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Thread: Insurance is killing me!

  1. #1
    Senior Member Limo Padawan
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    We have 5 cars and my insurance is $42,000 a year. I know you'll cry right along with me that this is outrageous. Let me lay a few facts down here. I have 5 cars. 3 are 18 - 22 passenger. 2 are 8 passenger.

    To comply with federal law the cars with 16+ are required to have 5 million coverage. Adding 4 million on top of the normal 1 million adds $4000 per year per car.

    The base rate to have the cars covered for damage and the 1 million the federal law requires comes out to about $22,000 per year. That's not to bad. What kills me is the extra $4,000 per car to get them to the 5 million coverage that is required for our cars that are technically busses because of how many passengers they hold.

    So here's the math. 22k plus 3 bus size cars at 4k each. That's 34k. So why am I saying that my insurance is 42k!?!

    My insurance company is requiring me to cover all of the cars up to 5 million total. So my two cars that only require 1 million in coverage I'm being forced to cover them at 5 million. They refuse to take this off!

    I'm really pissed off about this. We are being 100% legal and making every effort to do so even though my competition is not. Now this extra forced insurance is just adding insult to injury.

    The only option they offer me is for me to split my fleet into two companies. They tell me that if I open a second LLC, get a second EIN and split the billing on the cars to the small cars in one company and the big cars in the other I can then get out of paying this extra 4k per small car.

    Does anyone think this is bullshit or have any good suggestions?

    I do have quotes pending from other companies. But so far it looks like the others are going to treat this the same way.

    Suggestions?



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  2. #2
    Senior Member Salicete's Avatar
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    Tell me about it, I'm throwing down $6093.00 per year, per car for 1.5 million on 10 pax.

    (And that was last year's rates. I renew March 8th, and am still nervously awaiting my new quote, even though, knock wood; I have zero claims to date.)

    Slick idea you have there about splitting your company, though in the long run I don't know how much it would really save you.

    Can you imagine the growth potential for limo operators if we wern't getting gouged on commercial insurance? Sorry, Phil, you guys are as bad as big-oil.

    Perhaps some of the old-boys or MBAs will chime in.

  3. #3
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    Markee,

    The insurance company is not requiring you to carry $5mm limits, the federal government is doing so because you have your Federal Authority and an insurance Filing is in place. On policies that do not require Filings of financial responsibility you are able to (but normally you do not see this happen) carry different limits of liability.

    BTW, I have Susan working on your account, I'll let you let you know what we are finding.

    Sal, I agree with you; I pay for insurance as well you know, and do not get any type of discount.

  4. #4
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    Sounds like you guys need to call my girl Jen at Buxton Insurance, her rates killed everyone elses rates.

    Jennifer - Buxton - 937-836-4536

    Make sure you tell her that Chris from Premier Limousine sent you.

  5. #5
    Senior Member LIMOJESS's Avatar
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    I am awaiting my rates to for March 17 2008

    Markee I sent you the info for the broker I and many companies use in the PAcific Northwest.

    Check him out

  6. #6

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    Markee:

    There are ways around splitting the company up if your agent is good, although splitting is still an option you should look at and one that many people choose.

    Welcome to the world of big cars....err buses.
    Tony Franzetti
    Marriton Limousine, Austin, TX
    Austin Limousine service, Austin airport service, austin bus charters
    http://www.marritonlimo.com

  7. #7
    Senior Member Wade Randolph's Avatar
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    You can also find out what your state mandates for coverage and drop the Inter-state authority. You won't be able to do trips out of state but it may save you a ton of money. By the way we formed a new LLC and put our bus under that name so we did not have to get 5 million on our limos and sedans. This is done all the time.

  8. #8

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    im sorry if someone already said this but i think i get add when reading and i hate to finish lol. But what you need to do is open up a seperate corporation and put on the buses in that corp. Get a seperate insurance policy for that company for the 5 million and you can leave your other alone. Thats the way we have it. All of our suvs and buses are under a seperate company.

    Best Wishes,

  9. #9
    Senior Member Greenpala's Avatar
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    One suggestion to keep that Payments down:

    RAISE YOUR DEDUCTABLE.(compare the numbers, experiment with all figures even up to 10K per car). It will save a bit of money. You can risk it but save some money.

    I know some companies that done just that.
    --------------------------------

  10. #10
    Senior Member Limo Padawan
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    Thanks for all the good advise. We are splitting the company as that will only cost $1000 or so to setup a secondary LLC. Then I'm sure I'll have a little more cost with the accounting as well. Over ll this will save us some.

    I've also learned something with this. If we get any more of the very large SUVs we will configure them to be 14 passengers max unless we are always sold out on the 3 buses we have. That should accommodate most of the large groups and keep the rates lower.

    Another thing. Some of the other limo companies in town I'm betting are not running legal. Just looking online you can see some of them showing 20 passenger limos but they don't have bus plates. I can only assume this means they do not have the proper insurance coverage as well. Its frustrating to work so hard to be legal and have to compete with another company that has lower costs because they choose to ignore the laws.

    That may be the topic for another thread.



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  11. #11
    Senior Member Salicete's Avatar
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    Originally posted by Markee:
    Thanks for all the good advise. We are splitting the company as that will only cost $1000 or so to setup a secondary LLC. Then I'm sure I'll have a little more cost with the accounting as well. Over ll this will save us some.

    I've also learned something with this. If we get any more of the very large SUVs we will configure them to be 14 passengers max unless we are always sold out on the 3 buses we have. That should accommodate most of the large groups and keep the rates lower.

    Another thing. Some of the other limo companies in town I'm betting are not running legal. Just looking online you can see some of them showing 20 passenger limos but they don't have bus plates. I can only assume this means they do not have the proper insurance coverage as well. Its frustrating to work so hard to be legal and have to compete with another company that has lower costs because they choose to ignore the laws.

    That may be the topic for another thread.
    It is the same everywhere.

    On my continuum of limo-related gripes, illegals run a close second to artificially high insurance rates.

    Actually, in the long run, the illegals may actually cost me more money. You know the calls where someone says, "well, the other company said they could rent me a 10 passenger limo for $55 an hour, can't you meet or beat that?" No overhead having beat up limo driving bastards...

    No enforcement and people just want low-ball prices. Good luck with the illegals in your area; my guess is nothing will get done until there is a tragedy involving an unlicensed-underinsured carrier.

  12. #12
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    I am in the commercial insurance business. I discovered this forum because I want to find a small limo business.

    Heres my advice. Tell your agent you want two policies, each written with the "symbol 7" which would include only the scheduled vehicles. I would assume your current policy is written with the "symbol 1", which would include all owned vehicles. By doing this, you can write one policy with the higher limits and the other with the lower.

  13. #13
    Senior Member LIMOJESS's Avatar
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    Originally posted by Markee:
    Thanks for all the good advise. We are splitting the company as that will only cost $1000 or so to setup a secondary LLC. Then I'm sure I'll have a little more cost with the accounting as well. Over ll this will save us some.

    I've also learned something with this. If we get any more of the very large SUVs we will configure them to be 14 passengers max unless we are always sold out on the 3 buses we have. That should accommodate most of the large groups and keep the rates lower.

    Another thing. Some of the other limo companies in town I'm betting are not running legal. Just looking online you can see some of them showing 20 passenger limos but they don't have bus plates. I can only assume this means they do not have the proper insurance coverage as well. Its frustrating to work so hard to be legal and have to compete with another company that has lower costs because they choose to ignore the laws.

    That may be the topic for another thread.
    Markee

    Some in the Pacific northwest are running 20 Pass limos without a CDL. I met a limo owner who just bought a 22 Pass Excursion and does not know anything about the CDL and let alone a bus license.

    Things in the Northwest are so laid back and no one to ckeck on them. The only place that they check is at the Seatac Airport. But who brings a 20 Pass limo to the airport.

    Now that prom season is coming, I am going to keep a digital camera and take a picture of the license plate and car and submit it to the person in charge.

  14. #14
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    Originally posted by Lee S:
    I am in the commercial insurance business. I discovered this forum because I want to find a small limo business.

    Heres my advice. Tell your agent you want two policies, each written with the "symbol 7" which would include only the scheduled vehicles. I would assume your current policy is written with the "symbol 1", which would include all owned vehicles. By doing this, you can write one policy with the higher limits and the other with the lower.

    Very few commercial auto for-hire policies are written on a symbol 1; I only have a hand-full and for very specific reasons. You will typically find that the average policy is written with symbols 7 (scheduled autos), 8 (Hired-auto), 9 (non-owned auto)

    Also, if an operation has federal authority, you cannot have more than one primary policy because of the insurance filings. If one vehicle requires the carrier to provide $5mm limits, then every vehicle scheduled on the policy must be covered for that amount. This is due to federal regulations, not the insurance companies. When an operation has two entities (they must each have their own FEIN) and they federal operating authority for both, then, you will be able to have two insurance policies. There are some ins companies that will not write two policies for operations that share the same physical address though.

    This holds true for regulated states that also require insurance filings for financial responsibility.

    In addition to rule and regs, the USDOT goes by the original manufacturers seating capacity. When a coach builder cuts a vehicle, there is a build sheet that describes the seating capacity, and because it has been remanufactured, they are considered the original manufacturer. Regardless of what is done to the unit after you take delivery of it (i.e., removing seats, blocking off areas, not allowing more than x# of people on board) the seating capacity is still what it was originally designed and built for (something to consider when you buy a 20pax bus, and convert it into a 14pax limo coach).

    Something else to take into consideration, when an operation is new, obtaining $5mm limits is difficult and also costly. Splitting a new company up into two different operating entities can some times be negligible in terms of savings. There are minimum premiums associated with many excess polices, and when you have multiple units on the policy, the minimum premium can be distributed over the entire fleet. Lets say you have six units, two of which require $5mm and the rest $1.5mm. If the min premium is $5-7,000 (not an exact figure the min premium differs by each company) this premium may be the total premium for the excess policy for all six units. Since it is a minimum, if you remove four units (put them into another entity insured for $1.5mm) and insure only two for $5mm, you will still pay the full minimum premium.

    You must also take steps to transfer ownership of the units into the new entity, if there are loans/leases on the vehicles, you may have to reapply for said obligations, and most likely pay the taxes again. You can sometimes lease the unit from the original entity to the newly formed entity; before this occurs, make sure that the insurance company, the banks, and any other person/groups involved is going to allow this.

    Another note, for companies that are carrying $1.5mm limits with plans to add larger units. In the future, if you plan on adding larger units to the fleet that are going to incresae the required limits to $5mm, it will be best to increase the limits of the existing company from $1.5mm to $5mm because there you already have an insurance history to base the premiums off of. It is more cost effective to pay premiums on a $1.5mm new-start policy than a $5mm policy.

  15. #15
    Senior Member Limo Padawan
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    Phil, Thanks for the detailed reply. That gives me a much better understanding on what happens on your end.



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