Given the complexity and risks involved in trucking operations, it’s important for trucking companies to work closely with insurance professionals to tailor coverage to their specific needs and ensure adequate protection against potential liabilities. The higher the risks, the higher the cost of insurance coverage.
Cost of Truck Insurance
Cost of the trucking insurance is dependent on multiple factors, including, but not limited
to:
Coverage Needed: trucking insurance typically includes multiple types of
coverage such as auto liability, cargo, physical damage. Each type of coverage
protects against different types of risk. Auto liability insurance covers injuries or
damage to other parties (if found legally responsible), while physical damage
covers the damage to the drivers’ own truck itself. Cargo insurance protects the
goods being transported.
Regulatory Requirements: different states or regions may have different
regulatory requirements for trucking insurance. In general, the Federal Motor
Carrier Safety Administration (FMCSA) mandates minimum insurance coverage
levels for interstate carriers, which can vary based on the type of cargo and size
of the truck.
Risk Factors: the distance of trucking operations (long-haul versus short haul),
company’s safety record, age and condition of the trucks, driving habits of the
operators, claim history, types of cargo being transported (ex. refrigerated goods
vs general freight), driver experience, and road conditions. Insurers must assess
these risks to determine appropriate coverage and premiums.
Types of Truck Insurance Coverage
Depending on if you are an owner-operator working for a Motor Carrier, or a Motor
Carrier itself, you will need a different type of insurance coverage.
As a Motor Carrier, you will be required to purchase Auto Liability and Cargo insurance
for your company. Physical Damage insurance might be optional.
Auto Liability Insurance
Auto liability coverage protects the company, if found legally responsible, for
injuries or property damage resulting from a truck accident. Federal Law requires a
Motor Carrier to carry a minimum of $750,000 (and up to $5 Million) in an auto liability
insurance; however, the amount of insurance coverage required will depend on gross
vehicle weight, commodities being transported or seating capacity for passenger
carriers.
Auto liability insurance typically consists of two main types of coverage:
Bodily Injury Liability
protects the trucking company if one of its drivers is at
fault in an accident that results in bodily injury to another party, such as other
drivers, passengers, pedestrians, or cyclists. It covers medical expenses,
rehabilitation costs, and legal fees associated with bodily injury claims.
Property Damage Liability
Property damage liability coverage protects the
trucking company if their driver causes damage to someone else’s property in an
accident. This could include damage to vehicles, buildings, or other structures.
Cargo Insurance
Cargo insurance coverage protects the trucking company against financial loss in case the
cargo being transported is damaged, lost, or stolen during transit. Typically, the
coverage limit is the maximum amount the insurer will pay in the event of a covered
loss. A typical cargo policy has a limit of $100,000; however, you can purchase a cargo
policy with a higher limit. Depending on the specific needs of the cargo and the
transportation arrangement, additional coverage options may be available, such as
coverage for perishable goods, temperature-controlled cargo, high-value cargo, and
more.
Physical Damage Insurance
Physical damage insurance coverage is not required by law but is important as it does provide
coverage against damage to your truck itself (including damage caused by collisions,
theft, vandalism, fire, natural disasters, and other unforeseen events). Physical damage
is required if the purchase of your truck has been financed by the bank (loan), or the
truck is leased. The insurance will typically pay for the cost of repairing or replacing your
vehicle (minus the out-of-pocket deductible that needs to pe paid). You can usually
choose your deductible amount when purchasing physical damage insurance. Typically,
the higher your deductible, the lower your insurance premium, and vice versa. This
coverage is especially important if you are at fault in an accident or if no other party is
involved (such as hitting an object).
Non-Trucking Liability & Bobtail Insurance
Non-trucking liability insurance (NTL) provides a limited liability insurance and protects independent owner-operators or leased drivers when they’re using their truck for non-business purposes (for personal use when running errands, off working hours), regardless of if trailer is attached. Bobtail insurance provides coverage for independent owner-operators when they’re driving their truck without a trailer attached (often during times when the truck is returning to a
terminal after completing a delivery or during personal use). It typically applies when the truck is not under dispatch from a motor carrier or leasing company.
Trailer Interchange Insurance
Trailer interchange insurance coverage protects trucking companies and drivers who are
involved in the interchange (borrowing) of trailers with other motor carriers or trucking
companies. Trailer interchange occurs when one trucking company or owner-operator
agrees to temporarily transfer a trailer to another party, typically another carrier, as part
of a transportation arrangement. Trailer interchange insurance provides coverage for
physical damage to the trailer while it’s in the possession of the other party. The
insurance covers damage to the trailer that occurs during the period in which it’s under
the care, custody, and control of the other party involved in the interchange. This
coverage is essential, because the primary liability insurance carried by the owner of the
trailer may not extend to cover damage while the trailer is in the possession of another
party.