4 types of insurance associated with owning an eighteen-wheeler

Owner operators are asking us to have truck insurance explained and what are the charges.

 We found out that many owner operators who want to lease with us, don’t know how different types of insurance coverage work. There are four main types of insurance that trucking companies and owner operators should be familiar with.

Liability Insurance

This is the most important from a legal standpoint. Without it, a trucking company cannot legally haul freight on public highways, making the company MC (motor carrier number) unusable.

As the name implies this type of insurance covers liability in a potential accident. When drivers with bad records apply for work, it is this type of insurance that prohibits the company from hiring them. From their standpoint, putting unsafe drivers in the truck is too big of a liability and the risk of potential accidents with such drivers is too high. Once denied coverage it is illegal to put these unapproved drivers behind the wheel.

Liability insurance covers only the accidents that happen under dispatch. These are during the normal work of the truck. Auto-liability insurance does not cover little personal trips.

The price varies among carriers, but for the most part starts at $500 per month and goes up, depending on the safety profile of the company. We, at Logiflex, implemented eLogs 2 years ago, which resulted in a significant revenue cut (you know paper logs are more “elastic”), but our safety scores improved dramatically and our claims decreased. I will get into more detail about the pros and cons of eLogs in a future post.

In a nutshell, when it comes to liability insurance,the safer the company the lower the premium.

Physical Damage

Covers the damages on the insured equipment. If we have an example with insured bobtail and uninsured trailer. In a potential accident the insurance company will pay for the first without covering the second.

The formula, calculated as percentage of the value for which the equipment is insured, is as follows: truck value x (policy percentage) / 12 = monthly physical damage payment. If we put in some numbers it would look like this: truck valued for $50,000 with insurance rate of 3%, in the formula, we get 50,000 x 0.03 / 12 = $125 monthly payment. Sometimes the driver can bargain a lower percentage. There are plans where you pay 25% upfront and the rest of the amount splits in 9 equal payments. Not paying anything in the last three months.

Some drivers are tempted to insure their equipment for a price higher than the actual value, so in case of a total loss accident they get more money than the truck is worth. Don’t do that!!! Insurance companies would only pay for the market value of the equipment.(You know when something happens with the batteries and the truck burns down). On the other hand, if the value of the truck on the policy is below market value, the insurance company will only use the reported value amount instead the actual market value amount.

Cargo Coverage 

As the name implies, this type of insurance covers the cargo that is transported in the trailer. It is usually very cheap — about $50–100 a month. If you are an owner operator who leases to Chicagoland carrier, most likely you know $700-900 “cargo” insurance per month(or $170 or so per week).

The lingo name of this truck is "bobtail". If it hits one of the surrounding cars, the claim will go under Bobtail Liability policies. Dispatcher did not authorized the driver to take it to that parking lot.

Bobtail Liability

When owner operators purchase physical damage insurance, they are also asked to add bobtail liability coverage. It usually costs just a few dollars per month. It covers potential accidents when the driver is using the truck as a personal vehicle. Example would be  driving bobtail to and from movie theater, buying groceries, etc.

Many trucking companies would require owner operators to show proof of such coverage before leasing with them. This way carriers protect their liability policy from potential claims that would happen during non-dispatched driving.

There you have it - truck insurance explained. For all documents that need to be in your truck folder read here.