Due to the emergence of transportation companies like Uber or Lyft a lot of attention is being paid lately to auto insurance coverage for taxis. Why does it cost six to twelve times more for auto liability insurance coverage for a taxi than it does for a private-passenger auto insurance in the same city? To understand why we need to define “livery”.
A “livery” is a vehicle for hire in which the person doing the hiring is NOT the driver. In some jurisdictions there are legal limits to the number of passengers, usually somewhere between seven and nine. The name seems to go back to horse drawn cabs that were dispatched from a “livery” stable. A cab or a limousine could be referred to as a livery, but a coach or bus would not. Due to the inherent good faith expressed by those who hire a “livery” cabs and limousines are held by the law to a hire standard of care.
Further, a typical taxicab travels 70,000 miles a year, compared to the average of 10,000 miles a year driven by the average owner of a private passenger car.
Factors in Taxi Insurance Premium
A taxi insurance premium will vary depending on the value of your cab. The more valuable your cab is, the more money it would take to replace it if you have a bad accident, fire, or theft.
A variety of discounts are available. Drivers who are married, own a home or display other signs of stability will be charged lower premiums.
Many companies will charge more for drivers who are young and/or inexperienced. Those drivers who don’t know the streets and highways have a much higher degree of risk of having an accident. One of largest problems is the distraction caused by the dispatcher. Drivers should be parked when communicating or writing instructions. However, time is money and in fact many drivers are multi-tasking.
Rates vary for how your cab is used. Those driving limousines that specialize in mobile parties can expect to pay for the increased exposure.
As a rule fleets will pay less per cab than individual cabs.
Drivers who have losses or violations will pay more for insurance, and in some cases will not be able to find an insurance company who will provide coverage for them.
Cabs in New York City are much more expensive to insure than those in smaller towns. This reflects theft frequency and congested traffic.
A driver’s credit rating might come into play. Insurance companies have noted that those who handle their finances responsibly will often drive responsibly. Insurance companies will take apart your credit numbers to get those factors that most clearly indicate predictable good driving behavior.
Over the next few years, it is almost certain that cab insurance companies will use electronic tools within cabs to record actual miles driven, speed, time of day, and other factors that can be linked to probable loss. Usage-based premiums will reward some and punish others. Those drivers prone to sudden starts and stops will pay more.
Insurance companies who insure cabs and limos have dissimilar views of what factors are most important in selecting risk. Because of that premiums for similar risks will vary greatly from company to company. An independent agent can help you shop the market for the best rate for you.
Recommended Limit of Taxi Cab Liability
The limit of liability you need to carry will depend upon the regulatory body who governs your area. In many states coverage requirements are set by cities. Be aware that meeting those requirements does NOT limit what can be awarded to a claimant in the event of a bad accident. Be sure that you carry limits that adequately protect your assets, both current and future earnings.
Most jurisdictions do not require that you carry physical damage (collision and other than collision . . . which is fire theft, hail, and other perils). If you have a loss payee they will require that you carry physical damage. A $1,000 deductible is not uncommon.
You may be required to carry PIP coverage and uninsured / underinsured motorist coverage. You should discuss these with your agent so as to carry adequate limits.
If you’re an independent contractor you may want to consider workers compensation insurance.
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Enhanced Insurance is not written by attorneys. If you’re looking for legal advice, you need to contact a lawyer. Further, insurance practices and forms change constantly and are varied from state to state. For definitive answers in your area, contact a local agent.
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