OOIDA Information Services
If you own a truck, you own a business, and certainly you want it to be successful. It makes sense to protect yourself and your business with the right insurance, but with so many different options available, I frequently receive questions about how to choose what’s best.
Question: I am seriously considering purchasing a truck and want to start up my business as an owner-operator. I know I’ll need insurance, but I don’t have a clue about which coverages to get. Can you help me solve this mystery?
Answer: The easy answer is that it’s all about the agent you choose to help find the coverages you want and need, at prices you can afford, and with the service that you deserve. OOIDA members don’t have far to look for such an agent because this is one of the many programs the association offers. Talking one-on-one with an experienced agent will definitely help to take the mystery out of truck insurance, but meanwhile, you’ll want to become familiar with the coverages that are available and how they can protect you and your business.
Owner-operators who have their own authority, private carriers or those who are hauling exempt commodities should consider the following coverages:
Primary liability – This coverage protects against loss from legal liability of the insured for bodily injury or property damage to another party. Minimum Federal Highway Administration requirements are $750,000, and most providers offer higher limits as well.
Motor truck cargo – This coverage protects against cargo damage or loss while in the insured’s care, custody and control in the course of transit. Check with your agent regarding specific policy wording to see whether extras such as debris removal, unattended truck coverage, earned freight coverage and refrigeration breakdown are included with your cargo policy.
Commercial general liability – This coverage protects business owners against liability claims for bodily injury and property damage arising out of premises, operations, products and completed operations, as well as advertising and personal injury liability. Although this coverage is not legally required, many business owners want the added protection for their specific operations.
Leased owner-operators should consider a different list of coverages for their specific insurance needs. Owner-operators who lease their equipment to authorized motor carriers should be aware that the lease contract must specify any coverages that the motor carrier requires them to maintain. Read your lease carefully and watch for provisions that require lessors to indemnify or hold harmless the motor carrier’s insurance company for losses that are the result of non-trucking use of the equipment, because you’ll need to secure insurance protection for these situations.
Federal leasing regulations prohibit carriers from requiring leased owner-operators to purchase coverage from or through them. In fact, there are advantages to controlling your own insurance, which include knowing exactly what protection you are purchasing and being able to search the market for competitive quotes. When you purchase your own insurance, the coverage will be in your name instead of the carrier’s, and any claims will be settled considering your best interests as opposed to those of the carrier. You can also take the coverage with you if you decide to terminate your lease.
Leased owner-operators who want to take control of their own insurance instead of allowing their motor carrier to purchase this type of protection on their behalf may want to consider the following coverages:
Non-trucking liability – This coverage, sometimes called NTL, provides liability protection for leased owner-operators while the truck is being operated for personal convenience, outside the scope of the motor carrier’s control or direction, and with no economic benefit to the owner-operator or the lease company.
For example, NTL coverage is applicable once the tractor has reached its regular place of garaging, then leaves again on a personal endeavor, such as visiting a friend across town, should it become involved in an at-fault accident. This coverage will not include instances in which the truck is being driven to and from terminals, the repair shop or truck wash.
Bobtail liability – This coverage provides liability protection for leased owner-operators while the truck is being operated without a trailer attached, whether dispatched or not.
Unladen liability – This coverage provides liability protection for leased owner-operators while the truck is being operated with an attached empty trailer, or without any trailer at all, whether dispatched or not.
In considering NTL, bobtail and unladen liability coverages, it is important to remember that the law requires the authorized motor carrier to maintain liability protection for the public in all instances. The fact that the leased owner-operator maintains non-trucking liability, bobtail or unladen liability does not relieve the carrier from its legal obligation to maintain insurance for the protection of the public for all motor vehicles operating under its authority.
Both authorized motor carriers and leased owner-operators may want to consider the following optional coverages in addition to those individually specified previously in this article:
Physical damage – Although this coverage is not a requirement of the Federal Highway Administration, you should seriously consider a physical damage policy in order to protect your financial investment in your equipment.
Your decision to insure your truck and/or trailer with a physical damage policy may save your business if an accident causes damage or total loss to your equipment, or if a fire, theft or vandalism occurs. In addition, some physical damage policies may include glass breakage and downtime coverage at no extra cost. Also consider that if your equipment is financed, your lending institution will require you to maintain this coverage in order to protect its financial interests.
Other optional coverages that go hand in hand with physical damage are breakdown coverage for emergency roadside breakdowns and personal property coverage that protects specific property carried in the cab of your truck, but not covered by your fire, theft and collision or homeowner’s policies.
In addition, you may want to consider gap coverage, particularly if you find yourself upside down on your equipment loan. Gap coverage pays the loan/lease deficiency following settlement of a total loss or constructive total loss claim as a result of collision damage only. Keep in mind that conditions and exclusions may apply, so have an agent go over policy terms with you to get any questions answered.
Trailer interchange coverage – This coverage provides basic physical damage protection to non-owned undescribed trailers pulled by your vehicle.
Optional downtime coverage – This coverage will come in handy if you want to increase the amount payable when your truck is out of service due to an accident, excluding theft or total loss. Again, check with an agent for specific limits and waiting periods that could apply.
Passenger accident coverage – This coverage provides accidental death and dismemberment coverage and accidental medical expense coverage for passengers other than co-drivers and employees.
Solving the mystery of truck insurance is not as difficult as you may think if you have the right agent. Regardless of where you secure your insurance coverage, always read and understand your policy, and feel free to discuss any concerns with OOIDA’s insurance department.
If you have questions about doing business as an owner-operator and/or an independent driver, please e-mail them firstname.lastname@example.org or send them to PO Box 1000, Grain Valley, MO 64029. We can’t publish all of your questions in Land Line, but you will receive a response, even if your letter is not published.