TIMOCOM Start-Up Blog: What insurance do I need to start a transport company?
Selecting insurance is an essential part of planning and starting a company. After all, if a damage claim is made, or there is a legal dispute, the resulting costs can quickly put the company itself at risk. But what transport insurance do I need – and how do I find the right one?
Starting your own company and breaking into the market is a huge challenge. In this blog series, TIMOCOM offers advice for starting the journey to self-employment for those hoping to become entrepreneurs in the transport, freight forwarding or logistics industries. The goal is not to provide classic consulting services for those who want to be entrepreneurs or those who recently made the jump to self-employment. Instead, we provide concrete practical tips from the logistics industry, so that your path to self-employment is successful right from the start. In the second part of this series, we explained how best to calculate transport costs in order to ensure your expenses are covered. In this post, we are going to look at insurance.
Professional liability insurance for freight forwarding and transport companies
Regardless of the services your transport company plans on offering, you will need professional liability insurance. This insurance protects you in the event that you or your employees are responsible for personal injuries, property damage or financial loss. This type of damage may arise from something as simple as a lost key belonging to a customer or accidental damage that occurred while loading or unloading goods on your property – or as complicated as data protection violations. As a new company, it is important to consider, in advance, what risks and expenses you need covered.
Disability insurance for entrepreneurs
It is impossible to guarantee that you will not become too disabled or ill to work, as illnesses do not only hit those in a specific profession and accidents can occur even when not at work. It therefore makes a lot of sense to invest in disability insurance in order to protected yourself from loss of income in the event that you are no longer able to work. Just imagine that, because of illness or disability, you are no longer able to perform all aspects of your job. This could affect not just you and your family, but also your employees and customers. If you plan to become a self-employed HGC driver or vehicle operator, you are at much higher risk of not being able to work in the future: sitting for hours at a time, stress caused by ensuring goods are delivered on time, physically demanding work loading and unloading goods, not to mention dangerous traffic situations – it’s all just part of the job. In Germany, drivers are considered a class 4 risk for insurance, meaning they are a high-risk group. Additional accident insurance may make sense for self-employed drivers. However, what this insurance entails varies greatly between providers. It is therefore essential that you pay close attention to the types of accidents covered and what services, exactly, are included in the event of an accident.
Legal expenses insurance in the logistics industry
As a logistics industry professional, you will be dealing with a variety of different parties, which, over time, can lead to disagreements. You will be renting commercial property, signing contracts with customers and partners. Even a problem with your own employees can lead to a legal dispute. Legal expenses insurance generally covers costs for legal consultation and hiring lawyers, court appointments, surveyors and experts.
The next types of insurance we cover in this blog are specific to the transport industry. If goods are damaged during transport, or in the event of consequential damage, the amount you owe could quickly exceed six or even seven figures.
Vehicle and cargo liability insurance
As with any car, liability insurance for your vehicle(s) is mandatory and should be matched with your cargo liability insurance plan. The latter is required by law in Germany for commercially transported goods and usually covers a fixed amount of money. If a transport order involves transporting goods worth more than this fixed amount, then you must have additional insurance to cover the extra.
In an earlier interview, Klaus Schäfer from KRAVAG explained what to pay attention to when purchasing cargo liability insurance.
Check shipping orders and ensure you are covered
“It is extremely important to pay attention to details such as ‘Where will I park my vehicle at night? Is that parking spot monitored or not?’” says Schäfer. Not only that, a trusted consultant needs to check shipping orders and ensure that the insurance is suitable. After all, it’s no use having insurance if the contract won't cover the type of damage that is likely to occur.
Make sure accident loss claims are handled quickly and professionally
If you want to make an omelette, you have to break some eggs. Even the most professional businesses will have to deal with damaged goods and accidents. The best course of action is to react quickly and professionally – whether you are dealing with an accident involving hazardous materials or load theft. The quicker you contact your insurance policy holder, the quicker they can act to limit the damage.
Pick a policy that offers rewards and bonuses
That is: if you go a long time without making a claim, you want a policy that ensures the insurance company will refund a portion of your payments to them. Schäfer also notes that experienced insurance consultants should be able to analyse which accidents happen most often to which drivers, and how to prevent them.
Always keep your insurance up to date
Another important factor when choosing the right insurance policy is the administrative effort required. Many providers offer digital solutions, so that you can make any changes directly online and quickly adjust the policy as needed. Particularly for new companies, it makes sense to discuss any changes with your own consultant first. After all, you might end up with orders that don’t fit your original business plan. At that point, you need to check that they are covered by your existing insurance.
Of course every transport company is unique, however, in general, the following insurance policies are must-haves:
- Professional liability insurance
- Disability insurance
- Legal expenses insurance
- Vehicle liability insurance, if your company owns any vehicles
- Cargo liability insurance
Make sure you keep your policies up to date by regularly checking that your current orders are covered by your insurance policies.
Other interesting articles:
TIMOCOM Start-Up Blog: How do you start a transport company?
How do you reduce corporate costs and optimise processes?