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.
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. O/Os under a permanent lease (LO/Os) are provided with a primary liability package by their motor carrier, which costs about $3,000 per year (give or take $1,000.) In contrast, O/Os with authority generally pay anywhere from $6,000 to $12,000 per year. “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. Most shippers and brokers require that O/Os with authority have at least $1M of coverage, but that figure continues to rise in the construction and oil industries.
In theory, an older truck is less expensive than a newer one and will therefore cost less to insure. But since the recent ELD mandate doesn’t apply to some older trucks, their cost is actually increasing. This impacts the cost of physical damage (PD) insurance, which covers the actual cash value (ACV) of your trucks and equipment at the time of loss. The annual premium is usually a percentage of the trucks’ value, often with a $1,000 deductible. 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.
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 loading or unloading trailers and 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—as low as $250 to $600 per year, says Josh. $1M is usually the recommended limit.
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. Often times, NTL is grouped together with physical damage insurance and under-/un-insured motorist insurance on the same policy. The average annual premium for NTL is $500, says Josh.
On the other hand, bobtail/deadhead insurance is broader. 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.
A sixth common type of trucking insurance is motor truck cargo insurance. It’s often a legal requirement for commercial vehicles, especially if your drivers transport household goods across state lines. Cargo insurance covers the loss or damage of client-owned goods hauled in your trailers. Several companies also include debris removal coverage, which pays for the removal of cargo that spills onto public roads. The average deductible is $1,000 and most shippers and brokers require at least $100,000 of coverage. Cargo insurance may sound pricy, but it’s essential to protect your cargo against theft, fire, and collision.
There are at least 6 other types of trucking insurance:
Reefer breakdown insurance: as long as the reefer unit is properly maintained with records to prove it, this covers damage to produce inside a trailer due to reefer motor failure; $2,500 annual deductible, on average.
Trailer interchange insurance: requires a written agreement between the motor carrier and the shipper in order to extend liability coverage to a driver who is carrying someone else’s trailer, even if the trailer is detached from the truck; average annual cost varies between $1,000 and $1,500.
Non-owned trailer physical damage insurance: broader and less expensive than trailer interchange insurance because it does not require a written agreement and covers physical damage done to another person’s trailer while it is attached to the truck; up to a selected maximum coverage limit and deductible.
Livestock cargo insurance: extra liability to protect against risks of hauling live animals, such as injury, escape, or death; $6,000 to $12,500 annually, on average.
Excess liability insurance: fulfills increasing liability requirements imposed by shippers with additional limits of liability to cover gaps between policies; average cost range is $500 to $1,500 per year.
Uninsured/underinsured motorist insurance: covers 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; this is usually the least expensive coverage—approximately $300 per year—and a very important policy to maintain.
Now that we’ve discussed what it takes to protect your business, let’s look into some practical ways to cut costs:
Some insurance companies offer discounts (10% to 20% off) for paying your premiums yearly instead of monthly. Keep up with payments and never allow insurance to lapse. (Your agent can adjust your coverage if your equipment value changes.)
Higher deductibles mean lower premiums, but be careful not to increase your deductibles too much. Your agent can help you understand all the details of your policy so that you don’t end up under- or over-insured.
Maintain a good credit score to keep premiums low.
Be upfront with your insurance agent about your operations and driving records. Stay loss-free and encourage truckers to drive carefully, both in their truck and personal vehicle. (Speeding tickets increase premiums.)
Earn potential insurance discounts by writing out a detailed safety policy, explaining company protocol for dealing with accidents, drug and substance abuse, and other safety-sensitive situations.
Keep logbooks up-to-date and make sure that FMCSA data is accurate. Logbook violations and data errors increase insurance rates.
Equip trucks with current safety features, such as fog lamps and deer guards.
Hire experienced drivers with good driving records.
Don’t allow trucks or trailers to be left unattended in unsecured areas, especially over holiday weekends.
Low rates are important, but Josh urges you to think twice before switching insurance companies: “Developing a lasting relationship with your insurance company can help stabilize your insurance costs over the long term. Switching insurance companies without a strategic long-term plan will often backfire and end up costing you more down the road.”
Call in the Experts
There are about a dozen different kinds of trucking insurance, each with their own federal and state requirements. We realize that insuring a trucking company is costly. But you need to protect your employees, third parties, trucks and equipment, and your own good name. How can you meet these challenges? Thankfully, there are plenty of ways to earn discounts on your policies. Our in-house trucking specialists can examine your coverage and discover what savings opportunities are waiting for you. They’re happy to help!
