When you buy insurance for your car in Canada, you’re usually paying to cover your personal use of the vehicle, whether it’s the car you use every day to drive to and from work, or perhaps a second vehicle that’s only driven occasionally. If you decide overnight you want to become a cab driver – not a far-fetched scenario with ride-sharing companies like Uber now in business – your personal coverage is no longer applicable, since the nature of risk changes. Insurance companies are all about risk and making sure it’s managed effectively.
Conditions are different for vehicles used to make money, such as cabs and limos. First and perhaps most important is the fact the vehicle will be on the road and in traffic more often. This significantly increases the chances a vehicle has for becoming involved in an insurance claim. When those chances go up, so do insurance premiums.
When a car is operating in the personal transportation business, personal injury coverage and liability becomes a factor as well. With an ever-changing cast of characters rotating through the vehicle, the potential settlement costs increase, compared with, for example, a truck used by a company driver alone. Just as your personal circumstances affect private car insurance, so do business uses affect commercial insurance rates.
Commercial Insurance Offerings
In Canada, individual insurance companies have the choice of what types of policies they choose to offer. There’s no guarantee that the insurer you want to deal with will cover taxi or limousine use. Even when they do, there may be requirements for fleet size and type of use. For example, an owner-operator cab that isn’t used by other drivers is easier to assess for risk than one that’s driven around the clock by a series of drivers. An insurer may offer coverage in one case, but not the other.
Location is another factor. Taxi insurance has been an ongoing issue in Toronto, for example. Few insurance companies offer commercial coverage for cabs in Toronto, even for fleets, so the challenge is daunting. Many cab owners are forced to find coverage through the Facility Association, the last resort for car insurance coverage.
Because of the marginal nature of the drivers working with the Facility Association, insurance arranged through the Association is expensive. Other users of the Facility Association include drivers whose driving histories include offenses such as impaired or dangerous driving. In an already highly competitive industry, paying these extreme rates may mean smaller cab and limo operators are forced out of business or worse, some renegades may operate illegally, without proper insurance coverage.
There are brokers, though, who do specialize in coverage for taxi and limo businesses. These brokers work with insurance companies to offer appropriate coverage at more affordable rates than those arranged through the Facility Association. There are policies out there that even cover such things as TVs and other electronics inside a limousine. The secret, as with all car insurance, is understanding the market and the providers and shopping around whenever possible to assure the lowest rates for appropriate coverage.