Taxi Insurance Buyer's Guide
Intro
We know that taxi owners and operators are some of the hardest working, busiest people on the planet. A job many others think is easy, is actually very difficult, stressful, and time consuming. And besides the day to day challenges any business owner faces, one of the most difficult parts about operating a taxicab or a fleet of taxicabs, is finding affordable insurance. Our experts have prepared this buyer's guide to help taxi owners and operators understand taxi insurance and make a decision about what insurance is right for them.
The topics we'll cover:
- Agents
- Carriers
- Coverage
Selecting a Taxi Insurance Agent
The first (and most important) step to finding insurance coverage for your company is selecting an insurance agent. Most reputable insurance carriers ("carrier" is another name for an insurance company) sell their insurance through agents, because agents are the "salesman" and serve as a friendly intermediary between the customer (you) and the carrier. Of course, we are grateful if you select IGS as your agent, but here are some general steps to follow when selecting an agent:
Make sure your agent is licensed in the state your company is in.
Most states have an internet database to research licensed agents. Try googling " [State Name] department of insurance" (for example: Texas Department of Insurance), or visit our List of All States' Department of Insurance with links to each state's website. Most state insurance websites have a link to search for an agent by name or a phone number to call. We recommend searching for the name of the person who is your agent and not the name of the agency. For instance, don't search for "Insurance Group Services", search for your agent's name, for instance: "Jack de la Cova". Most agents will be happy to provide you with their license number and a phone number or website to verify it on. Just ask.
All IGS agents are licensed in every state they operate in. We are happy to provide you with documentation of our licenses and ways to verify that this information is correct.
Find an agent with specific Taxi experience
Many agents will sell any type of insurance they think you are willing to buy. Don't be fooled by someone who says they are a "commercial insurance" specialist, or even a "commercial auto" specialist. Search for an agent who can prove he or she is an expert on taxicabs and has other active taxi accounts. Taxi insurance is a very unique product and most insurance agents do not have the experience needed and are not equipped to handle your account.
There are only a few taxi insurance specialists in the entire country and IGS is one of them. If you don't feel IGS is a good fit for you, please call us and we will recommend one of our competitors.
Ask for references
Any reputable insurance agent should be able to provide you with names or phone numbers of his or her existing customers. If you operate a fleet, ask the agent to provide you names and phone numbers of other customers with similar size fleets. If you are an owner operator, ask to speak with another owner operator in your area. This is by far the best way to make sure your agent is everything he or she claims to be. Be cautious of any agent not willing to provide references.
Selecting a Taxi Insurance Carrier / Company
Once you've found a reputable agent, your agent will likely provide you with a quote from one or more carriers. Many taxi operators think their agent is the insurance company. As mentioned above, the term insurance company typically is used to refer to the insurance carrier. Your agent only sells the product, the carrier is the company that receives your premiums and pays for any claims made against your policy. For this reason, you need to make sure that the carrier your agent is placing you with is capable of covering the cost of any claims made against you or your company. There are many factors that go into determining a carrier's ability to pay claims, and none of them are foolproof, but we recommend checking just a few details.
Check The Carrier's "Financial Strength Rating"
United States carriers are typically rated by an organization called A.M. Best. A.M. Best investigates carriers and assigns them a financial strength rating from A to S. This rating is an indication of the financial strength of the company. IGS generally recommends searching for a carrier with a B rating or better, but there may be times where a lower rated or unrated carrier will meet your needs. Unless a carrier has an E, F or S rating, they likely have enough reserves to pay claims.
Click here to read more about A.M. Best Co.'s ratings.
Some carriers choose to remain "unrated". This does not necessarily mean they are a bad company or unable to meet your needs, but make sure you ask your agent for advice before selecting an unrated carrier. You can also check your state's insurance department website to make sure the company is authorized to do business in your area.
Verify The Carrier is Approved by Your State
Check with your state's department of insurance to make sure the carrier is authorized to do business in the state. Many states also maintain a database on their website. You can also ask or search to see if there are any complaints registered. Visit our department of insurance list for all 50 states.
Admitted vs. Non-Admitted Carriers
Carriers authorized to do business in your state are classified into two types: Admitted and Non-Admitted. The basic difference is that Admitted carriers are required to follow laws specific to your state and non-admitted carriers are not. That doesn't mean they don't have to follow the law and conduct honest business practices. In fact, many non-admitted carriers in your state may be considered admitted somewhere else, or may be larger, more stable companies than their admitted competitors. Therefore, although Admitted vs. Non-Admitted should be considered in your selection process, IGS recommends placing more importance on the advice of your agent. Your agent should be able to explain the pros and cons based on your specific circumstances.
IGS represents both admitted and non-admitted carriers. We make carrier recommendations based on each client's specific circumstances.
Selecting Taxi Insurance Coverage
You've got an agent, they've recommended a carrier, and now you need to determine what coverage you need.
Taxi Liability Insurance
Taxi liability insurance typicaly provides coverage for you in the event you injure or harm someone else's person or property while operating your taxicab. Every state in the United States requires all motor vehicles to have some form of liability coverage. In some areas, there are special requirements for taxi cabs and other for-hire public vehicles. Certain counties, cities, municipalities, or facilities (airports, hotels, convention centers, etc.) also may impose their own requirements.
Typically, the requirements are expressed in the form of limits, for instance 100/300 or 100CSL. Your agent can explain in detail what these cryptic limits actually mean, but essentially they refer to the maximum amount your policy will pay in the event of a claim. When looking at "split limits" (such as 10/25, or 100/300) the first number refers to the maximum your policy will pay for any one person injured or damaged because of something you did, and the second number refers to the maximum your policy will pay per event (accident). Numbers are typically expressed as thousands so 10/25 would mean $10,000/$25,000. In other words, if you run a red light and have a collision with a car that has 3 people in it, the maximum any one of those people could collect from your insurance is $100,000 and the maximum the insurance company will pay out for all the people combined is $300,000. Combined Single Limits, "CSL", are similar, except that there is no specific limit for a single person, the policy simply pays a maximum per claim.
When you are operating a taxicab, your liability coverage will also provide coverage if the passengers in your taxi are injured or damaged during an accident. For this reason, you can understand that the costs of an accident can add up quickly if there are multiple people injured in your vehicle and the vehicle you are in a collision with.
Obviously, you need insurance that meets the requirements for the place(s) you operate. You may also want to consider getting coverage that exceeds the minimum requirements. Why? Because if a claim exceeds the value of your policy, the claimant (plaintiff in a lawsuit), can come after you or your business to collect additional damages. For instance, let's use the example above, except you have a 100CSL policy. Again, you have an at fault accident where you injure 3 people. Their total medical bills and damage to their car adds up to $300,000. But, your policy has a $100,000 limit. That means that if a court finds you liable for their damages, your insurance would pay $100,000 and you could be personally responsible for the remaining $200,000. For most taxi drivers, this means certain bankruptcy and likely the loss of your car and livelihood.
One important thing to note about liablity insurance is that it only pays others in the event your actions cause injury or damage to them. Liability coverage will not pay you for injuries or damage you sustain or your car sustains.
Physical Damage Insurance (PD) or "Full Coverage Taxi Insurance"
Many taxi operators express interest in "full coverage". We don't like the term "full coverage," because we feel it is misleading. Typically, when taxi operators are looking for "full coverage" what they actually mean is they are looking for insurance for their own vehicle in the event they are in an at-fault accident. We prefer to call this Physical Damage coverage, it is also referred to as Comprehensive or Collision coverage. Physical Damage pays for repairs or replacement to your vehicle if you are in an accident that is your fault, or in an accident with a person that is underinsured or does not have insurance. If you are in an accident that is the fault of the other vehicle(s) involved, your claim will likely be paid by their insurance.
So it sounds like this is something every taxi should have, right? We don't think so. The fact is, many taxicabs (if not most), are inexpensive, used cars like repurposed police Crown Victorias. It often simply does not make sense to pay hundreds or thousands of dollars a year to insure a car that is inexpensive to replace.
Ultimately, this is a decision you as a business owner must make for yourself. We recommend consulting with your insurance agent to get advice on whether or not Physical Damage coverage is right for you.
Conclusion
Clearly, selecting insurance for your taxicab operation is a complicated process. In our opinion, though, much of this can be simplified by selecting a well-qualified agent who has experience serving taxicabs in your area. Be aware, though, agents get paid a commission, typically beteween 5% to 20%, of your annual premium. Unfortunately, this means that the higher price you pay, the more your agent makes. For this reason, many agents do not have their client's best interest in mind. Again, checking references is a great way to eliminate your chances of getting scammed. Once you have an agent you trust, though, the rest of the process should be much easier. It never hurts to speak to multiple agents and get multiple quotes. Just keep in mind, cheaper may be attractive, but it's not always better. At the end of the day, the most important thing is that your business and your livelihood is protected.
This buyers guide was prepared by Insurance Group Services, Inc. for the exclusive use of taxi owners and operators. This buyers guide may not be reproduced in whole or in part without express written consent from Insurance Group Services, Inc. This guide was produced in good faith to educate consumers about taxi insurance. It is not intended to be all-inclusive. Consumers should consult with a licensed insurance agent prior to binding coverage.