Truck Insurance: Know Your Needs

Truck insurance is one of your largest fixed costs as an owner-operator, and one of the most critical. Having the wrong insurance coverage after a claim could mean financial disaster.

There are many variables that factor into the rate you’ll pay, including your driving record, age, what you’re hauling and the age and condition of your truck and trailer. As a non-hazmat independent driver, you’re likely to pay in the neighborhood of $20,000 or more for liability, cargo, physical damage and non-trucking-use liability insurance.

Leased owner operators carry the same insurance, but don’t bear as much of the cost, as some fleets often absorb costs such as primary liability and cargo insurance.

So, what do you need to know? Here are the basic types:

• LIABILITY INSURANCE

Operating under your own authority? You must have liability coverage – it’s required by federal law. Generally, $750,000 to $1 million is usual, although many shippers require a minimum of $1 million for their carriers. Remember, truck accidents can cost millions upon millions of dollars, so you may want to consider more coverage for your own protection.

Even if you are operating under a lease agreement, that agreement may not necessarily protect you. For that reason, some leased owner-operators have their own liability insurance in addition to what their carriers provide. For most, though, having liability insurance provided is a distinct advantage. Liability insurance is expensive, and new independents can have difficulty finding insurers.

• DAMAGE INSURANCE

Although you aren’t legally required to have damage insurance, your lender will require it. The damage policy pays for the value of the equipment at the time of the accident, so the payout likely won’t be enough to buy a new truck.

When purchasing damage insurance, it will be less expensive to buy from an independent agent than from your truck dealer, who will roll the cost into your truck payment.

Finally, make sure the policy doesn’t include towing. You don’t want any part of the settlement to count toward towing fees, or else you’ll be out thousands of dollars that could have gone to repairs.

Extra Costs

You can always purchase gap insurance to cover any difference between a settlement you receive from a damage insurance policy and what you owe on your equipment. This is particularly helpful if you have a new truck, when you might owe more than the truck is worth due to depreciation.

Also, give your deductible serious thought. The deductible is the amount the policyholder pays before the insurance policy goes into effect. The higher the deductible, the more out-of-pocket expense you will have after a claim. A low deductible – around $1,000 – is often the best bet for an owner-operator. If you have a high deductible in your fleet policy, consider deductible buyback insurance, which is quite reasonably priced, to ensure you’re not placed under financial strain.

Finally, make sure you understand what equipment won’t be covered under your damage policy. Items such as tarps, tools, electronics, chains and auxiliary power units can add up. Your personal items also won’t likely be covered.

• CARGO INSURANCE

Shippers require their carriers to have cargo insurance, and fleets typically purchase $100,000 for their leased owner-operators, unless they are specialty carriers that need more. Since your liability and damage insurance policies won’t extend to cargo, make sure you know what your cargo insurance covers, the value of what your carrying, and who is responsible in the event a load is lost.

• NON-TRUCKING-USE LIABILITY INSURANCE

Non-trucking-use liability insurance – or what is sometimes called “bobtail insurance” – covers situations when accidents occurs while drivers are operating trucks on their own personal time. If they’re under lease, but not under dispatch, non-trucking-use liability insurance pays in the event of damage or injury.