Shopping for trucking insurance has never been an easy and enjoyable task. Let’s face it, who wants to pay large sums of money to the already wealthy insurance companies. Yes insurance is one of those necessary items we all have to buy. We understand this dilemma very well. This is why we would like you to be informed. We really want you to shop for your insurance, but we also want you to be well-versed of what to expect and what to demand.
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Trucking insurance rates have skyrocketed in the last couple of years. Insurance used to cost in the neighborhood of $7,000 per year per truck, now people are paying over $10,000 per truck. Being informed is more important now than it has ever been in the past. Let’s go over some of the determining factors in your insurance premium:
Yes this is the first and most important factor in calculating insurance cost. Trucking Insurance premium can very as much 60% or even 70% based on the company owner’s personal credit history. People with good credit pay a fraction of what people with bad credit pay. On several occasions we had people call us and say: “Well, my neighbor is about my age, don’t have tickets just like me, we driver very similar trucks, yet he is paying about half of what I am paying”. Yes this will always be the case. Every person is different and the insurance premium is based on many factors including personal credit history. Keep your credit history clean of blemishes and you will save thousands in truck insurance.
Your safety rating from the Federal Motor Carrier Safety Administration (FMCSA) is a very important element in calculating truck insurance. In many cases trucking companies are forced to close their doors because they can’t find an insurance company to insure them. The Safety Score and the Out Of Service violations are very serious matter and you should concentrate heavily in keeping your safety record spotless. Make sure your drivers’ log books are in proper order and your trucks and trailers are regularly maintained and inspected.
Even though when you buy a truck you are expected to travel far long haul distances, your home location will play a big role in calculating your insurance premium. People in densely populated cities pay far more than those in rural country areas. For example, insurance rates in Idaho, Montana, Wyoming and in many other less populated states, are 20-30% less than those in CA, FL, NJ, IL, etc. Even your zip code plays a role in your insurance premium.
Anyone below 30 years of age should expect to pay at least 20% more than if they were 30 or over. Trucking insurance rates are sure high, but for young drivers the insurance cost is almost unbearable. There is not really a fix for this issue, only time will reduce your trucking insurance premium. For now, stay in school.
General Liability vs Primary Auto Liability
Many people don’t distinguish between General Liability and Primary Auto Liability. But in fact the two are very different in respect to what they are intended for and in premium. General Liability, as the name of it entails, is intended to cover general business losses. Such as rented premises, office locations, personal injuries, etc. The premium for General Liability in most cases is about $600 - $700 per year. The Primary Auto Liability is the one which covers your trucks. This coverage is intended to cover other party in case of an accident at which you are found at fault. The premium for Primary Auto Liability is the most expensive part of your trucking insurance package. Usually in the neighborhood of $5,000 to $7,000 per truck per year.
The limit of your cargo insurance also makes a difference. Generally speaking, the premium for cargo insurance is 1% of the total limit you need. For instance, if you need $100,000 of cargo insurance, you should be prepared to spend about $1,000 per year per truck. But this is not always the case. Car haulers for instance pay more than general dry freight haulers. Car haulers’ cargo premium is about 4% of the total cargo limit.
Also called bobtail is something you can buy to cover your truck when you are not under dispatch with the motor carrier which provides your Primary Auto Liability. It will only cover losses when you are not using your truck on for hire bases.
Also called full coverage or comp and collision, is the coverage which covers your equipment. It usually has a deductible of about $500 or $1,000. The cost for this coverage is in the range of 3,5% to 5% of the total value of your equipment.
Above we discussed what factors play the most important role in determining your insurance premium, now let’s talk about a few additional things you should know about trucking insurance.
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Often motor carriers will lease on owner operators. In some cases the owner operators may have bought their own insurance would not want to be paying for the insurance provided by the motor carrier. Well this is simply wrong. You can’t allow your owner operators to display your MC number and not be covered under your primary liability policy. This is the FMCSA rule as well as almost certainly disclosed in your insurance contract. You have to insure all trucks owned or operated by the motor carrier or is owners. You may be asking yourself, well what would happen if I don’t list the owner operators under my insurance policy. The consequences are severe. If the owner operator is in an accident where he / she was found at fault, then the owner operator’s insurance may not pay for the damages. Ultimately it is the motor carriers’ responsibility to include the owner operators on to their Primary Auto Liability policy. Also, if the motor carrier’s insurance company finds out that owner operators are being used and not listed, more than likely the insurance policy will be canceled.
Recently, we have seen an increased tendency for a motor carrier to close their MC / DOT number and open a new one. In most cases the reason for such is the motor carrier’s safety record. However, insurance companies are becoming more and more vigilant in their research. They are using services which match old and new MC / DOT numbers. If such match is found, more than likely either the insurance company will not offer a quote or if the policy has been bound they will cancel it.
We really hope that what we discussed in this section has been helpful to you, the transportation professional. We have many more stories, examples and information to share. We will gladly try answering any of your questions. If you have something you would like to discuss with us, just give us a call please. We will assist you.