A big hurdle for owner-operators (O/Os) is finding the right insurance at the best prices. You know that protection is a must, but how can you be sure you're making good choices? Your truck and trailer values, cargo, and O/O status determine which coverages you need most and how much they will cost.
Non-Negotiable Coverage: Primary Liability Insurance
The Federal Motor Carrier Safety Administration (FMCSA) requires that all O/Os have primary liability (PL) insurance, which covers bodily injuries and property damages to third parties that happen during business use when hauling any type of cargo. Though the FMCSA requires at least $750,000 in coverage, they acknowledge that most shippers and brokers require that O/Os with authority have at least $1M of coverage–that figure continues to rise in certain industries, including construction and oil.
O/Os under a permanent lease (LO/Os) are provided with a primary liability package by their motor carrier. The story is different for O/Os with authority, who can generally expect to pay out for their own primary liability coverage, often venturing into territory north of 10K.
What makes primarily liability insurance such a chunk of change? Driving history can play a part, but, “A lot depends on the commodities you haul, your radius of operation, and the value of your equipment,” says Zinc’s trucking expert, Josh Freet. For example, trucks hauling high-risk loads such as coiled steel, coal, and logs drive up the cost of PL.
Certain factors can affect truck insurance costs:
Ownership status
Vehicle type
Driving history and experience
Location
Operating radius
Business type
Coverage requirements
Physical Damage Insurance
Physical damage (PD) insurance covers the actual cash value (ACV) of your trucks and equipment at the time of loss. Much like personal auto coverage, PD insurance can often be broken into two types of coverage levels–comprehensive and collision–with one offering more robust protection in the case of various physical damage losses. According to Josh, many motor carriers need to increase their PD coverage limit to make sure that they are properly insured. Having trucks paid for in the event of collision, natural disaster, vandalism, or theft is well worth the cost.
General Liability Insurance
As a motor carrier, you definitely need commercial general liability (GL) insurance. GL is much broader than primary liability and covers accidents that happen when your trucks are stationary, such as during loading and unloading trailers or third-party slip-and-fall accidents. (Employee slip-and-falls are covered by workers’ compensation, not GL.) Although GL claims are some of the costliest, the frequency of those claims is low enough to make it one of the most affordable kinds of coverage. $1M is usually the recommended limit. Non-Trucking Liability Insurance Two other types of trucking insurance are often thought to be interchangeable, but there are key differences. Non-trucking liability (NTL) insurance covers property damage and bodily injuries done to third parties while a driver operates their truck for non-business purposes. In most states, motor carriers are required by law to provide NTL coverage to LO/Os, which applies until the trucks are returned to their garage locations. Oftentimes, NTL is grouped together with physical damage insurance and under-/uninsured motorist insurance on the same policy.
Bobtail/Deadhead Insurance
Similar to non-trucking liability but offering broader coverage, is bobtail/deadhead insurance. It covers your trucks while your drivers are not hauling a trailer (bobtail) or are hauling an empty trailer (deadhead), regardless of whether or not they are under dispatch. This coverage includes trips to and from truck servicing or truck wash stations. However, each state individually defines what “under dispatch” means. Because of the legal issues involved, bobtail/deadhead insurance is becoming rare. It’s also a little more expensive than NTL, but both have a recommended coverage limit of at least $1M. Bobtail/deadhead is often required for LO/Os but not necessary for O/Os with their own authority. NOTE: The above-mentioned figures for NTL and bobtail/deadhead insurance are generalized—policy and coverage may vary between insurance companies. Each policy must be reviewed for the specific coverage that’s included. Motor Truck Cargo Insurance Another common type of trucking insurance is motor truck cargo insurance, often referred to as freight insurance. It’s often a legal requirement for commercial vehicles, especially if drivers transport household goods across state lines. Cargo insurance covers the loss or damage of client-owned goods hauled in your trailers. Debris Removal Coverage In addition to cargo insurance, several companies also include debris removal coverage, which pays for the removal of cargo that spills onto public roads. Most shippers and brokers require at least $100,000 of coverage. Cargo insurance may sound pricey, but it’s essential to protect your cargo against theft, fire, and collision. Reefer Breakdown Insurance Refrigerated (reefer) trucks are typically used to haul loads of items that are temperature sensitive. As long as the reefer unit is properly maintained with records to prove it, reefer breakdown insurance covers damage to products inside a trailer due to reefer motor failure. This necessary coverage addresses the specific risks that affect time- and temperature-sensitive loads, but it is only valid in reference to the reefer unit. Other causes for load spoilage would fall under a more broadly defined spoilage coverage. Trailer Interchange Insurance This insurance policy protects non-owners when driving someone else’s trailer. Covered losses include collision, fire, theft, and more. Because the trailer isn’t owned by the driver, a written agreement between the motor carrier and the shipper is needed in order to extend liability coverage. This is necessary even if the trailer is detached from the truck.
Non-Owned Trailer Physical Damage Insurance
Broader and less expensive than trailer interchange insurance, this coverage does not require a written agreement. Non-owned trailer physical damage insurance covers physical damage done to another person’s trailer, only when it is attached to your truck. Uninsured/Underinsured Motorist Insurance For bodily injury and property damage caused to you or your employees by a driver who either does not have any auto insurance or does not have enough to pay for the damages incurred, you’ll need uninsured/underinsured motorist insurance. This is usually a very affordable policy and a vital coverage to maintain.
Livestock Cargo Insurance
This extra liability to protect against risks of hauling live animals is a must-have to responsibly transport this very specific form of cargo. Livestock cargo insurance protects against injury, escape, or death, whether the animals are yours or you’re hauling them for a client.
Excess Liability Insurance
Shippers are increasingly imposing higher liability requirements. Excess liability insurance covers that, with additional limits of liability to cover gaps between policies. This necessary coverage provides for big, unexpected events like catastrophic auto accidents or product liability claims.
Down Time/Business Income Insurance Should your truck be part of a covered claim and end up in the shop for repairs, the process could take longer than expected. Mechanics and parts are both becoming increasingly hard to find. That means that a run-of-the-mill incident can become a prolonged ordeal that keeps you from earning an income. Business income insurance–also known as Business Interruption Insurance–pays your lost income as you wait for your truck to get back up and running.
Transportation Pollution Liability (TPL) Insurance
If you’re hauling cement, soap, motor oil, medical waste, or any other number of potential pollutants, what happens if you are involved in an accident on the road or during loading or unloading? Obviously, a serious clean-up will be in order, especially if substances enter the local waterways or storm drains. Transportation pollution liability insurance picks up the slack and addresses these varied risks and exposures. This vital coverage helps with clean up, property damage, injury, and potential legal action.
Call In the Experts
Insuring a trucking company can feel like a never ending, always-shifting puzzle. There’s a lot to know and countless factors to take into account. Remember too that each of these dozen or so different kinds of trucking insurance come with their own federal and state requirements. These are just some of the reasons why it’s a good idea to work with a pro who can decipher what’s needed and help you track down the right policy. You know that you need to protect your employees, customers, trucks and equipment, and your own good name. Zinc can help you to meet these challenges while still running a profitable business. Reach out today to learn more!
