Being your own boss can be the American dream. As an independent driver, this dream comes with the costs and responsibilities of operating a business. You manage equipment leases, maintenance, fuel, tolls, recordkeeping, accounting, taxes, insurance, and so on. The array of this responsibility can be dizzying. This article will focus on insurance coverage for small trucking companies.
As everyone knows, inadequate insurance coverage can result in financial devastation. As a business owner, it’s wise to protect your business and your family by having proper insurance coverage.
Ensuring Proper Coverage
If you’re under lease with a motor carrier, they may provide the “primary” liability coverages through their insurance company. But ask yourself; what do I have? Has my motor carrier provided me with a copy of the policy or just an insurance card or certificate of coverage?
Don’t just assume your motor carrier’s coverage is adequate. Don’t assume you and your truck are listed on their policy. Get copies of the policies and make sure all agreements are in writing.
Make sure the following questions are answered:
- What does the lease agreement say about providing you with primary liability insurance?
- Who is responsible to secure the insurance?
- Who will pay the premiums?
- Will the costs be passed onto you and deducted from your settlement statements?
- What happens if there is a claim?
Protect your business
As an independent owner operator, make sure you are fully protected. Under your motor carrier’s liability insurance, coverage often applies to the other driver and their occupants, not you or your vehicle. The other parties may be covered for their property damage and bodily injury when you are at fault. There may be no coverage afforded to you or your vehicle. Consider protecting the business you’ve worked so hard to build by purchasing your own separate insurance coverage. This additional coverage may even be required under your motor carrier contract.
Your insurance agent may recommend purchasing Physical Damage and Comprehensive insurance. Physical Damage insurance provides coverage for collisions caused by another vehicle or object. Comprehensive insurance covers other perils such as fire, theft, vandalism, hail; losses not as the result of a collision. Additional coverage can be added as endorsements, such as Towing and Downtime. If you finance your vehicle, most lienholders require insurance to protect them. If you are in an at-fault accident and do not have insurance, the cost to repair, replace or pay the loan balance will be your responsibility.
Consider Non-Trucking Liability or Bobtailing insurance. Bobtail insurance applies when you are not under dispatch, parked or elsewhere. Non-trucking liability insurance does not typically cover, nor does it add additional tier insurance, while not under dispatch. It typically provides less insurance than Bobtail insurance, and less expensive.
Bobtail insurance may cover you when you are not under dispatch, when you are traveling to and from the terminal to pick up or drop off a load, or when you are on the road and made a delivery and are returning without a load. Your motor carrier may require you have this coverage due to the fact that you likely drive your truck when you are not hauling or using it for personal trips.
Cargo losses can be very expensive. Consider Cargo insurance to cover the replacement loss or damage to a load due to fire, theft or accident.
Operating Under Your Own Authority
If you are working under your own authority, you should minimally insure for liability insurance, physical damage coverage, and cargo insurance. The statement we hear often is “but, I have full coverage”. Full coverage to an agent might mean the coverage that is required, not the coverage you actually need. Your agent or broker should spend time with you to understand exactly what you need. You need choices, and understanding as to what you are purchasing, so you will feel confident that you are sufficiently covered in case of an accident.
Like the trucking business, insurance is complicated and multifaceted. Interpreting and understanding insurance and your policies is important to your business. We suggest that you consult with an insurance expert such as OOIDA (Owner Operators Independent Drivers Association) to assist in determining your needs. The Department of Transportation (DOT) can be consulted to assure you are meeting registration, insurance, log book, decal and other requirements. Your state’s Department of Insurance can assist with providing information on insurance companies, their financial rating, complaints filed, and premium rates.
Review Your Coverage Periodically
It is important to review your insurance coverage frequently. Make sure you are covered for all major scenarios which could harm your business. Work closely with your insurance agent and make sure your agent is proactive in his or her representation of you and your business.