to cancel a policy, make changes to a policy, add or drop coverages at any time for any reason, or for no reason at all.

In addition, you can also make changes to a personal or commercial auto insurance policy as many times as you like. Indeed, it’s even expected that multiple changes will be made to commercial auto insurance policies during a policy term.

If you cancel a policy or make a change that reduces the overall premium, the insurance company is required to credit your account accordingly to the date the change was made. If you make a change that raises your premium, such as decreasing a deductible, the company will raise your rate accordingly.

Remember, rate increases due to driver ratings can only be executed at renewal, but rate increases due to increases in coverage must occur immediately.

Canceling Your Policy Before Renewal

While you have every right to cancel a policy mid-term (by law, a company must honor such a request), it is important to understand the possible ramifications of doing so. Obviously, canceling an insurance policy means one must replace it in order to continue driving legally.

Also, while changing insurance companies mid-term may save you money in the long run, remember the new company will probably charge your down payment which is more than the normal premium. This means you could come out behind in the short run. While you will probably get a premium refund from your old company by canceling mid-term as most companies have you pay your premium approximately six weeks ahead, it won’t be refunded right away.

In order to ensure there are no coverage gaps or unnecessary double coverages, make sure your new insurance is written effective the same day your old insurance is canceled. Bear all these things in mind when canceling mid-term.

What is car insurance premium, why it’s different for policyholders, and what it pays for.

Now you have the keys, you'll have to pay for insurance.

Perhaps no insurance term creates more interest or controversy than “premium.” Premium is the money you pay to your insurance company for your car insurance policy.

Everyone knows they have to pay it. Everyone wants to save as much as possible on premium. But what does premium do?

Premiums Are Different for Policyholders

Strictly speaking, insurance is communally financed by premiums paid by all policyholders. This financing in turn pays for claims. How much a particular policyholder pays is based largely on risk. Policyholders deemed riskier pay more than those who are considered less risky. There’s nothing particularly earth-shattering about any of that.

Premiums are determined by specialized insurance company employees called actuaries. Actuaries are experts in statistics who determine premium rates based on factors such as risk exposure, claims history and business concerns. These rates are then approved by the company’s board of directors.

Premiums Go To Insurer’s Reserves

By far the largest portion of your premium, well over 60 percent of it in most cases, goes towards a company’s fund to pay out claims. Since the primary function of an insurance company is to pay legitimate claims, this is taken very seriously.

Insurance companies are required by law to keep a certain amount of cash on hand at all time for claims. This amount is based on company size and amount of policies in force, but it is invariably quite substantial.

If a company drops below its acceptable cash on hand, it can face increasing sanctions from the state, up to and including receivership and dissolution. Accordingly most companies keep cash reserves well in excess of what the state tells them they need.

Third party rating companies such as A. M. Best annually rate insurance companies on their financial strength. Claims-paying ability is preeminent in the factors they look at. These ratings, such as A++ and A+ for companies in outstanding financial shape, are made available to the general public. Most insurance companies are quite proud of these ratings and use them in their marketing campaigns.

Commissions Paid By Premiums

Another significant cost of insurance is agent commission. Agents typically work for insurance companies as independent contractors. Their compensation from the insurance company is in many cases is based solely on commission.

Agent commissions for most auto insurance and other property and casualty lines usually range from six to 12 percent of total premium. The exact amount is determined by several factors, including product sold, whether the policy is new business or a renewal, and perhaps the agent’s past sales performance.

Some companies cut out the agent and sell directly to the consumer via the Internet or other means. While this can result in some cost savings to the consumer, that’s not necessarily the case.

Many companies have figured out that cutting out the middleman leads to increased profits for them, as consumers are used to paying premium prices that take agent commissions into consideration. The result can be a lack of service, as the policyholder has no agent to turn to in these situations.

Premiums Pay Other Costs

Most of the rest of your premium dollar goes towards company operating costs such as salaries for home office staff, building maintenance, and other factors. Premiums are regulated by state governments, but states give companies enough leeway to allow them compete in a free market.

As a result companies with similar financial strength ratings can offer very different premiums for similar coverages. You will pay premiums if you have insurance. That’s why it pays to shop around.

What is a car insurance policy, standard definitions in your policy, including exclusions and endorsements.

What you should know about your car insurance policy.

An auto insurance policy is detailed in a lengthy and confusing booklet given to you when your policy is issued.

Unlike the declarations which are specifically tailored to you, the policy invariably consists of boilerplate language which is applies to everyone who holds your particular insurance product.

In addition, policy language must be approved by a state insurance commission. Because of this and other factors, the basics don’t vary much from company to company, although there are certainly differences.

If you read and understand your policy, you’ll not only understand your own insurance, but in many respects you’ll be well on your way to passing your state’s insurance licensing exam for property and casualty lines. That is, if you want to.

If not, that’s OK. We understand.

Definitions in Your Policy

In order to truly understand auto insurance policy language it is important to define several terms used in the insurance industry. Some of these terms are fairly self-explanatory, while others are not necessarily discernible by context alone.

Regardless of what line of insurance you’re looking at, all insurance claims must be tied to at least one proximate cause. This specific cause is known as a peril.

Examples of perils that commonly apply to auto insurance policies include vehicular collision, theft and vandalism. Perils may be covered on a stated “basic form” or “broad form” basis, meaning that companies will only pay claims on perils specifically mentioned in the policy.

Also, they may be covered on a “special form” basis, meaning that all possible perils are covered except those that are specifically excluded in the policy language. Naturally, special form is the best available coverage.

Exclusions & Endorsements In Your Policy

An exclusion is a peril that is specifically not covered by an insurance policy. Examples of common exclusions in auto insurance policies include general maintenance, depreciation and intentional damage. Sadly insurance companies won’t cover you if you blow up your car on purpose, even if it’s ugly.

Amendments to the standard policy language are known in the insurance industry as endorsements. Endorsements can be policy options or blanket changes to the policy language initiated by the company. Examples of endorsements include accidental death and dismemberment coverage and so-called “accident forgiveness” options.

Changes to Your Policy

As with base insurance rates, insurance companies can only make changes to policy language at renewal. In addition many changes to policy language must be approved by your state’s insurance commission beforehand.

In other words wide-reaching policy changes are not particularly common. Even so, it’s always a good idea to periodically review your insurance with your agent. A good agent will alert you to any upcoming changes.