Everything is bigger in Texas, including the party on the bus. Before the party gets started though, the logistics of getting started need to be complete first.
One of the many advantages of opening a party bus / luxury bus business in Texas, is you will often save money by not needing an interstate authority, which lowers your bus insurance.
An interstate authority allows the party bus operator to cross state lines, while an intrastate authority is for in-state for-hire livery service (livery service is scheduled people transportation). For more on the difference between livery and taxi service, click here
Due to the sheer size and population density, most party bus operators including those in Dallas, Houston, Austin, and the rest of the state never have to leave, which in turn lowers the insurance cost.
The insurance premium is made up of two primary categories. The first is the commercial auto portion. This comprises the lion’s share of cost and it’s the one most party bus operators have their eye on. The second is the physical damage insurance premium, especially if the bus is highly valuable, which many are. Many party bus operators use relatively low cost buses, including the conversation. This becomes increasingly true for the smaller “short bus” insurance. I can’t say if it’s right or wrong, albeit many of the start-ups using a bus in the value range of about $6000 choose to self-insure regarding physical damage. For those new to commercial auto insurance, physical damage refers to what’s called comp and collision for personal auto insurance.
One thing to note about self-insuring physical damage, it’s NOT an excuse for lowering your price. Those party bus operators that fall into the trap of hiding costs, or what I’ll refer to as off-balance sheet expensing, is a fast-track to losing money when you’re expecting to make money. Or, at least not making as much as you expect. A good rule of thumb if you’re self-insuring physical damage is to budget about 70% of the insurance cost you would otherwise spend for what it’s going to cost you in the long-run for damage to vehicles. If it’s surprising that insurance companies aren’t making more from selling physical damage, you should note one of the reasons why party bus insurance cost as much as it does is because many commercial auto carriers have left the for-hire space due to losses.
Because of the reality of carriers losing money, one could make an argument that the amount of savings by self-insuring is even less than 30%. That may sound like sale’s rhetoric, however, I don’t actually mean it from a “you better buy physical damage, or else.” I know most having a bus worth less than $6,000 won’t get physical damage, and I not only understand, I don’t disagree necessarily. As with all insurance, we don’t pressure people, and in fact, we don’t even attempt to create “urgency” or really any other sales techniques. Quite frankly, as with your party bus business, long-term relationships aren’t built that way and are counter-productive for true professionals.
So, focusing on the commercial auto liability cost, it does depend on what part of Texas you’re in. For example, for a small 15 passenger Houston party bus during their first year of operation is going to have a premium of about $4000 if a few things are true. The vehicle isn’t too old, and too old generally means 15 years old, and the driver is old. Young bus, old driver is the key. Next, the driver has zero, as in zero, none for insurance claims, and no violations in the last three years (five years for “big” stuff like DWI).
Keep in mind that even seatbelt violations have an impact on rates. In fact, seatbelt violations are considered safety violations and a low-cost ticket can cost thousands more in insurance cost. Dallas and Austin is about the same in premium. Once you get out of the metro areas, it becomes a balancing act of how far out you are versus how much more in radius you want. When your party bus business is located in a large metro area, you’re likely to not want such a large radius of operation. For those new, a radius is a one-way circle around the place you park your party bus at night. In other words, if you have a 100 mile radius your bus will go, it’s a 200 mile round trip assuming you’re driving in straight lines, or as the crow flies kinda sorta (the actual radius is slightly less than the “crow flies.”
An urban bus might have a radius of 100 miles and have all the business they want. A bus located between San Angelo and San Antonio might have much of their business taking passengers to Austin, San Angelo, San Antonio, or even maybe Fort Worth and/or Dallas, resulting in a requirement for 250 mile radius. A larger radius will result in additional premium. The net result is you may find the premium cost somewhat on a level playing field between urban and more rural party buses.
As stated, the driver, and the older, the better. A driver 50 years old with no violations or insurance claims in the last five years will be maybe $1500-$2000 less per year than a 22 year old driver. Bottom line, in a tight job market where recruiting and retaining drivers is tough, you can pay the 50 year old $2000 more a year and you’re much better off. Firstly, the older driver is likely more stable and will stay with your company longer than a younger driver looking for the thrill as much as the pay (hint, the thrill doesn’t last long as the driver quickly finds out, they’re isn’t part of the party and is part of the “hired help”).
Speaking of drivers, keep in mind none of the commercial auto carriers we use for ANY type of auto insurance, liability and/or physical damage will allow non-scheduled drivers. What this means is the carrier will ask for driver information, including the name, address, driver’s license number, state of issue, social security number, marital status (which doesn’t seemingly effect rates anymore in most/all the states we write party bus insurance), violations and insurance claims in the last three years (five for the “big stuff”), and when and if a CDL was obtained. For a passenger bus with a maximum passenger rating of 15, we haven’t run into a situation where a CDL was required, however, over that amount does in every party bus operation we’ve written so far (I purposefully want to be vague as laws and regulations change from time to time, and since we’re not licensed in every state, someone reading this in a state I’m not familiar with may have different rules to follow).
That said, if you allow a non-scheduled driver to operate your bus, or if your driver has their brother or sister “fill in for them,” your party bus business will be in the fast lane (cheesy pun, I know) to get your policy either canceled or non-renewed, so if you value your bus business, don’t do it and don’t allow it. Insurance carriers HATE unscheduled drivers, even ones that are a better risk because they believe if you will allow it, you will also allow a driver that should have a higher premium or not be allowed to drive at all. Too often I see a business go right down the tubes because the owner decided to have someone not on the scheduled driver list to drive. I can’t say it’s better to have an unscheduled driver than lose the contract, I can say that if you do it, you better be prepared to take that risk. Trying to get party bus insurance isn’t easy to begin with from the point of view I usually only have one or two carriers to choose from for a start up. Once you’re canceled, I have zero, other than the assigned risk pool from the state.
Robert Weinstein is a husband, dad, stock market junkie, real estate broker, and of course…Insurance agent. Interests include my family, economics, marketing, technology, real estate, finance/investing, history, and Asia.
Robert’s insurance expertise includes having the designation of Certified in Long-Term Care (CLTC) and assist in asset protection for families with members entering retirement.
Robert is also an accomplished syndicated writer whose work can be found in TheStreet, MainStreet, CNBC, Forbes, Yahoo Finance, Seeking Alpha, MSN Money, The Money Show, Stock Saints, Motley Fool, Fidelity, Minyanville, RealMoney Pro, and many national and international newspapers.