Congratulations, you are now an owner-operator. For years, you’ve toiled for someone else’s fleet, traveling the country but having little say in where you go and what you haul. The time is right, though, to make that switch, with rates near record highs, a lack of available capacity meaning you can now be selective about the loads you choose, and the proliferation of digital freight matching apps and loadboards that are making it easier than ever to find a load at the right price, and to do so quickly.
If only it was that easy. There are many steps you need to take to gain your own authority, or maybe you’ve chosen to lease on with a larger company as a leased owner-operator, but whichever route you choose, there is an endless list of items you must address. Once you find your truck and attend to the many other matters at hand, you must turn to insurance.
What type of insurance do you need?
Reliance Partners recently offered some insight into owner-operator insurance, which varies from other types of commercial insurance.
The firm says to start with Liability insurance. Minimum levels are $750,000, but they suggest a higher amount, perhaps $5 million, which can help keep your operation afloat in the case of a major incident. There are usually riders available to help you tailor the coverage to your specific needs.
Most lenders will require “physical damage insurance” that covers the cost of a truck’s depreciated value. Like automobile insurance, you can also purchase gap insurance that can help cover for the difference between the value of a truck and any loan balance should the vehicle be totaled.
Cargo insurance is another must. Owner-operators must have at least $5,000 in coverage, but can be significantly more depending on the freight being hauled. You can even acquire load-specific insurance should you contract for a specific type of cargo. Bobtail insurance is also needed for times when you are hauling no trailer.
Many owner-operators haul someone else’s trailers, in which case you will need “non-owned trailer insurance” to protect yourself for damage to trailer. You can also add an equipment coverage rider. This will cover items such as tarps and other small equipment used in the course of operating the vehicle.
Various other coverages are available and should be considered, including non-trucking liability, trailer interchange insurance, trucking umbrella insurance and worker’s compensation.
It’s important to understand your insurance coverage as there are dozens of different commercial truck policies. For instance, if you have physical damage insurance and your rig is stolen, is it covered?
If you are an owner-operator leased to a larger carrier, you may have fewer insurance requirements as the carrier will provide primary liability insurance. Owner-operators with their own authority will have to acquire additional insurance coverages, and it is not cheap. Policies costing $10,000 or more a year are common.
To ensure you are paying for the proper coverage at the best price, ask about:
- What are the deductibles and the cost impact of raising or lowering the deductible?
- Are there coverage limits and are there are any gap policies to address these holes?
- Is the coverage is sufficient in a worst-case scenario?
- Are there coverages that can be dropped without impacting overall protection?
- Are there any discounts available, such as paying 6 months at a time or for good safety scores or adding safety technologies to the vehicle?
Ultimately, the type of insurance you need will depend on your specific operation. Costs will also vary based on your specific risk profile, which can consider your driving record, your overall safety record, the vehicle’s age and condition and type of operation among many other data points. Even your credit rating can be a factor, so it’s important to shop around and work with a company that is willing to work with you.
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