A Guide To Shopping For Commercial Trucking Insurance

A Guide To Shopping For Commercial Trucking Insurance

As a new trucking company, one of the first things you will do is get commercial trucking insurance. This is because you need to show this insurance to the FMCSA to get your operating authority activated

Read more here about what’s needed to activate an operating authority.

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So in this article, we’ll go through everything you need to know about commercial trucking insurance: what’s included, how much it costs, how the cost is determined, and some tips for getting and comparing quotes.

Leer este artículo en español.

Who needs commercial trucking insurance?

If you want to operate a trucking business under your own authority, then yes, you need commercial trucking insurance to activate your authority.

If you run a hotshot rig, you might think you can insure your truck under your personal policy. You cannot. If you get into an accident and the insurance provider finds out it’s being used for commercial purposes, you will not be covered.

If you’re an owner-operator leased onto a carrier, the carrier likely has auto liability and cargo insurance as part of the agreement. However, they may not have all the coverage you really need. 

So let’s talk about the different types of insurance you need before you hit the road:

What’s included in a commercial trucking insurance policy?

There are different types of insurance you may or may not need for your business. 

Auto Liability

Auto liability, also known as liability coverage, is the only type of coverage legally required to activate your operating authority. This insurance will cover the cost of repairing or replacing vehicles and property from an accident where you’re at fault. This will not cover the cost of repairs or replacement of your truck(s) or equipment. See information about Physical Damage coverage below.

The FMCSA requires you to get at least $750 thousand in liability coverage. However, most brokers won’t want to work with you unless you have a policy that covers at least $1 million. 

Cargo Insurance

This one is pretty self-explanatory – it protects the cargo you’re hauling. Most brokers will look for at least $100 thousand in coverage, but you may need more or less depending on the freight you haul. For example, hauling luxury cars will require a higher amount of coverage. 

When getting quotes for cargo insurance, make sure you ask about exclusions. For example, there are policies that exclude electronics, which can be more expensive to replace. If electronics are excluded from your cargo insurance policy, and you get into an accident hauling electronics, the cargo will not be covered and you will be responsible for covering the cost out-of-pocket.

Something else to keep in mind is whether or not you plan to haul automobiles. This can increase the price of your insurance substantially, so if you’re not sure, don’t include automobiles. You can always add more coverage in the future if you decide to become an auto hauler.

Physical Damage

This is the coverage that will pay to repair or replace your truck(s) and equipment. Typically, this type of insurance will pay out in the event of a collision, fire, theft, hail, windstorm, earthquake, flood, mischief, or vandalism, though not all policies will cover all these scenarios.

When signing up for this kind of insurance, it’s particularly important to understand the conditions your vehicles are subject to under the policy. For example, some policies may require that the truck be parked in a gated facility with 24-hour security. If something happens to it while it’s not under surveillance, the insurance company doesn’t have to pay out your claim.

General Liability

Different from auto liability, general liability insurance covers anything that happens when you’re in a yard or loading dock. Some brokers will require this type of coverage before you can haul loads for them.

Non-trucking liability

This is a good type of coverage to get, especially if you’re an owner-operator, as it will cover the truck while it’s not under dispatch. For example, if you’re driving it back to your house or to a repair shop for regular maintenance. 

Uninsured Motorist

Uninsured motorist insurance will protect you in the event that you get hit by someone who doesn’t have insurance and can’t pay for repairs.

Trailer Interchange

This is a type of physical damage coverage and is required for power-only carriers, who are using other companies’ trailers to haul loads.

Accidental occupation insurance

This will pay for medical bills and disability if you get injured while working.

Reefer Breakdown

Of course, this is only necessary if you haul refrigerated products in a reefer. It’s required by most brokers.

How much does commercial trucking insurance cost?

Generally, when you’re first starting out, commercial trucking insurance will run you between $12,000 and $35,000 per year. That sounds like a lot of money. It is! But you really don’t want to skimp on commercial trucking insurance. 

If you find a rate far below this range when you’re operating under a new authority, it’s likely a policy that won’t give you the coverage you need under the conditions you need it. If it looks too good to be true, it probably is.

There’s quite a gap between $12,000 and $35,000, though, so what makes the difference?

Insurance companies take a lot of factors into consideration:

  • The cargo you will haul: different cargo means different levels of risk for an insurer. For example, hazardous material poses a larger threat with likely higher payouts if an accident happens. If you’re not absolutely sure you’re going to haul hazmat or automobiles, we recommend not including them in your policy. If you decide to move them in the future, you can add coverage later. But never haul cargo that’s not covered by your insurance policy
  • Your personal/business credit: a better credit score will help you get better rates on insurance. Paying your bills on time makes you look like a trustworthy business owner, running a serious operation.
  • Your driving history (and that of your drivers): insurance companies will pull an MVR on you and all your drivers before giving you the final quote. We recommend you bring your motor vehicle records to meet with insurance agents. It’ll save you and their time by getting you closer to an accurate quote faster.
  • How long you’ve had a USDOT number: insurance is most expensive for carriers who just got their USDOT number for the first time. If you can get your number early on and sit on it for a while, you’ll have a better chance at a lower rate.

Want to learn more about how to get a USDOT number? Read this article.

  • DUI, DWI, or suspended license: if you have any of these on your driving record, you may be turned away from most insurance agencies. If you’re not disqualified, your rates will likely be astronomical. 
  • Your age: being older than 35 will get the best rates.
  • Your CDL age: the longer you’ve had your CDL, the better.
    • If you’ve moved states recently, be sure to bring your MVR with your CDL to prove how long you’ve actually had your CDL. Most insurance agents will only look at your current state. 
    • If you’ve been procrastinating about getting your CDL, wait no longer! The older your CDL is with a clean driving record, the better.

Learn more about how to get your CDL in this article.

  • Where you live: this goes down to the county level. If you keep your truck in a garage, be sure to let your insurance agent know where that is. Moving it to another county could lower or raise your rates.
  • Where you will travel: if you’re going to work in interstate commerce using the load boards, make sure you let your insurance agent know that you’ll be traveling farther than 500 mi from your home base. It’s important to be covered no matter where you are in the country.

What could change the cost of insurance?

First, let’s talk about what can increase your insurance rates:

  • Accidents: of course, the cost of insurance is based on your risk. If you prove to be a riskier carrier, your rates will increase. 
  • Out-of-service by the USDOT: being placed out of service by the USDOT is a sign that you’re not following all the safety regulations you should. Many companies go out of business for this reason.
  • Violations at weight stations: this isn’t quite as severe as being put out of service, but these violations can add up very quickly and result in higher costs.
  • Growth: growing too quickly can pose more risk. Before you buy any new trucks or hire new drivers, ask your insurance agent if you will be able to add them to your policy. Most policies will have a limit on expansion, especially in your first two years of business. 

Now, what can lower insurance rates?

Insurance policies generally are renewable each year. So over time, there are many things you can do that can lower your insurance premiums:

  • Maintain clean driving and safety records
  • Hire more experienced drivers
  • Buy or upgrade to newer equipment
  • Avoid high-population metro areas or areas with notoriously bad weather
  • Build your company’s credit through a fuel card or other means
  • Pay upfront on a quarterly or annual basis

Where should I get my commercial trucking insurance?

So, what are the best insurance companies to work with? This is a difficult question to answer because policies vary widely across geographical regions, states, and counties. In fact, there are a number of states where you will want to find a local insurance agent to get the best deal:

  • California
  • Florida
  • Michigan
  • Mississippi
  • Louisiana

Regardless of where you live, be sure to shop around with a number of different agents and insurance companies. Limit your search to insurance agents that specialize in the commercial trucking industry because they will understand better what you need. And only get quotes from insurance companies with an A rating from AM Best or another reputable insurance credit rating organization. 

An A rating means the insurance company has a good track record of paying out claims and is likely to honor the terms of the insurance agreement. Brokers will want to know the rating of your insurance company to make sure they will also get paid if anything happens to one of their loads.

Many new trucking entrepreneurs find risk retention groups because they offer significantly lower premiums. But don’t be fooled – this is not the same as traditional insurance. 

You pay for what you save in your monthly expenses with many risks. There is a chance that if you make a claim, the group doesn’t have enough money to pay it out. Traditional insurance companies can access state guaranty funds in the event that they don’t have enough money to pay your claim. In fact, many brokers will not work with carriers insured by risk retention groups

It’s all in the details.

There’s so much to think about when you’re getting commercial trucking insurance for the first time. Here are some additional tips to think about:

  • Get at least three quotes from three different agents or brokers. 
  • Look to see what company is underwriting the policy
  • Check how many certificates of insurance you can get and at what cost. Some providers will give unlimited COIs at no additional fee, which is a great deal, especially for new trucking business owners, because you will need a lot of them!

The most important tip of all: talk to your agent to understand everything your insurance includes and doesn’t include. There are no stupid questions when buying insurance. The agent is there to help you understand your policy options and provide you with all the information you request. Remember, part of your premium will go to paying them for selling insurance – get your money’s worth of knowledge!

Insurance and cash flow

Insurance is one of the biggest expenses for motor carriers. It’s right up there with fuel and driver pay. You’re going to need strong cash flow to pay all your expenses on time.

But brokers and shippers can take weeks or even months to pay for loads. That’s where we come in with same-day funding. Our factoring service pays your invoices quickly so that you can keep up with all your expenses. Sign up here to get in touch with an Account Executive and learn more today!

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