No one wants to pay too much for insurance, but if you skimp, you could be in trouble when things go wrong. In this month’s Floral Management, certified public accountant Derrick P. Myers, CFP, PFCI, gives three questions to ask before picking your policy:
- How many vehicles are in your fleet? “Consider that, in the worst-case scenario, your deductible could be multiplied by the numbers of vehicles you own in any given year,” Myers said. The odds of this go down as your fleet gets larger, but if you only have one to three vehicles, “this is a very real consideration.”
- How much can you afford to pay out of pocket for accidents? If you have sufficient cash reserves to pay for accident repairs out of the business, then you can increase the deductible.
- At what point do you actually save more money on the policy by having a lower deductible than you stand to lose by paying a larger one? Myers suggests reviewing claims from the last few years. Did you have to meet to meet your deductible? How many times? Then study the amount of savings you get by increasing your deductible. Identify the point where premium savings exceed your typical out-of-pocket expenses. “That is your tipping point,” Myers said. “Once you are over that point, you will likely profit from self-insuring a larger deductible.”
For specific examples, as well as the pros and cons of buying new or used vehicles, check out “Hit the Road.”