A Guide to Commercial Truck Insurance Requirements
For any enterprise that has trucks, having a good understanding of how commercial truck insurance works is important. Here is everything you need to know in one guide to help you handle requirements and make informed decisions.
What is Commercial Truck Insurance?
Commercial truck insurance is for businesses and goes beyond standard personal auto insurance. It includes liability, collision, and cargo damage coverage, which are important to safeguard against the numerous risks involved in commercial trucking.
Types of Commercial Trucks That Require Insurance
Various commercial vehicles need specific insurance coverage, including:
- Semi-Trucks: Used for hauling heavy goods over long distances.
- Box Trucks: Common for local deliveries and moving goods.
- Flatbed Trucks: Transport large or oversized items.
- Refrigerated Trucks: For perishable goods requiring temperature control.
- Dump Trucks: Used in construction for hauling materials.
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Types of Coverage
Liability Insurance
Liability insurance is a basic commercial truck insurance coverage, mandated by many states. It pays for the damage the truck driver causes to others involved in a crash. That includes bodily injury liability (for medical costs, lost wages, and legal fees of injured third parties) and property damage liability (for vehicle, building, and property repair or replacement).
It does not protect the truck driver for his injuries or damage to his vehicle. When a truck crashes into a car, for instance, liability insurance will cover the cost of repairing the car and the medical bills of the injured driver, but not the damage to the truck. There are typically set limits on policies (e.g., $100,000 per person, $300,000 per accident), and higher limits may be needed if operations are high-risk.
Collision Coverage
Collision coverage covers repairs or replacement of the truck itself in the event of an accident, no matter who is at fault. It’s meant for collisions with other vehicles that are parked or moving, stationary objects (like guardrails), or rollovers. This coverage is optional but is typically required if the truck is financed or leased.
Unlike liability insurance, which shields others from your mistakes, collision insurance will protect the trucking company’s investment, the truck, but does not cover non-collision-related damage, such as theft, weather-related incidents, and other incidents. For example, if a truck slams into a barrier, collision coverage covers repairs once the deductible is achieved.
Comprehensive Coverage
It is crucial to include collision coverage because comprehensive coverage shields the truck from loss or damage that is not related to collisions. It includes theft, vandalism, fire, natural disasters (floods, hail), falling objects, and animal strikes (swerving to avoid a deer). This coverage isn’t required, but it may be a smart idea, especially if you have an expensive or regularly driven vehicle.
Just like collision insurance, there’s a deductible. If, for instance, someone breaks a truck’s windows or steals its cargo, comprehensive coverage covers the cost of repairs or replacing the broken windows or stolen goods. It offers financial security for unexpected, unforeseen accidents.
Cargo Insurance
The goods being moved in a truck are protected under cargo insurance from loss or damage caused by accidents, theft, fire, or natural catastrophe. It is mandated for over-the-road truck operators by FMCSA regulations and is also a requirement within shipper contracts. Limits are dependent upon the value of the cargo, with some policies offering up to $100,000 or more per load.
However, there are some high-risk or perishable goods (e.g., hazardous materials, fresh goods) that may have to use the specific policies. If, for instance, a truck tips over, crushing a load of electronics, cargo insurance reimburses the shipper for the lost items. This coverage is necessary to protect customer confidence and to avoid potentially significant out-of-pocket expenses.
Additional Coverages (Optional but Useful)
In addition to the above basic policies, trucking companies may also require optional coverages such as uninsured/underinsured motorist (UM/UIM) coverage to provide protection if a negligent driver has inadequate insurance. Medical payments (MedPay) is for the driver’s or passengers’ medical bills after an accident, and non-trucking liability (creates bobtail insurance) covers trucks when they are being used for personal errands.
Some policies include downtime reimbursement to compensate for lost income during repairs. This coverage allows drivers, vehicles, and business operations to be protected even more fully.
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Factors Affecting Insurance Costs
- Several factors influence premiums:
- Truck Type and Value: Higher-value trucks cost more to insure.
- Goods Transported: High-risk or high-value cargo increases costs.
- Driver's Record: Safer drivers may receive lower rates.
Operating Area: Urban areas may have higher risks and costs.
Minimum Insurance Requirements
The Federal Motor Carrier Safety Administration (FMCSA) mandates at least $750,000 in liability coverage, though some states require more. Always check local regulations.
Tips to Reduce Commercial Truck Insurance Costs
- Keep Your Driving Record Clean: Being a cautious driver can reduce your rates.
- Install Safety Devices: Features like GPS tracking can reduce risks.
- Choose Higher Deductibles: Lower premiums mean higher deductibles in a trade-off.
- Annual Payments: Making an annual payment can be more cost-effective than monthly.
Common Mistakes to Avoid
When navigating the complex world of commercial truck insurance, try to avoid these typical blunders that could expose your company. One big mistake is to underinsure, meaning the coverage is too little in relation to the value of your assets. That leaves the baker, or ultimately the insurance company, on the hook for a very large bill if there is an accident or other circumstances.
Ignoring your policy's fine print, which contains numerous details that could leave you with unintended gaps, is another costly mistake. Make sure you understand exactly what is and isn't covered by your insurance policy by carefully reading it every time.
Conclusion
Getting the right commercial truck insurance is crucial to protecting your business, your investment, and your future. It is recommended to consult with an insurance professional to make sure you have adequate coverage that addresses your unique circumstances.