September 28, 2022

What Can I Expect with Commercial Trucking Insurance?

What Can I Expect with Commercial Trucking Insurance?

Securing commercial trucking insurance is a legal requirement for every owner operator, but the details behind what types of coverage you should have and what an appropriate rate is for your business aren’t always spelled out in clear terms. With so many unknown and unfamiliar factors, it’s easy for commercial insurance to seem like a prohibitive obstacle for many independent truckers.

Here’s what you need to know before purchasing commercial insurance, including specific Haulin’ Assets episodes and resources designed to help you on your way toward successfully operating your new trucking business.

man driving a truck

Five Simple Steps to Follow When Securing Commercial Trucking Insurance

It’s no coincidence that obtaining sufficient coverage is one of the first issues new owner operators must tackle when setting up a new trucking business. Insurance is a costly expense for owner operators, making it even more critical to understand the coverages you need, the options available, and the cash you’ll need on hand before following through with an insurance plan. 

Frequent listeners to our Haulin’ Assets podcast might remember one of our earliest episodes in which Chris Vernon, owner of Motor Carrier HQ, covered five prerequisite steps that owner operators need to take before acquiring commercial trucking insurance. These steps, listed in the order you should follow when completing them, are to:

  1. Apply for your motor carrier authority to secure an MC and USDOT number before you call your insurance agent.
  2. Gather the information your insurance agent will need for a quote.
  3. Call at least two different insurance agents and get quotes from several insurance companies.
  4. Evaluate the quotes, bearing in mind that balancing cost and the necessary coverage doesn’t always mean picking the cheapest possible option.
  5. Be prepared for a sizable down payment of at least 10% (usually more like 15–25%).

Following these steps will help prepare you to discuss potential insurance options with your agent — saving both of you time and effort — and also ensure you have several viable insurance quotes to compare so you can find the best rate and coverage in your area. 

It’s also worth noting that not all insurance agents specialize in organizing commercial trucking plans. When researching insurance plans for your trucking business, be sure you’re speaking with an agent who has a deep understanding of commercial truck insurance. These specialists will know how to avoid headaches as you sort through options with potential insurance providers.

Determining Your Coverage

There are several key areas owner operators are legally required to insure in the event of an accident: 

  • Your Truck – Coverage for physical damage to your own vehicle will vary — yet another reason it’s helpful to speak with an agent who works specifically with commercial truckers. Since there’s no one-size-fits-all amount for insuring your truck, you’ll want an expert to evaluate exactly how much coverage you require without needlessly over-insuring it.
  • Your Cargo – The most common amount of insurance for cargo is $100,000, but the figure can vary depending on what you’re hauling and the potential scope of the damage caused if that cargo is involved in an accident.
  • The Property of Other Individuals – When it comes to damage done to others’ property, the FMCSA requires primary liability coverage starting at $750K and potentially up to $5M. There is a lot of talk about increasing the minimum to $2M, which will definitely have an impact on everyone’s insurance rates.

Other types of liabilities in need of commercial insurance that owner operators should be aware of include:

  • Trailer interchange liability
  • Non-trucking liability
  • Medical liability
  • Uninsured motorists

Are Insurance Rates on the Rise?

Though disruptions to the global supply chain and talk of an ongoing driver shortage typically grab most of the headlines, the trucking industry is also enduring rising operating costs for business essentials like fuel and insurance premiums. Earlier this year, one ATRI report revealed insurance premiums have risen 47% over the past decade, far exceeding the nominal rate increase in crashes over the span of the study.

someone using a calculator

Causes in rate spikes range from larger economic forces like inflation and pandemic safety precautions to more specific challenges like rising litigation costs and an industry-wide decrease in coverage plans in excess of $1M. 

How to Get the Best Commercial Insurance Rate

Despite the difficulties causing rates to rise, there are several ways for even the newest owner operator to bring insurance rates down and keep them manageable as you work to grow a budding business. 

Here are a few quick tips to help keep your insurance premium rates in check:

  • Maintain a clean driving record. Sure this is probably the most obvious key, but it’s also among the most impactful. Keeping your record free of infractions and then making an effort to hire other drivers who have managed to do the same will help you save big in the long run.
  • Plan ahead. Did you know that your insurance rate can be affected by what routes you choose to take? Drivers who frequent accident-prone areas will often have higher insurance premiums. Take some time to carefully plan your routes ahead of time so that you avoid areas known for extreme weather and dense traffic. Whenever possible, always opt for the less-risky routes.
  • Pay for an annual payment plan. Yes, your insurance plan’s monthly payments may appear more palatable at first, but they’ll hammer you with high interest over time. The annual payment plan is generally accompanied by more friendly interest rates, which will save you money in the long run. If needed, you can apply a business term loan to the annual lump sum, then pay off the loan throughout the year with significantly lower interest than you would have on your monthly insurance payments.
  • Don’t miss your payments. Whether you pay annually or monthly, consider your insurance payments set in stone with your other foundational business expenses as non-negotiables. Many insurance providers offer small discounts for customers who regularly make their payments on time. 
  • Keep at it! Insurance can be a frightening barrier to entry for new owner operators, but rates decrease as your business builds credibility and shows insurance providers that it has staying power. Small business owners who faithfully make their payments and avoid accidents will be rewarded as they become “less risky” to insure.

Being an independent trucker often means grappling with obstacles that can seem daunting at first glance, but with the right preparation, new owner operators can quickly learn the skills necessary for success. The Motor Carrier HQ team is determined to bring drivers the resources and coaching needed to get their new businesses off the ground. Schedule a call with one of our coaches today!

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