Trucking insurance

| December 12, 2008

Expect to pay 3 percent to 5 percent of your truck’s value for damage insurance premiums.

THIS ARTICLE IS FROM the 2006 edition of the Overdrive Partners in Business manual, co-written by American Truck Business Services, presenter of the Partners in Business seminars. The program is sponsored by Freightliner Trucks and Castrol. The next seminar will be during the Mid-America Trucking Show, March 22-24, 2007, in Louisville, Ky. To order a manual, call (800) 633-5953, Ext. 1135. Visit this site for more excerpts and program information.

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.

Insurance expenses can add up quickly, which is why many owner-operators budget their premiums a year in advance. 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 each year:

  • $5,000 for $1 million in primary liability insurance to cover damage or injury done to others in case of accident while you’re under dispatch.

  • $2,400 for physical damage insurance to cover damage done to your truck and trailer in case of accident.
  • $1,000 for cargo insurance to cover damage to or theft of the load you’re hauling.
  • $450 for $1 million in non-trucking-use liability insurance.

All that insurance totals about $9,000 per year, assuming a safe driving record.

Leased owner-operators generally carry just as much truck insurance as an independent, 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 non-trucking liability insurance).

Many fleets charge the owner-operator for 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. Some fleets require drivers of smaller trucks to handle their own primary liability, especially in courier or delivery applications.

Owner-operators shopping for insurance can look to trucking-specific insurance agencies or truck dealers. Shop around before you buy.

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. Independently purchased insurance is portable, so if driver and fleet part ways, the driver’s still covered en route to the next orientation. Before you can be assigned a load, of course, you’ll have to show your carrier proof that you have all the coverage it requires.

If you are an independent, you are required by federal law to have a minimum of $750,000 liability coverage. This is to protect you in case of a major accident in which you are at fault. You may want to consider higher coverage, at least $5 million, since a catastrophic truck accident can cost 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.

For many, however, having liability taken care of is one of the biggest advantages to leasing. Owner-operators who switch to their own authority often are surprised by how costly, complex and time-consuming liability coverage can be.

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