Reducing Commercial Auto Insurance Costs: Strategies For Savings

Commercial auto insurance rates are influenced by several factors, including claims history, vehicle type, driver records, and deductibles. To lower these rates, businesses can implement strategies such as hiring and training good drivers, improving fleet safety, and reducing risk. Here are some key strategies to reduce commercial auto insurance costs:

- Hire good drivers: Employ drivers with clean licenses and conduct thorough background checks.

- Provide consistent training: Implement regular driver safety training programs to reduce crashes and improve safety.

- Monitor driver performance: Use technology like GPS tracking and telematics to track driver behaviour, speeding, and compliance with rules.

- Improve fleet safety: Maintain a young fleet with up-to-date security and safety features, and keep vehicles secure and well-maintained.

- Choose the right vehicles: Opt for less expensive vehicles as premium costs are higher for costly vehicles.

- Review insurance policies regularly: Assess your coverage needs, consider usage-based insurance, and explore payment options to find the best rates.

- Increase deductibles: Opting for a higher deductible can lead to significant savings on premium costs.

- Bundle insurance policies: Combining commercial auto insurance with other types of insurance, such as home or renters insurance, can result in discounted rates.

Improve your credit score

Improving your credit score is an effective way to lower your commercial auto insurance costs. Here are some detailed and direct steps to help you improve your credit score:

Make On-Time Payments

Making timely payments is crucial for improving your credit score. Your payment history accounts for 35% of your FICO® Score and is the most important factor in credit scoring. Late or missed payments can remain on your credit report for up to seven years and negatively impact your score. Set up autopay or calendar reminders to ensure you never miss a payment due date.

Pay Down Revolving Account Balances

The amount you owe makes up 30% of your FICO® Score. Aim to keep your credit utilisation rate, the percentage of available credit you're using, as low as possible. If you have high credit card balances, make paying them off a priority. Consider debt consolidation loans, balance transfer credit cards, or debt management plans to help reduce your credit card debt.

Don't Close Your Oldest Account

The length of your credit history accounts for 15% of your FICO® Score and is influenced by the age of your oldest account. Avoid closing your oldest credit card, even if you no longer use it regularly. Consider using it occasionally or putting a small recurring bill on autopay to keep it active.

Diversify the Types of Credit You Have

Your credit mix, or the variety of credit accounts you have, accounts for 10% of your FICO® Score. Lenders view a diverse credit mix as a positive indicator of your ability to handle different types of credit responsibly. Consider adding different types of credit, such as credit cards, auto loans, or mortgages, to your portfolio.

Limit New Credit Applications

Each time you apply for new credit, a hard inquiry is made on your credit report, which can knock a few points off your score. Only apply for new credit when necessary, and consider prequalification offers that use soft credit checks instead of hard inquiries.

Dispute Inaccurate Information on Your Credit Report

Inaccurate information on your credit report can significantly impact your credit score. Regularly review your credit reports from the three major credit bureaus (Equifax, Experian, and TransUnion) and dispute any errors or fraudulent activity you find. You're entitled to free weekly credit reports from each bureau through AnnualCreditReport.com.

Build a Strong Credit History

Having a long and positive credit history is beneficial for your credit score. This includes factors such as on-time payments, low credit utilisation, and a mix of different types of credit. Focus on maintaining a consistent and responsible credit history over time.

Monitor and train your drivers

Monitoring and training your drivers is a crucial aspect of lowering commercial auto insurance costs. Here are some detailed steps to help you achieve this:

Driver Selection:

Start by hiring drivers with clean licenses and good driving records. Conduct thorough background checks and request driving records to ensure they have no recent traffic violations, license suspensions, or revocations. Choose drivers with 1 point or fewer on their licenses. Avoid hiring anyone with charges related to driving under the influence, reckless driving, aggressive driving, or distracted driving, as these pose higher risks and can increase your premiums.

Training Programs:

Implement comprehensive driver safety training programs for all new hires. Provide ongoing and periodic training sessions for both new and seasoned employees to reinforce safe driving practices and procedures. Cover various topics, including safe driving techniques, accident prevention, and the steps to take in the event of an accident. Provide clear instructions on reporting procedures, emphasizing the importance of immediate reporting to supervisors.

Monitoring Performance:

Regularly monitor your drivers' performance to ensure they adhere to safe driving standards. Consider using GPS tracking and telematics systems to track vehicle locations, speeding, and other driving behaviors. Utilize monitoring services, such as SAMBA driver record monitoring, Driver's Alert, or Driving Dynamics, to automate the process and receive regular reports on any violations or issues.

Targeted Interventions:

Once you identify drivers who exhibit higher-risk behaviors or fall below the fleet's driving standards, implement targeted interventions. This can include management interventions, additional training courses, and disciplinary actions as necessary. Work with these drivers to improve their performance and reduce their risk profile.

Focus on Younger Drivers:

Pay particular attention to monitoring and training younger drivers, as they are more prone to dangerous driving behaviors. Ensure they receive the necessary guidance and confidence to make safe decisions behind the wheel.

Incentivize Safe Driving:

Implement incentive programs to encourage safe driving practices. Reward drivers for achieving certain milestones, such as a specific number of miles of incident-free driving. You can also bonus drivers with a share of premium savings if their safe driving records help reduce insurance costs.

By actively monitoring and training your drivers, you can not only improve their performance but also reduce the number of claims and incidents, which will positively impact your commercial auto insurance premiums.

Raise your deductible

Raising your deductible is one of the most effective ways to lower your commercial auto insurance premiums. A deductible is the amount you pay out of pocket before your insurance company starts paying. Typically, the higher the deductible, the lower your premium.

When considering raising your deductible, it's important to ensure that you have enough financial buffer to cover the higher deductible in the event of a claim. While a higher deductible can lead to significant savings on your premiums, it also means you will have higher out-of-pocket costs if you need to file a claim. For example, increasing your deductible from $200 to $500 could reduce your collision and comprehensive coverage costs by 15% to 30%. Moving to a $1,000 deductible can result in even greater savings of 40% or more.

It's worth noting that the savings from a higher deductible may not always be significant, especially if you have an expensive vehicle. Other factors such as your driving record, miles driven, location, and claims frequency also play a role in determining your insurance premium. Additionally, if the amount of damages is less than your deductible, you would need to cover the repair costs yourself.

Before making a decision, it's recommended to compare pricing from different insurance providers using several deductible options. This will help you find the right balance between premium savings and the potential costs of a higher deductible.

By raising your deductible, you can substantially lower your commercial auto insurance costs. However, it's important to carefully consider your financial situation and the potential risks involved before making this decision.

Bundle your insurance policies

Commercial auto insurance is a necessity for small-business owners who use their vehicles for work purposes, whether that's driving to meet clients, delivering goods, or transporting tools and supplies. It's also required if you have employees who drive their own vehicles for work.

If you're looking to lower your commercial auto insurance costs, one effective way is to bundle your insurance policies. Here are some detailed instructions on how to do this:

• Identify your insurance needs: Assess the different types of insurance you require for your business, such as commercial auto insurance, general liability insurance, commercial property insurance, or a business owner's policy. By combining multiple policies, you can often secure a bundling discount.
• Research insurance providers: Look for reputable insurance companies that offer the types of insurance you need. Consider well-known insurers like Geico, Progressive, State Farm, Allstate, and Liberty Mutual, who often provide bundling options. Compare their rates and discounts to find the best fit for your business.
• Contact insurance companies: Reach out to your chosen insurance providers and inquire about their bundling options and discounts. Ask about the specific policies you're interested in combining and the potential savings.
• Evaluate the offers: Compare the quotes and discounts offered by different insurance companies. Consider not only the cost but also the coverage, terms, and customer service provided.
• Choose the best bundle: Select the insurance company that offers the most comprehensive coverage, competitive rates, and additional benefits like online services or dedicated agents. Finalize the bundle that best suits your business needs and will result in the greatest cost savings.
• Purchase the bundled policies: Once you've made your decision, proceed to purchase the bundled insurance policies from your chosen provider. This will help streamline your insurance coverage while also lowering your commercial auto insurance costs.

By bundling your insurance policies, you can benefit from convenience, cost savings, and the peace of mind that comes with having comprehensive coverage for your business. Remember to regularly review and assess your insurance needs as your business evolves, ensuring that your policies remain up to date and provide adequate protection.

Compare quotes from multiple companies

Comparing quotes from multiple companies is one of the best ways to lower commercial auto insurance costs. Prices vary significantly from company to company, so it's worth shopping around to find the best deal. Here are some detailed steps to help you compare quotes and lower your insurance costs:

Get Multiple Quotes:

Start by obtaining quotes from at least three different insurance companies. You can do this by contacting companies directly, either by calling them or visiting their websites. Additionally, your state insurance department may provide comparisons of prices charged by major insurers.

Compare Rates and Coverage:

When comparing quotes, ensure that you are looking at the same type and amount of coverage across all companies. This includes liability coverage, collision coverage, and comprehensive coverage. By standardising the coverage, you can make an accurate comparison of the rates offered by each company.

Consider Company Reputation:

In addition to price, consider the reputation and financial stability of the insurance company. Check consumer magazines and third-party websites for customer feedback and ratings. This will help you assess the company's ability to pay out claims and provide good customer service.

Ask for Recommendations:

Don't rely solely on price when making your decision. Ask friends and relatives for their recommendations and experiences with different insurance companies. Contact your state insurance department to find out if they provide information on consumer complaints or satisfaction ratings for the companies you're considering.

Analyse Deductibles and Discounts:

Pay close attention to the deductibles and discounts offered by each company. A deductible is the amount you pay before your insurance policy kicks in. By choosing a higher deductible, you can often lower your overall costs. Additionally, look for companies that offer discounts for things like safe driving records, low mileage, or bundling multiple types of insurance.

Regularly Review and Compare:

Insurance rates can change over time, so it's important to review and compare quotes periodically. This is especially important if your circumstances change, such as moving to a new state, adding or removing drivers, or purchasing a new vehicle. By regularly comparing quotes, you can ensure that you're still getting the best deal and taking advantage of any new discounts or offers.

Frequently asked questions