Water Taxi insurance – cost and types of policies
In more and more urban areas near major water bodies, entrepreneurs are turning to an exciting new startup business, water taxis, and water busses, and they are quickly learning that proper Water Taxi insurance is the one way they can be sure to protect their investment.
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What has changed to make the water taxi business such a great business?
Recently, the whole taxi industry was overturned by Uber’s on-demand systems, revolutionizing ride-hailing demand.
This has quickly spread not just for street taxis, but also to water transport in the areas where rivers and seas have brought foot traffic alongside waterfronts.
What makes the Water Taxi business such a great idea for a startup?
Water taxis provide several unique experiences and services.
For tourists, it’s the best way to conduct sightseeing.
For commuters, it’s a way to get to their destination without the possibility of traffic jams and blockages making them late.
People always prefer a fast water taxi service that will get them to their destination on time, regardless of traffic at rush hours.
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The range of people wanting water taxi services is very broad, which means that it’s not just a peak-hour business.
It goes just as much for commuters in the morning and evening, tourists and leisure seekers during the day, and late at night.
All want to use water taxis. Therefore, a water taxi service is always in demand and being used every day.
The business provides such a steady level of revenue generation every day.
How much does it cost to start a water taxi business?
A successful water taxi business plan must incorporate the setup costs as well as ongoing expenses.
A proper business budget needs to cover:
- Initial costs, which is the acquisition or rental of the passenger boats
- Running expenses, such as fuel and maintenance
- Marketing material and advertising
- Personnel costs
Every business needs to budget for its assets and running costs – without them, you have no way of operating.
Similarly, marketing and advertising are the way to bring your business to customers’ attention – without it, there’s no sales.
Personnel costs like wages and salaries are built-in to any enterprise, unless you’re a one-person show and do not intend to draw any income from the business.
In the long run, personnel costs are one of the most significant components of any business, large or small, and need to be budgeted.
Finally, why is insurance one of the main elements of any business’s budget, and more importantly, why is it one that can make or break your whole enterprise? That’s the main topic we are going to deal with in the rest of this article.
Why is insurance such an essential element in the budget?
For any water taxi business, it is crucial to protect yourself from being personally liable in case the service is sued, for any reason.
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Liability insurance protects your private financial health and guarantees the long-term viability of the water taxi service.
For the first four budget items, you are budgeting for expected expenses.
In the case of insurance, you are budgeting so that you can protect your business and yourself in case something unexpected happens. Laws in every state are stringent in enforcing liability on the owners of businesses for the results of their actions.
If someone claims that your water taxi operation caused them some physical harm or economic damage, a court can award penalties far beyond the total size of your business.
When you are running your operations, you can’t escape responsibility for the outcomes of your actions.
Most importantly, unless you have arranged the insurance up-front, all of that liability belongs to you as a person.
Not just the water taxi business is at risk, but it could even cost you your home and life savings.
General liability insurance for your Water Taxi service operations
Like for traditional taxis and now for Uber drivers, Water Taxi insurance coverage is critical for anyone using a boat to transport passengers in return for payment. Whenever you are transporting people for compensation, you have a legal duty of care that is significantly increased.
This means that adequate insurance is critical.
Simply relying on ordinary boat insurance is not enough because if your insurance company finds out that you were transporting passengers for reward, you will be left personally liable for any damages claimed.
Any Water Taxi business deals directly with members of the public, which means you generally have the danger that some accident can happen causing injury to them physically, or else something of theirs can be spoiled.
In such a case, they can sue you for compensation.
A general liability insurance policy for your business covers you against claims alleging injury to anyone on one of your water taxis, inside your office, on the gangplank or anywhere considered to be inside your legal domain.
As well, any damage to their property is covered.
It protects your business from the claims themselves and in addition to any associated court costs and legal fees of the lawsuits.
In many cases, city and state bodies may insist on proper liability insurance before they will license your business.
The recommended level of general liability insurance for a water taxi business would be with the limit of $1 million for a single submission and a total of $2 million for the whole year.
Water taxi companies operating along the northern water borders, for example, water taxis in Chicago or Seattle, should take special notice of the relevant laws for marine vehicles in Canada, which are different from those for water taxis in the USA.
The cost of general liability insurance depends on the level of cover you choose, but as a general guide, we have found a range of $450 – $500 per year for the level we indicated here.
The main factors that will determine the cost of cover are the location of the business, the level of deductibles you are prepared to accept, and the general size of the business.
In general, the level of cover can be increased without a proportionate increase in the premium.
For example, doubling the level of cover to $2 million/$4 million will only add around 30% to the policy cost.
Professional liability insurance for your Water Taxi business
In the event where a customer alleges some negligence, errors, or omissions in how you conducted your services for them, you can quickly be involved in a lawsuit.
The cost of defense can be high.
The most significant benefit of Professional Liability insurance is that the insurance company guarantees to defend you in the case, regardless of the merits.
Otherwise, even if the case against you is judged in your favor, you cannot rely on a decision that grants all the costs to go your way.
Often, courts decide that each side must meet its own legal expenses.
Most small Water Taxi services should take out enough professional liability insurance to cover a single claim of $25,000, with an annual cover of $50,000.
The cost for this should be around $220 – $340 per year if you are prepared to accept a reasonable deductible of $500.
Commercial Property insurance for your Water Taxi business
You will need commercial property insurance if you own an office or any other space where customers can assemble prior to boarding.
It covers that structure and the equipment you use, like ticketing machines, computers & printers. Commercial property insurance covers you against natural disasters like storms, theft and vandalism, and fires.
You may already have a substantial capital investment, in addition to significant liability if there’s a mortgage.
Suppose your business deals in areas of high risk of storms, like hurricane prone Miami or North Carolina, then extra coverage may be needed.
Others like California may need extra cover against earthquakes. It would be best if you discussed this with your insurance broker, agent or mortgage bank.
Since the level of cover depends mainly on the property’s value, it’s not possible to say what level of cover you need.
To give some idea of the average price of property insurance for your business, the range is between 0.01% and 0.025% of the building value – note that land values are not covered, only the structures and content.
Temporary insurance by month, week or day for your Water Taxi services
Many water taxi businesses are seasonal, being restricted either by weather or by levels of tourist demand.
If your business is working part-time or casually, then using short-term insurance makes excellent sense.
Insurance policies operating by the month, day, or week are special policies where you can cover a nominated period.
By only paying for that period of cover, you will save by having lower premiums but still having the necessary levels of risk cover.
Basically, with short-term insurance, you purchase the cover for a defined period – a specific date, or a week or month starting on a specific date, for example, for 90 days beginning on the first day of summer, which would be when the tourist trade begins to boom.
Talk to your insurance agent, broker or the company’s representatives to see what options you have.
Workers Compensation insurance for your Water Taxi business employees
It is mandatory to have workers compensation insurance in almost all states when your business has one or more employees.
Workers compensation insurance covers the employees, whether full-time, part-time or casual, in case of any injury or sickness that arises as a result of work.
The insurance provides for medical expenses, death benefits, lost wages, and vocational rehabilitation in the case of an accident while at work.
North Dakota, Ohio, Washington, West Virginia, and Wyoming have their own government-run monopoly state funds, and you can only get coverage from them.
This means you cannot obtain your cover from private insurance providers.
Workers compensation premiums are worked out based on the employee’s pay, and usually come out at somewhere around $1.00 per $100 per month.
But to get the exact amount to be paid, you must refer to the relevant authorities in your state.
What special covers are needed for maritime vehicles like water taxis?
Water taxis are a particular category of passenger carriers, because of the unique risks involved in water transport.
It would help if you talked to a reputable agent or broker to see whether any of these types of maritime-related insurances are needed in your state or city.
- Dockside Liability
- Personal Property Cover / Medical Cover for
- Emergency assistance / Towing
- Vessel Replacement
- Business Interruption
If you are moving both people and their pets or animals around, then you should also look at the requirements for Pet Transport insurance.
What will influence the cost of insurance for your Water Taxi service business?
In larger states like California, New York and Texas, premiums are generally about 5%-10% higher than national averages.
Still, in smaller states like Rhode Island and Idaho, they usually are about 10%-15% cheaper. The location of your Water Taxi business can also have a significant effect on the cost of different policies.
Operations on larger water bodies like the Great Lakes in Illinois, and open seas, such as Washington and Massachusetts, will require higher levels of cover and will cost more.
River-based services like in Missouri are generally less prone to accidents, so premiums and levels of cover can be reduced.
It would be best if you discussed all of your needs with professional insurance agents and brokers, or insurance company representatives.
Does my Water Taxi business have to have insurance by law?
Some of the types of insurance we detailed are not mandatory for you to operate your business, but they can protect you from risks in your business operations.
Some of the other forms are required by state law, such as workers compensation and taxi operators’ insurance.
Must a Water Taxi operator have Liquor Liability insurance?
If you serve liquor to passengers, you need to protect yourself from risks associated with any intoxicated passenger.
One example is if he or she becomes too inebriated to walk off the taxi at the end of the trip, and they stumble and fall, then a court could hold you to be liable for their injuries.
This insurance is designed to pay for any medical expenses and associated costs that result.
Related article: Pet transport insurance, Errand service insurance.