Whether you own a single unit or small fleet, the considerations for proper insurance coverage are the same.
That being said, make sure you go into the situation prepared and emerge victorious with the best pricing and necessary coverages possible. In this article, I will discuss all of the areas that you will want to be aware of and consider when purchasing.
1. Not Choosing a Reasonable Deductible
Consider the advantages of higher deductibles for Physical damage. Generally, there is not a significant advantage to choosing a higher deductible for Comprehensive, but in many cases a $2,500 deductible on Collision might make sense. A good rule of thumb is the likelihood of having a collision within 3 years. If it is not likely considering your history, then the higher deductible might be a smart move. Most of time after 3 years with the coverage and no Collision claims, you are already ahead of the financial game.
2. Not Considering Different Payment Options
Not considering different payment plans can be costly. Whether you want to remain liquid or stay within budget, it is important to consider different plans to make sure you pick the one that best suits your needs. If a large up-front cost is feasible for you, you can enjoy a substantial discount, well worth the use of your money.
3. Trying to insure for Replacement Cost
I have had to counsel several Tow Operators as to the amount they will receive in the event of a total loss of a vehicle. Many operators feel that if they assign a value that equals or comes close to replacement value, that they will recover up to that amount. Unfortunately, this is not the case.
Today, Physical Damage coverages are written on either a “Stated Amount” or “Actual Cash Value” (ACV) basis, however of late we normally see Stated Amount from the carriers.
It is important to fully understand the difference between these two. Another policy form that is no longer available is “Agreed Value” which comes the closest to Replacement Cost, but unfortunately is not being offered by any of the carriers.
Stated Amount and Actual Cash Value are related in that both methods of settlement take into consideration the Actual Cash Value of the vehicle at the time of loss.
The difference is that Stated Amount limits the recovery to that amount. Having said that, you are best served by skillfully assigning what you believe is the closest to the Actual Cash Value in the market at the time of purchasing your policy, to avoid overpaying for an amount of coverage that you will never realize.
A claims adjuster will be looking at a “blue book” value to settle the claim, but with consideration to the entire value including all necessary attachments and equipment. Physical Damage coverage (Comprehensive and Collision) are expensive parts of the Tow Truck policy, and you will want to be skillful in assigning the value to each piece of equipment when discussing this with your agent.
6. Not Covering All Bases
Be sure that you have all the necessary coverages for your operation-
Automobile Liability, normally $1,000,000
On Hook, determined by the highest value of any vehicle that you may tow. This will vary according to the areas that you operate in
Garage keepers Liability, enough to cover the maximum value of cars that are stored in your impound lot is a good rule of thumb
Comprehensive and Collision according to the Actual Cash Value of your equipment
General Liability (see my article describing this coverage and the need for it)
Commercial Property if your business owns any property, shop and office, satellite buildings at another location
What Are the Next Steps?
To get set up properly go to our Tow Truck information page and review what we offer, and what our plans cover. Give Marc Schillinger a call at 561-448-6115, anytime, and we’ll have a discussion, free of charge. Make the smart decision and take steps to protect your business today.