The fact that insurance costs may quickly accumulate is one of the reasons why many owner-operators budget their rates a year in advance. The following factors can impact your insurance costs: your age, your driving history, the age and condition of your equipment, the goods you move, the lanes you operate in, and state regulations. However, an owner-operator with a new truck and his own authority is likely to spend each year:
- $5,000 for $1 million in main liability insurance to protect you against harm or loss caused to third parties in the event of an accident while you’re on duty.
- In the event of a collision, you should have $2,400 in physical damage insurance to cover damage to your vehicle and trailer.
- Invest $1,000 in cargo insurance to protect against theft or damage to the load you’re transporting.
- $1 million in liability insurance for non-trucking uses costs $450.
With a clean driving record, the total cost of all that insurance comes to almost $9,000.
Although they contribute less to the cost directly, leased owner-operators often carry the same amount of truck insurance as an independent. The leased operator should ensure that the lease agreement details what he is accountable for and what is not (usually main responsibility and cargo insurance) (typically physical damage and non-trucking liability insurance).
A lot of fleets charge the owner-operator for liability and cargo insurance, often by taking a cut of all settlements, although some fleets cover it as a necessary evil. Particularly in courier or delivery applications, several companies require drivers of smaller vehicles to manage their own principal obligation.
Owner-operators shopping for insurance can look to trucking-specific insurance agencies or truck dealers. Shop around before you buy.
Some leased owner-operators buy all their insurance independently of the plans offered by their fleets. This costs more in most cases, but its advantages include more control of your coverage, a closer business relationship with your agent, and a speedier reply when you have an emergency. Independently purchased insurance is portable, so if driver and fleet part ways, the driver’s still covered en route to the next orientation. Before you can be assigned a load, of course, you’ll have to show your carrier proof that you have all the coverage it requires.
Federal law mandates that independent contractors have liability insurance with a minimum limit of $750,000. This is to safeguard you in the event that you cause a serious accident and are at fault. Given that a catastrophic vehicle accident might cost millions of dollars, you might want to think about getting greater coverage, at least $5 million.
Primary liability insurance is a requirement by law, thus leasing agreements typically include it. But keep in mind that just because your carrier is covered for damage you do doesn’t mean that they will be on your side in the event of an accident. Because of this, some leased owner-operators decide to get liability insurance separately from their carriers.
But for many, one of the main benefits of leasing is that responsibility is taken care of. Owner-operators who transition to independent regulation are frequently shocked by how expensive, complicated, and time-consuming liability coverage may be.
A typical main liability policy binds the insurer to paying up to $1 million if something goes wrong, as opposed to a damage policy, which just commits the insurer to covering the truck’s current worth. The insurer only receives roughly $5,000 a year in premiums for taking on that risk. Additionally, owner-operators are viewed as larger risks by the insurance sector than fleets.
It makes sense that the insurer would seek every assurance that nothing would go wrong before signing that contract. The sort of freight to be transported, the area or operating radius, the independent’s driving and business experience, and standard safety and security procedures are likely to be discussed with him by the insurance. Owner-operators might benefit from showing that they have a sound long-term and short-term business strategy, which includes a daily maintenance program and regular safety measures.
Physical damage insurance is required by lenders but is not mandated by law. A common damage premium is between three and five percent of the truck’s value, or $3,000 to $5,000 for a truck with a value of $100,000. However, assuming you can still receive damage insurance at all, a poor driving record can increase the cost to $8,000 or more each year.
A damage policy’s most crucial aspect to comprehend is that it will only cover up to the equipment’s book value at the time of the accident. In other words, even if your current truck is totaled, you won’t be entitled to a new one through a damage claim. Always choosing the lowest option, which is typically fixing the truck you already have, is how the insurer like to operate. You’ll get, at most, enough money to buy a truck with similar age and mileage.
Due to depreciation, an owner-operator frequently owes more on a truck than it is actually worth, thus GAP INSURANCE may not even be sufficient to cover the remaining payments on the damaged vehicle. Gap insurance is beneficial if you drive a new vehicle or a used truck that is no older than five or six years. It pays off the difference between the truck’s real book value and the amount you still owe on it. In the event that your truck was totaled, you would fall short of $20,000 to pay off the loan if the market value of your truck was $30,000 and you had a loan debt of $50,000. The $20,000 gap would be covered by Gap coverage.
DAMAGE DEDUCTIBLES The deductible is a crucial component of a damage calculation in addition to the premium. A $1,000 deductible means the policyholder has agreed to foot the first $1,000 in costs out of pocket before the insurance kicks in.
Ask your agent for a variety of costs at low- to high-deductible levels. Typical deductibles are $1,000. The deductible options on a top-of-the-line vehicle may reach $10,000. For an owner-operator, low to moderate deductibles are the best options. If an accident forces you out of business, having a large deductible is not a good deal.
OTHER EQUIPMENT COVERAGE Any truck equipment, such as tarps, binders, or chains, that isn’t covered by a standard damage insurance can be added by the owner-operator for a low fee. A basic damage coverage probably won’t pay for the expense of replacing any spilled liquids or a tank full of fuel that occurs in an accident. Boilerplate damage plans normally only cover the truck’s original equipment manufacturer-installed fittings, not any aftermarket additions. None of the above, including Qualcomm, Vorad, satellite radio, TVs, and laptops, is automatically covered. For a little charge, they can be insured, but the insurance provider has to be informed that the objects are there.
INSURANCE FOR CARGO
Only $5,000 in cargo coverage is required by the federal government, but that is the absolute least. In most cases, fleets purchase $100,000 on the owner-behalf, operators as required by many shippers. Specialty haulers have far more capacity. According to Overdrive study, 5% of owner-operators had to utilize their cargo insurance within the previous three years. Even though the average claim was just $2,936, 25% of those who filed claims claimed that the cost put their firms in a difficult financial situation.
In some leasing agreements, if the owner-operator causes an accident and is at fault, whether or not there is cargo insurance, he is responsible for any cargo losses. Some cargoes are significantly more valuable financially than what an owner-cargo operator’s insurance will pay for. However, 39% of owner-operators are unsure about who is responsible for the difference in case a costly load is lost. Before an emergency arises, read your insurance and get the answers to these inquiries.
This insurance is more precisely known as bobtail insurance, and it protects you even while you’re not on dispatch. Most carrier leases include the need for non-trucking usage liability coverage.
The precise definition of under dispatch is typically decided in courtrooms. According to court rulings, even a bobtail ride home falls under dispatch since the route is based on the last place the company dispatched the driver.
Sometimes the fleet’s insurance provider denies a claim, claiming the owner-operator was not on dispatch at the time, and the owner-insurance operator’s provider denies payment as well, claiming the owner-operator was on dispatch at the time. Owner-operators in these situations are caught in the middle and require competent legal representation.
PREMIUM REINVESTMENT. Here are a few ethical business principles that might assist prevent premium rises.
DRIVER SAFELY. A truck insurance price will go up if you get a speeding citation in your personal car, and some insurers could refuse to work with you. Major offenses will remain on your record for the rest of your life, even for small offenses.
TAKE A BITE OUT OF CRIME. Take extra care while transporting items like cigarettes, mobile phones, or luxury clothing that crooks find appealing. Do not leave a vehicle or trailer unattended during a holiday weekend; only park in well-lit, secure places.
KEEP VALUES UP TO DATE. Every year, discuss with your insurance agent how to modify your coverage to reflect the evolving worth of your equipment.
AVOID OVER-INSURANCE. Being over-insured frequently results in redundant coverage, such as a private insurance that overlaps a fleet policy. Also, avoid purchasing excessive coverage.
ALERT FOR THOSE LUMPERS. Leave your trailer and goods to the care of dockworkers and lumpers you don’t know. To ensure that nothing is harmed, keep an eye on what is happening.
RECOGNIZE YOUR CARGO. Check out the bills of lading. Find out exactly what you’re transporting and for whom by asking inquiries of your dispatcher or freight broker in case it exceeds the scope of your cargo policy’s coverage.
CONTINUE MAKING PAYMENTS. Even if you can find an insurer to cover you, letting your insurance expire can cost you more in premiums for years to come.