Tips for avoiding overinsuring your trucking business
Last month an Illinois trucking company contacted me. They were concerned about the high cost of their trucking insurance and asked if I could help them. I looked at their policy report pages and noticed that they were paying for insurance that was neither necessary nor really useful to them.
They were paying for a blanket they would be hard pressed to find a reason to exploit. They had no exposure or risk that would require filing a claim under this coverage.
As owner-operators or owners of small fleets, when we talk to insurance agents about “trucking insurance” we usually mean one of our biggest insurance expenses, the legal name of which is “Commercial auto insurance”. The term itself, however, is broad and can be used to refer to any insurance for any business of any kind that uses any type of vehicle for business purposes. Understanding this is essential when shopping for trucking insurance coverage.
When talking to an insurance agent, make sure they are well aware that your business is not just any old business – it is an trucking Business. As such, you probably have no use for many of the commercial auto coverage that other types of businesses need. Here are the top 3 that fit that description.
- Commercial civil liability. Yes independent owner-operator is the phrase that describes your business, trucking with your authority, then there is a high probability that you are operating your business from your home. Your physical, non-mobile place of business is not open to the public or customers. As such, in many cases smaller carriers have no use for “general commercial liability”, which covers you for liability to people visiting your place of business, such as a dispatcher’s office. or a maintenance facility. **To note: Of course, do not confuse general liability with “motor vehicle liability,” of which at least $ 750,000 is required by federal law for all carriers, generally.
- Car rental coverage. Independent owner-operators and other small trucking companies also rarely use “Rental Auto” insurance coverage, which covers liability expenses for accidents involving vehicles your company uses for “work” purposes. but that you do not have. Since the self-employed and small fleets typically don’t hire anyone with a car to use for business purposes, this coverage is of no use.
- Motor vehicle liability of non-owners. Similar to “rental car”, this type of coverage is generally not required. Motor vehicle liability of non-owners covers the liability of the company when the personal vehicle of an employee or temporary staff member, whether owned or rented by them, is driven for business purposes. Since an independent owner-operator has purchased personal automobile insurance on the personal vehicle that they could use to pick up parts or other groceries, it is highly likely that they have adequate insurance for any issues. met during these races. **To note: Yes, “Rental Car” and “Unowned Car” are actually very similar. The way I like to distinguish them is by noting that the first is a hedge that applies in a more formal contractual relationship. “Auto not belonging to your vehicle” could apply to more occasional situations, such as when you are asking a driver / employee to quickly go to the parts store for a case of oil or a set of batteries.
In the case I mentioned at the beginning of this story, the small family transporter consisted of two brothers and their sister. The two brothers had their own truck and trailer, and their sister acted as dispatcher and safety officer for the company. After careful consideration, I delved into their policy and was able to save them almost a mile a year by removing unnecessary covers. Now they frequently ask for trucking and insurance advice – I’m always happy to help.
Knowing whether or not these coverages are necessary can save any truck owner, especially an independent owner-operator, potentially thousands of dollars on their annual insurance premiums.
Readers can find plenty of information on the ins and outs of trucking insurance and other aspects of running an owner-operator business in the updated 2021 edition of Overdrive’s Manual Partners in Business for owner-operators and future owner-operators, produced in partnership with ATBS. It is available for download via the link.
[Related: Trucking trends to watch in 2021: Speed limiters, insurance]