A Guide to Commercial Trucking Insurance

Insurance is one of those products you purchase and hope you never have to use. Insurance is a means of protecting yourself from high medical or property damage costs. In the trucking world the most common risks are personal injury to another person or to yourself, damage, or loss of your truck, and as a trucker, damage to or loss of the load you are carrying and/or another truck. Depending upon the extent of injuries and/or damage to other vehicles, insurance awards in the hundreds of thousands—and even millions—of dollars are not uncommon.

Introduction to Insurance

Obtaining truck insurance protects you and your business from having to pay for these injuries and damages—except a relatively small deductible—directly out-of-pocket. Assuming you own and operate a personal vehicle—car, truck, SUV, etc.—you are familiar with the basic requirements of auto insurance.

Commercial trucking—driving tractor-trailer rigs—is similar, except that there are more interests and much higher dollar values at risk. If your truck is involved in an accident, there is also the potential for your load to be damaged or destroyed. The owner of that load will expect to be compensated for his loss; therefore, the load should be insured with cargo insurance. In fact, as a trucker, there are several types of insurance that you should have or consider under specific situations.

A Word for New Drivers

There are challenges for truck drivers, especially drivers just starting out. Most insurance companies are reluctant to insure drivers with fewer than two or three years of accident-free driving experience.

New drivers—drivers with less than two years of safe driving experience—need to drive to get the needed experience for the better insurance rates of experienced drivers.

“So how do I get to drive two years without insurance?” you ask. You don’t. To keep your costs low, find a trucking company you can work with—they may cover your insurance costs.

Or there are agencies that will provide the needed insurance, but at an increased premium—the amount you pay for insurance. After two years of accident-free driving, you can expect the cost of your premiums to go down.

If you plan to drive your own rig, contact a commercial truck insurance agent. They should be able to help you, but keep in mind that your insurance premium will be higher than more experienced drivers. After two or three years of safe, accident-free driving, your insurance rates should go down. Remember, any record of speeding or reckless driving may adversely affect your insurance premiums. Stay in contact with your insurance broker or insurance company.

Deductibles

The term “deductible” will appear in most discussions and quotes relating to insurance. Most insurance policies include a “deductible” which is the amount of money the policy will not cover and expect you to pay or be responsible for as part of the insurance coverage. First, this means the insurance company will not have to be responsible for a $100 dent. Deductibles vary but are generally on the order of $500 to $1000 on typical policies.

Deductibles may be negotiable—you may be able to negotiate a lower premium if you are willing to accept a higher deductible on a specific policy. For example, if the insurance company’s quote is based on a $1,000 deductible, you might offer to accept a $5,000 deductible in exchange for a lower premium. Of course, if you have to make a claim, you will be responsible for the $5,000 deductible—that is, $5,000 would be deducted from your insurance payout.

Types of Insurance

In addition to the driver’s experience and driving history, other factors can influence premium amounts, including:

• Any specific coverage requirements
• Vehicle type
• Cargo

Primary Liability Insurance

Like most other vehicles, each truck must be covered by a specified minimum amount of liability insurance for a vehicle involved in an accident that is determined to be “at fault.”

Primary liability insurance covers bodily injury and property damage to other persons, vehicles, and property caused by you, or your truck involved in an accident while your truck is on the road. The federal government requires this of coverage before using or leasing your trucks for business purposes.

Liability insurance has no set price; it is dependent on your age and driving record, years of driving experience, and other market factors. It may pay to shop several different insurance brokers to get the best rate.

General Liability Insurance

If you own and drive a personal car, you already know that there are at least two basic types of insurance, Collision and Liability, and these apply to trucking operations too.

General liability insurance—a state-required insurance—is the most important insurance since personal injuries and their treatment can often amount to hundreds-of-thousands to millions of dollars.

Over time, your premium for liability insurance may be reduced by your insurance company if you maintain an accident-free driving record and with no citations for moving violations.

If you are an owner-operators and you sign on with a leasing company, you will want to determine whether you or the leasing company will pay the premiums for the liability insurance.

Collision or Physical Damage Insurance

The purpose of physical damage insurance is to repair or replace your equipment—your tractor or trailer—damaged in an accident. Your premiums will be based on the value of your tractor and trailer as well as your driving record.

There is some flexibility in the premium you pay. Assume you own your rig outright, and it is valued at $200,000, you could purchase a policy with a limit of $100,000 at a lower premium, understanding that if the vehicle is a total loss, your insurance company will pay only $100,000. This is not practical unless you have significant saving to make up the difference.

Legally, collision insurance is not required, which means you assume responsibility for the cost of any damage or loss of your vehicle due to an accident. If, however, your tractor and trailer are financed by a lender, the lender will require you to insure the vehicle.

Cargo Insurance

There are two aspects to “cargo insurance.” First, all carriers are required, by law, to carry a minimum amount of carrier liability insurance for their cargo—usually in the amount of $50,000. This basic level of insurance, however, may not cover the full value of the cargo, and shippers may request additional cargo insurance. Trucking companies and independent drivers should have working relationships with insurers of cargo so that they can obtain quick coverage for higher value loads. The fee for the additional insurance would be factored into the quote to haul the load.

Non-Owned Trailer Insurance

There are two versions of non-Owned trailers. A trucking company with several tractors may frequently be called upon to pull trailers not owned by the company. Typically, these companies enter into a written interchange agreement. As part of the agreement the company provides insurance protection for trailers covered under the interchange agreement.

However, if, for example, and independent trucker contracts to pull a trailer he does not own, he would obtain non-owned physical damage insurance to cover that trailer.

Bobtail or Non-Trucking Insurance

A Non-Trucking insurance policy covers the truck owner when the truck or truck and trailer are being driven for non-revenue purposes, for example deadheading from one point to another.

Physical Damage Coverage

Operating and maintain a truck is costly. Trucks are occasionally subject to vandalism, theft, collision, or natural disasters. Physical damage coverage will pay for the cost of repairs or the cost of replacement with a truck of comparable value if the truck cannot be repaired. Again, there may be a deductible as part of the policy.

Obtaining Truck Insurance

Truck insurance differs significantly from ordinary automobile insurance. It is important that you work with an insurance broker or company that is familiar with the requirements and business of commercial over-the-road trucking. When you first set out to get your insurance, take along a list similar to that above to be sure you obtain the coverages needed, or future access to coverages you might need.

While you may find it is simpler to obtain insurance from a single broker or agency, you may find that doing business with several trucking insurance companies or insurance brokers beneficial because it may be possible to get better rates for liability insurance from one agency, and a better rate for cargo insurance from another.

Selecting an Insurance Company or Broker

Insurance companies can offer excellent service and may cost a little less for a policy identical to that you may get from a broker. Brokers have access to several insurance companies and may be able to put together a custom package for you using different insurance companies for various kinds of insurance.

If you go to a broker, find out what companies he represents and the types of insurance he can provide. Also keep in mind that some brokers specialize in a specific type of hauling such as household and commercial goods, or heavy equipment, or oversize and overweight hauling. Check with other drivers and trucking companies for recommendations on trusted insurers and brokers.

Also, insurance brokerage license requirements vary from state to state. You may find that the best value is a broker familiar with your primary area of operation.

Do you specialize in one primary type of trucking, for example, flatbed hauling, overweight loads, refrigerated trailers, etc.? Look for a broker who fully understands your specialty.

When you apply for any job or to sign on with a trucking company, you ask around about the person’s or the company’s reputation. Do the same for your insurance brokers. Insurance is going to be a significant cost.

You want an insurance agency and/or broker who will help you get the best value, and who has a good reputation on handling claims. When you go to an insurance agent or broker, approach it as an interview to determine whether you are going to “hire” him or her to represent your insurance interests.

• Does the broker understand your insurance requirements based on his experience?
• Are the broker’s questions to you thorough and relevant to your operation?
• Does the broker understand the risks associated with your type of operation?
• Is the quote clear and understandable? Are your questions answered clearly?
• Does the broker seem confident and well informed relative to your requirements?
• Does the broker have the ability to find several different quotes for you?
• Does the broker answer your questions clearly and completely?
• Does the agent or broker seem like someone with whom you could maintain a long-term business relationship?

Summary

When discussing insurance with a prospective agent or broker it is important to ask for a quote tailored to your operations and requirements. Review the quote(s) carefully. Price is not the only consideration. You also want to look at value of coverage and reputation for prompt, fair settlements. You should not be pressured into accepting the first quote you get. Be prepared to shop insurance companies and agents.