So, you have your commercial driver’s license (CDL) and you are in the process of getting your own authority. Well, there is a critical step that you may still need to take. You need to get with a knowledgeable insurance agent that will help you get the insurance coverage you need to operate. Insurance is what it is. You need it, especially in this industry. The Federal Motor Carrier Safety Administration (FMCSA) estimates that more than 500,000 accidents that involve large trucks happen each year in the U.S. This is over hundreds of millions of vehicle miles traveled (VMT). But even one accident is one too many. If you’re a new trucking company or new CDL holder or new truck driver, you need the proper insurance coverage in order to keep everyone protected and your wheels turning.
What insurances are required?
The FMCSA, which sets standards for licensing motor carriers and is responsible for mandating regulations for how motor carriers operate to reduce crashes, injuries, and fatalities on U.S. roadways, requires that motor carriers have insurance documentation on file before they will issue an operating authority. The FMCSA (BMC-91 form) sets minimum public liability insurance coverage requirements based on the type of commodity or freight (e.g., non-hazardous, hazardous) that you haul. See FMCSA for current requirements.
The table below lists an example of coverage requirements from recent years.
Source: FMCSA
What insurance coverage should I consider getting to start a trucking company? What are the different types of insurance coverages that I might need?
There’s a variety of commercial motor vehicles out there, ranging from box trucks to tractor trailers, which means there’s a wide range of insurance coverages (policies) out there, too. Different types of insurance protect against different types of risks.
Below are some of the main insurance coverages to consider when starting and running a trucking company:
Primary Liability ("Public Liability") coverage is a form of commercial vehicle liability insurance coverage for injuries or damage to other people or property if you're at fault for an accident. In short, primary trucking liability insurance is protection while you’re operating your truck on the road. It’s a form of public liability coverage mandated by the FMCSA that must cover bodily injury, property damage, and environmental restoration.
This mandate means you have to have a federal filing (BMC-91 or BMC-91x form) that affirms you have met the minimum coverage to activate and maintain your own authority to operate. Again, this official document or form must be on file with the FMCSA. The BMC-91 filing by the insurance company furnishing coverage guarantees the FMCSA - and the general public - that you have enough liability insurance to cover the risk of transporting goods across state lines.
As shown in the table, FMCSA requires a minimum of $750,000 in coverage. However, many shippers and brokerages insist that trucking companies have $1 million in coverage.
Commercial General Liability protects you against liability claims for bodily injury and property damage that arise out of premises, operation, and products as well as personal injury liability. It typically excludes truck and traffic accidents and covers property damage and physical injuries coming from day-to-day operational activities. In short, general liability covers you for accidents that occur when you’re off the road, so to speak, and not related to operating your truck. An example would be someone slipping and falling in your garage or somewhere on your premises.
Physical Damage insurance covers your truck in the event that it’s damaged. It consists of two areas of coverage: 1) Collision pays for damages to your truck when it collides with another vehicle or some object. 2) Comprehensive pays for damages to your truck caused by non-collision events such as theft, vandalism, faulty infrastructure, fire, or weather.
Cargo Insurance provides insurance on the freight that you’re hauling. It covers your liability for any cargo that is stolen, lost, or damaged due to things like theft, fire, or collision. Any cargo is the trucking company’s (carrier’s) responsibility while in their possession.
PROTIP – Pay close attention to the exceptions, restrictions, and/or exclusions in a given policy to make sure you’re getting the coverage you need. Speak to an agent or insurance specialist directly to learn more about the coverages listed herein as well as other policies that might better meet your needs.
How can I be sure about insurance?
Insurance is costly, but accidents can be even more costly if you are underinsured. It is best that you work with insurance agents or specialists to make sure that you are legally compliant, but also that you have adequate coverage that affords you some peace of mind knowing that your trucking company is properly insured and well protected. Finally, carrying proper insurance shows your customers (shippers, brokers) that you are reliable and trustworthy and willing to go the extra mile to protect their property and interests. The right insurance can help you win over more customers and win more loads.
Our training program takes a deeper dive into this subject and discusses the following:
What determines the rates or premiums I pay for insurance?
How much do the different types of coverage for trucking usually cost?
What can I do to lower my costs?
What to watch out for with deductibles!
What if I’m not hauling or trailering anything?
How do I update my information for the DOT and FMCSA?
What types of insurance coverage do freight brokers carry?
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Soshaul Logistics LLC and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. It is meant to serve as a guide and information only and Soshaul Logistics, LLC does not assume responsibility for any omissions, errors, or ambiguity contained herein. Contents may not be relied upon as a substitute for the FMCSA's published regulations. You should consult your own tax, legal and accounting advisors before engaging in any transaction or operation.