Partners in Business: Trucking Insurance
Understand the types of coverage and what your operation requires.
After the truck payment, truck insurance is an owner-operator’s biggest fixed cost, one that must be paid on time whether a truck is running hard or parked. Without adequate insurance, an accident or cargo claim could mean financial ruin.
THE COST OF PROTECTION
Insurance expenses can add up quickly, which is why many owner-operators budget their premiums a year ahead. Your age, your driving record, the age and condition of your equipment, the commodities you haul, the lanes you run and state requirements all affect insurance costs, but an owner-operator with a new truck and his own authority is likely to pay:
• $6,000 or more a year for $1 million in primary liability insurance. This covers damage or injury done to others in an accident.
• $3,000 a year for physical damage insurance. This covers damage done to your truck and trailer in an accident.
• $1,000 a year for cargo insurance. This covers damage to or theft of the load you’re hauling.
• $630 a year for $1 million in nontrucking-use liability insurance. Often called “bobtail insurance,” this covers damage or injury done to others in case of an accident while you’re not under dispatch.
All that insurance totals almost $11,000 per year, assuming a safe driving record. Cited speed demons can pay much more.
Leased owner-operators generally carry just as much truck insurance but pay for less of it themselves. The leased operator should make sure the lease agreement specifies what he is not responsible for, typically primary liability and cargo insurance, and what he is responsible for, typically physical damage and nontrucking liability insurance. Some fleets charge the owner-operator for primary liability and cargo insurance, usually by taking a percentage of all settlements, but other fleets absorb it as part of the cost of doing business.
Owner-operators shopping for insurance can look to trucking-specific insurance agencies or truck dealers – or buy direct from the insurance company itself. Shop around before you buy, looking for the most coverage at the most reasonable cost. Some leased owner-operators buy all their insurance independently of the plans offered by their fleets. This costs more in most cases, but its advantages include more control of your coverage, a closer business relationship with your agent, and a speedier reply when you have an emergency. Better yet, independently purchased insurance is portable, so if you and your fleet part ways, you’re still covered en route to the next orientation. Before you can be assigned a load, you’ll have to show your carrier proof you have all the coverage it requires.
If you are operating under your own authority, you are required by federal law to have a minimum of $750,000 liability coverage. This is to protect you in a major accident in which you are at fault. You may want to consider higher coverage, $5 million or more, since a catastrophic truck accident can cost many millions of dollars.
Because primary liability insurance is the law, it’s standard in lease agreements. Remember, though, that just because your carrier is insured against damage you cause, it won’t necessarily be on your side in case of an accident. For that reason, some leased owner-operators opt to buy liability insurance independently of their carriers.