Insurance that Fits

Overdrive Staff | August 05, 2011

After a truck payment, insurance is often the biggest fixed cost for owner-operators, particularly those running under their own authority. When shopping for damage and liability insurance, finding the most coverage at lowest price should be your goal, but minimizing costs is more directly related to how you operate your business.

Whether you’re leased or running under your own authority, there’s plenty you can do to reduce costs when updating existing policies or shopping for new ones.

Optimizing current coverage

Owner-operator Rick Ash, leased to HVH Transportation of Denver, insures via Continental Owner-Operators Ltd. (coolmembers.com), a Billings, Mont.-based association that aggregates risk by offering a large group insurance plan to owner-operators. Many fleet plans are structured in this manner, as are association plans like that of the Owner-Operator Independent Drivers Association (ooida.com). For physical damage and non-trucking-use liability, or bobtail, insurance, Ash pays $283 a month, including occupational accident insurance. “Every year, when my policy renews, they ask me if I’ve had accidents, and if personal info has changed,” he says.

Both could affect liability rates, whether like Ash you’re leased and need only bobtail insurance or you have your authority and need primary or commercial auto liability. If Ash goes a year without any accidents, his insurer sends him a rebate check of $125 to $150.

Updating business information, such as freight, miles driven and area of haul, is crucial to obtaining accurate rates. For instance, “liability will vary depending on whether the operator is in regional or long-haul,” says Wes Brackey, president of Great Plains Casualty (greatplainscasualty.com), writing physical damage and bobtail through its Independent Contractor Services Association. Rates go up with long haul “because they’ll more often find themselves in unfamiliar places,” he explains.

Freight also will impact rates, says Trent Tillman of the True North Insurance (truenorthcompanies.com) agency. “Intermodal carriers will have lower liability premiums – their accidents are small losses, typically,” he says. “They’re driving around town at low speed.” Physical damage premiums, though, likely will be high for most intermodal operators on a percentage of value basis. If a $15,000 truck gets in a fender-bender-type accident “it’s not much difference in the price to replace the bumper than it would be for a $100,000 truck,” he says. The insurance company can charge the $100,000-truck operator a much lower percent of stated value and extract the same premium.

The insurance industry is moving toward more frequent rate updates utilizing GPS technology to track actual mileage, says Paul Brocklebank, chief underwriting officer for Canal Insurance (canalinsurance.com). “Instead of guessing at what the miles driven every year will be, let’s on a quarterly basis validate that and adjust the premium quarterly,” he says. “I think the insured owner-operator benefits.”

The same may apply to physical damage insurance. The stated value percentage on which most insurers base physical damage premiums, says Brackey, is “3 percent to 4 percent on an annual basis.” Unlike the personal auto market, where value estimation updates are fairly automatic for underwriters, updating the stated value of your equipment for physical damage coverage is largely your responsibility.

Bob and Linda Caffee, team expediters leased to FedEx Custom Critical, recently upgraded their power unit from a 2005 model to a 2012 Freightliner Cascadia with a big-bunk sleeper. Their insurance package with Progressive Insurance “went up right around $1,300,” says Linda, but with a new truck, “you adjust your insurance a little bit quicker, the value declines so fast. On our new truck, I’ll adjust it every six months for the first three years” to keep physical damage premiums low.

On how much to reduce the value, Ash says, “I was always told 15 percent of new value every six months for the first 18 months.” The association he buys through sends a yearly reminder to him to adjust his value and, “when they send that letter, I usually go to TruckPaper.com and punch in my truck’s specs and gauge it that way,” he says. If there’s a big difference between sale prices for his truck model and his stated coverage, he tells COOL to drop coverage amounts.

If fair market value of your truck drops below what you owe, consider physical damage “gap” insurance to cover the difference. That coverage is included in Arkansas-based dry bulk carrier Oakley Trucking’s physical damage policy, offered to business owners in its 520-power-unit all-owner-operator fleet. Giving the example of an owner-operator involved in a total loss who owes $80,000 on a truck worth $50,000, Oakley Office Manager Tommy Mitchell says gap insurance would cover the $30,000 spread to assure the lender gets paid in full. Rates in Oakley’s physical damage insurance offering, written by Great American Insurance, run at 3 percent of stated value, while non-trucking liability is a flat $31 monthly.

Shopping for new coverage

Brackey says it’s important to fully understand coverage when comparing policies. That includes knowing your deductible and exclusions, and whether you want to assume more risk by choosing a higher deductible that will reduce your premium.

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