The trucking industry provides essential services for consumers and companies around the world. As a crucial part of manufacturing and transportation, trucks transport large quantities of raw materials and finished products across long distances. With over 70% of American goods shipped by truck, the trucking industry is essential for regular access to goods.
One of the most important aspects of a healthy truck company is insurance. With so many trucks on the road, keeping drivers and transported goods safe is essential. The Federal Motor Carrier Safety Administration (FMCSA) requires proof of insurance before trucks can operate. But understanding all the insurance requirements can become overwhelming if you’re starting a new trucking company.
Read on for more information about insurance needed for trucking companies.
Why Insurance Is Necessary for Trucking Companies
Before purchasing a trucking insurance policy, you should understand the reasoning behind its necessity. Insurance is essential for trucking companies due to several reasons:
- FMCSA requirements: The FMCSA requires insurance registration before they grant trucking companies authority to operate. Applicants must file the appropriate paperwork and legal documents before they can begin operation. Without insurance, you cannot legally use a carrier for commercial purposes.
- Road safety: Next, insurance is also essential to keep roads safe. Road accidents are common, and the heavy loads hauled by trucks make them more damaging. Insurance plans provide coverage for potential damages to roads and third parties in the case of accidents.
- Truck driver health: Insurance can also help with truck driver health. The long hours, tight deadlines, and extended time spent sitting can cause health issues for drivers. Having insurance is important for helping with these risk factors.
It’s also important to know the difference between insurance types so that you can choose the best option for your needs. For instance, understanding the distinction between trucking and typical auto insurance is critical for trucking companies. Here’s an overview of their differences:
Trucking vs. Regular Commercial Auto Insurance
Regular commercial auto insurance covers vehicles needed to conduct business, like passenger cars, larger vans, or box trucks. Businesses that rely on these vehicles travel shorter distances and drive for briefer periods. They conduct business on specific job sites, while truckers’ business centers on driving. When it comes to insurance, the trucking industry is subject to different risks and liabilities than other commercial businesses.
The trucking industry delivers cargo types across much longer distances, with drivers on the road for hours. These factors put the trucking industry at risk for liabilities that typically aren’t present in other commercial industries. Lengthy hours on the road each day becomes a sedentary lifestyle, which can lead to health issues.
Additionally, truck drivers operate much larger vehicles to conduct business. Using these vehicles requires specialized training because they are harder to maneuver and can do a lot more damage in the event of an accident. Trucking insurance is tailored to the risks associated with the trucking industry, mitigating the chance of financial burden when the inevitable accident occurs.
Two Essential Policies for the Trucking Industry
When you’re in the trucking industry, you should have two primary types of insurance policies: primary liability and general liability insurance. Both work together to provide coverage for personal injury or property damage.
Primary Auto Liability
Primary auto liability insurance, also known as commercial liability, is generally required by law for anyone who drives a vehicle. This must-have insurance has two main components: property damage coverage and bodily injury coverage.
- Property Damage (PD) liability insurance: If you or one of your drivers is at fault for an accident that damages another individual’s property, this portion of your primary auto liability insurance can cover the related costs. These include money needed to repair or replace damaged property like vehicles, homes, and household fixtures. Sometimes, this type of insurance also provides coverage for pets.
- Bodily Injury (BI) liability insurance: This portion of auto insurance covers costs related to injuries and deaths from driving. These include funeral costs, nursing care, lost wages, pain and suffering, and hospital, medical, and rehabilitation bills.
The cost of primary auto liability insurance varies. The amount of coverage you receive depends on the limits you select. Limits determine the maximum amount of money your insurance provider will pay if you need coverage for bodily injury or property damage. They are usually characterized as combined single limits (CSL) or split limits.
Generally, combined single limits are more expensive because the limit totals what your insurance provider would pay in the case of a bodily injury or property damage accident.
Split limit coverage works as follows:
- Bodily injury per person: The maximum amount your insurance company would pay for injuries per person involved in the accident.
- Bodily injury per accident: The maximum amount your insurance provider would pay for injuries per accident.
- Property damage per accident: The maximum amount your insurance provider would pay for property or vehicle damage per accident.
When selecting a limit for your primary auto liability insurance, make sure to check your state’s requirements and restrictions. Each state has minimum limit requirements for liability insurance.
General Auto Liability
General auto liability insurance covers your trucking business against injuries or property damage caused by business activities. However, it does not cover costs directly related to operating your trucks.
Like primary auto liability insurance, general liability insurance is a must-have for trucking companies because accidents can happen even on your business premises. To get general liability insurance, you must already have primary liability policy as a prerequisite.
When you purchase general liability insurance for your trucking company, you can get coverage for:
- Bodily injury and property damage liability: This option covers property damage or injury to a third party caused by you or your drivers.
- Medical payments: This type covers injuries to individuals who are not typically on your business premises but get injured while visiting.
- Personal injury (PI) and advertising injury (AI): This method covers injury to an individual or entity that is not physical and is the result of negligence on your business’ part.
- Products/completed operations: This option covers bodily injury or property damage resulting from delivering someone else’s products.
- Damage to premises rented to you: This coverage is available for a maximum of seven days.
General liability insurance limits are generally around $1,000,000 per property damage or injury occurrence, with a $2,000,000 aggregate. Of course, every business has different insurance needs, so costs for general liability insurance vary depending on various factors, like:
- Driver experience and potential accident records
- Type and size of trucks
- Type of cargo being hauled
- Where you and your drivers haul cargo
- Duration and distance of hauls
Additional Insurance Policies to Consider
In addition to primary and general auto liability, trucking companies have a variety of other insurance coverage available. Each type can provide additional coverage in specific circumstances. If you want to start a new trucking company, you might encounter additional insurance costs for new trucking businesses.
These are other insurance policies you can consider:
Bobtail or Non-Trucking Liability
Bobtailing is a common method used while transporting goods. The term “bobtailing” refers to a driver operating a semi-truck or 18-wheeler without an attached trailer. Drivers might have to bobtail after dropping a load off or on the way to retrieve a new load.
Bobtailing is a risky practice for multiple reasons:
- Difficult control: In a bobtail setup, the truck’s front end bears the most weight, making driving more difficult. And without the weight in the back, a bobtail can pick up speed more easily, resulting in more speed-related accidents.
- Reduced brake power: A truck’s brake system usually resides on its back wheels to account for the heavy load in the back. But in a bobtail configuration, the brake power is reduced due to the lack of weight on the back wheels. Drivers might find it challenging to fully stop their vehicle, which causes hazards on the road.
- Lower frictional force: A lot of truck movements rely on frictional force, or the friction between the truck’s wheels and the road’s surface. But with less weight on the rear wheels, the truck produces less friction. The lack of friction can cause skidding or other road-related accidents. In extreme weather conditions with low friction levels, such as when ice is on the road, bobtailing becomes even more dangerous.
With bobtail insurance, you can receive coverage for bobtail-related accidents. These insurance plans cover the time in-between loads when drivers must operate the truck without a load in the back. For instance, if you got into an accident after dropping off a load while on your way to pick up the next load, bobtail insurance would assist you with damage coverage.
Physical damage coverage is another insurance type to consider. This insurance option covers the expenses for truck and trailer repairs after physical accidents. Many factors could cause damage to your truck, including:
- Theft or vandalism
- Extreme weather or natural disaster
With physical damage coverage, you can receive financial assistance for any damages that occur. Your insurance premiums depend on your truck’s overall value and the extent of the damages.
Physical damage insurance consists of two options:
- Collision coverage: Collision coverage provides coverage only when your truck collides with another vehicle.
- Comprehensive coverage: This type covers all other instances of physical damage besides collisions. For example, a comprehensive insurance plan would cover injuries from fire, theft, or vandalism.
Because collision and comprehensive coverage are regarded separately, you can purchase one or the other. It’s typically recommended to buy both options to cover all potential incidents.
Cargo insurance for trucks gives coverage for the goods you carry in a truckload. It covers liability for the commodities in case they become damaged during transit. Many officials require truckers to get cargo insurance to ensure they can cover the costs of lost or damaged goods.
Your truck’s goods might get harmed by:
- Accidentally falling off the vehicle
- Exposure to water
With cargo insurance, you can receive coverage for the damaged property. Depending on your insurance plan, you could also get coverage for removal expenses or possible legal fees.
Before registering for cargo insurance, it’s important to ensure your products are eligible for coverage. Cargo insurance doesn’t cover some goods, such as:
- Tobacco or alcohol
- Live animals
- Explosive materials
Uninsured motorist insurance offers coverage for accidents involving uninsured drivers. If an uninsured driver hits your truck, they likely won’t have enough to cover the costs of the damages to your truck. This insurance type will pay for the remaining expenses, guaranteeing you don’t have to pay out-of-pocket for the accident.
Many truck companies use trailer interchange agreements to complete shipments on time. An interchange contract transfers one trailer to another company for a temporary period. However, while the driver has possession of the vehicle, they become responsible for any damages that might happen.
Luckily, another insurance option available for trucks is trailer interchange insurance. Similar to physical damage insurance, this option provides coverage for any harm that occurs to trailers under an interchange agreement. In other words, it functions like physical damage insurance for rented or non-owned trailers. Because you don’t own the trailers, they require a separate policy.
For example, if you returned to your trailer and found it vandalized, you would need to find sufficient coverage for the costs. Regular physical damage wouldn’t cover the expenses because you don’t own the vehicle. Instead, you could use trailer interchange insurance to cover the damages.
If your company frequently uses interchange agreements, interchange insurance is highly beneficial.
Downtime Coverage and Rental Reimbursement
Finally, you can also purchase downtime coverage and rental reimbursement insurance. Your primary source of income relies on your trucks’ efficiency. If your truck falters or experiences downtime, you could lose valuable income.
This insurance option provides coverage for truck downtime. Whether your vehicle needs maintenance or is inoperable after a collision, downtime coverage can get you back on the road quickly.
For example, this insurance type could:
- Provide you with a rental vehicle while you wait for your truck to get fixed
- Help you cover crash-related bills and costs
- Pay rental fees while you use an alternative vehicle
Downtime coverage and rental reimbursement insurance can prevent you from losing income after an accident, making it crucial for trucking companies.
Apex’s Startup Program Can Help
Truck insurance is essential for driver and road safety. Trucking companies should regularly evaluate their insurance policies to ensure they meet their needs. If you’re interested in starting a trucking company, finding the best insurance coverage is essential for your success in the industry.
At Apex Capital, we understand the importance of the right insurance plan, especially for new companies. Our Apex Startup Program can help you establish a new trucking business. We can guide you through the setup process, from filing for registration to finding the best insurance policies. We tailor our full-service program to meet your specific needs and goals for the company.
If you’re ready to kickstart your trucking company, get started with Apex’s Startup Program today. Contact us to learn more.