Recommended Insurance for New Owner-Operators

Truckers keep the American supply chains rolling, delivering more than 70% of our nation’s goods and materials. The men and women who haul freight across the country lead a rugged existence that can prove very lucrative if they go into business for themselves.

Becoming an owner-operator involves a series of hurdles, and deciphering the Federal Motor Carrier Safety Administration’s (FMCSA) mandatory insurance regulations is one of them. Whether you own a big rig outright or you lease a semi-truck, the following guide will help clarify your insurance coverage needs.

Cargo

Although the FMCSA does not necessarily require freight haulers to carry cargo insurance, you’ll find that purchasing it is in your best interest. Shippers and brokers typically expect all independent truckers to have $100,000 to upwards of $500,000 worth of coverage in the event the goods or materials are damaged or stolen.

Primary & General Liability

It may seem repetitive at first blush, but solo and small trucking businesses need both primary and general liability insurance. Primary insurance covers losses that stem from collisions and a variety of accidents. Comparatively, general liability insurance kicks in even when unusual incidents occur. For example, a slip-and-fall that occurs at your office would be covered through general liability coverage, not primary.

Bobtail

Bobtail insurance is a prime example of how trucking insurance can be confusing. This liability coverage protects truck drivers from financial responsibility if accidents occur from deadheading (hauling an empty trailer) or bobtailing (driving a tractor without a trailer). It pays for the other party’s property damages, but not yours. Standard bobtail insurance usually covers owner-operators and lease outfits up to $1 million.

Physical Damage

Banks and leasing companies require independent truckers to carry physical damage insurance to cover any accident repairs to the commercial motor vehicle. Even if you own a semi-truck outright, forgoing physical damage insurance would put your livelihood at risk. One of the critical factors independent truck drivers need to consider is the size of the deductible. The insurance carrier pays for the repairs only after you pay the out-of-pocket deductible.

Passenger Accident

This optional coverage insulates trucking entrepreneurs from paying losses and damages to authorized invitees. Also known as guest passenger liability, it does not necessarily cover helpers, employees, and co-drivers—it’s an add-on you can include if you anticipate inviting a friend or family member to ride along.

Standalone policies generally have coverage limits of $100,000 to $300,000. Underwriters may offer specific line item options, such as accidental dental expenses or death and dismemberment. It’s important to keep in mind that without a passenger accident designation, you won’t be able to invite a friend or loved one to experience your trucking business without significant financial risk.

Non-Trucking Liability

Freight hauling professionals who lease semi-trucks will likely be required to select a policy that includes non-trucking liability. That’s largely because lease agreements do not typically authorize truck drivers to use the power unit for non-commercial purposes.

Consider this example: A CDL professional’s personal vehicle is in the shop, and they need to keep a doctor’s appointment. If a lessor uses the leased truck, their policy may not be applicable.

Truck lease organizations normally task operators with opting for a non-trucking liability rider. It’s in their best interest as well as yours. It may be prudent for owner-operators to have the add-on, too.

Unladen Liability

Commercial liability insurance is designed to protect against losses when the big rig is hauling freight. Not every insurance policy provides coverage when independent truckers are deadheading.

While that may sound counterintuitive, considering how the industry functions, owner-operators and lease drivers have an opportunity to opt into an unladen liability add-on.

It’s not uncommon for solo trucking outfits to include unladen liability coverage of around $1 million. This option protects truckers when they are driving to pick up a load after taking mandatory days off or need the semi for a non-business emergency. Before we discuss ways to save money, consider whether you plan to utilize trailers owned by third parties. If so, you may want to look into trailer interchange insurance, too.

Ways to Save Money

As an owner-operator or independent lease driver, you can expect insurance to be one of your highest expenses. After diesel fuel, the truck loan or lease agreement, things like maintenance and upkeep also land among the top costs of doing business. Just as truckers employ fuel discount cards and apps such as Gas Buddy, lowering your commercial motor vehicle insurance premium puts more money in your pocket. While it may seem like premiums are largely at the whim of the insurance carrier, there are ways for you to get a better price, including:

• Shopping Around: Never agree to the first quote you receive. Take your time and request quotes from reliable insurance carriers, ensuring their proposed program covers all your needs. If a quote seems unusually low, it’s likely you aren’t getting all the add-ons.
• Considering a By-the-Mile Program: Plenty of freight contracts involve per-mile rates. If you qualify, consider tying the miles to an insurance policy. It may be more cost-effective.
• Joining the OOIDA: Members of the Owner-Operator Independent Drivers Association have access to discounts, and joining this organization gives you premiums that have been bundled with more than 150,000 like-minded independent truckers. You can visit OOIDA’s website to learn more about how to become a member.
• Work With a Broker: Reaching out to a broker empowers entrepreneurs to gain access to rates they might not enjoy otherwise. Brokers use their negotiating power to get lower premiums for their clients. These professionals can also highlight discounts and make sure you have a policy that covers all of your professional and off-duty needs.
• Flaunt Your Experience: When you are shopping for a truck insurance policy, highlight your experience and good driving record. Make it a point to demonstrate you have invested in tools and technology that support safe driving outcomes.

Are You Thinking About Becoming an Owner-Operator?

If you have OTR experience and are considering growing your career in the trucking industry, an owner-operator is a logical next step. Whether you’re new to the industry but want to become an owner-operator eventually or you’re ready to take on this new role, TSI is ready to help you make that leap. We offer a six-week, hands-on program for new drivers and solo driver, team driver, and owner-operator job opportunities. Visit our website to learn more.