New and established party bus operators will want to have a keen eye on their insurance agent, the agency, carrier, and the costs associated with properly insuring their bus or fleet of buses. When you operate a party bus business, you’re not really buying insurance from an agent, you’re almost partnering with the agent because the cost component of commercial auto insurance for a party bus operation is so significant, that selecting the wrong agent can spell the difference between being successful or going out of business.
An experienced party bus insurance agent will help guide you to find the sweet spot of number of buses to own and operate, the radius of operation, types of buses for any given offering, and your growth trajectory.
As a new operator, if you haven’t bought your first bus yet, albeit are exploring the idea, I highly suggest you first call and find out the pros and cons of any given bus type. Some buses require the driver to have a CDL and along with increased driver requirements, the minimum amount of coverage required is also influenced by the number of seats.
Also, as a new operator, your choices of insurance carriers will be highly limited, often with only one “real” choice and it’s a take-it-or-leave-it proposition. For those part bus owners that are in business for the long-term, and realize that the first few years will be the toughest, they’ll be rewarded after about three years of favorable claims history. I have to stress that the first three years is all about establishing a high quality and accident free business history. Because party bus insurance cost is so high in the first three years, any profit, however small is a significant victory.
From an insurance perspective with a focus on growth, and all else being equal, a party bus owner will want to grow from one to two buses after the first year. Anything more than two buses can lead to hiring drivers that aren’t the absolute best and if you have insurance claims, you can count on either insurance premium rate increases, or non-renewal. Non-renewal is often a death sentence for a newer and small party bus company, so it’s imperative that safety is at the very top of the list in priorities.
If a party bus company can successfully grow from one to two buses after one year, then I suggest a maximum increase from two party buses to four party buses. That again equates to a doubling of growth as the maximum amount of growth a new party bus company will want to grow in its second year in business. As one of the buses, the operator may wish to consider a larger full-size bus, and in doing so, generally speaking, one rear axle is usually the correct choice unless the owner believes there is much more opportunity in a larger bus. Again though, this is an area where a discussion with the insurance agent can help the business owner understand the break-even point for adding a large party bus compared to a smaller and lower-cost bus that’s also cheaper to insure.
On the third year of operating a party bus company, if your claims history is either perfect or no more than one small claim, then you have a somewhat green light to add one or two more buses. By this time, your experience is starting to pay off and you understand what works and what doesn’t much more than in your first year. You may not be a seasoned vet with 15 years experience operating party buses, albeit your mistakes are likely to occur with less frequency and severity. With any luck you’re now starting to give thought to upgrading your party bus fleet so you can avoid all the maintenance and repair costs you almost for sure have paid out and never budgeted because you didn’t think the darn buses would breakdown so often (or cost so much).
After three years, if you have a fleet of five or more party buses, AND a favorable loss history, more options in terms of commercial auto carriers that are willing to write you party bus operation will become available. The savings can be very significant. For example, a six bus fleet, with some large and small, traveling across state lines and a 500 mile radius on its fourth year of coverage can anticipate spending $36,000 on commercial auto premium per year, and that’s just liability. The number quickly increases well past $40,000 a year with comprehension and collision coverage, even with a large deductible.
The same $36,000 with one of the largest party bus insurance carriers may only cost $30,000 with another carrier that requires greater experience, size, and claims history. Broken down, that’s about a 20% difference in cost and it’s a large 20% because of the degree of insurance cost is to the entire operation. In other words, you may be in the people transportation and entertainment business, however, you’re also in the managing risk business because a failure to do so will punish your greatly.
This brings me back full circle and why I started out by saying having the right insurance agent by your side is so critical. If your agent isn’t protecting you by suggesting slow and steady growth and is simply happy to write more business because they’re more focused on their commission for the month, you’re not receiving the advice and support you not only need, but also deserve and can receive.
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.