Insurance lets a commercial truck roll.
Before a big rig ever leaves a yard, the truck, its contents, and driver should be insured, according to Pat LaVoie, a licensed insurance agent and the chief operating officer at the Varney Agency. The risks associated with not insuring or underinsuring a commercial truck could financially devastate the truck’s owner if an accident occurred.
According to LaVoie, insurance requirements vary widely in commercial trucking. A common carrier or contract carrier will need “a motor-carrier policy that basically has two parts: liability and physical damage,” he said.
• Liability coverage applies to bodily injury and property damage that an insured vehicle causes to someone else. “When you are hauling someone else’s property, you are regulated by the Federal Motor Carrier Safety Administration,” LaVoie said. “You’re driving on your rights as a trucker. A whole different set of laws and regulations kicks in.”
Liability insurance typically establishes “one limit per accident,” he said. “A typical limit would be $1 million” combined for property damage and bodily injury caused to others in an accident.
He explained that FMCSA sets liability limit requirements “based on the type of cargo that is carried.” Such limits could range from “a minimum of $750,000 to a maximum of $5 million. Those are typically the limits determined on a per trucker basis” by the FMCSA, LaVoie said.
“It’s driven by the degree of hazard of what you typically haul,” he said. Required liability limits for a trucker hauling gasoline would be higher than limits for a trucker hauling potatoes or wood chips, LaVoie cited as examples.
Under a motor-carrier policy, liability insurance should cover “non-owned vehicles and, if needed, hired vehicles,” he said.
Liability insurance should also cover “non-trucking liability exposure, which is sometimes referred to as ‘bobtail coverage,’” LaVoie said. This coverage would cover a driver taking “a power unit to a repair shop,” for example.
• The “physical damage” coverage provided by a motor-carrier policy would insure against collision and comprehensive claims, LaVoie indicated.
“Collision covers physical damage to your own vehicles involved in a collision.” he said. “Get options on different deductible levels. That can save you money.”
Comprehensive “covers physical damage for losses other than collisions,” LaVoie said. “Your truck’s in the garage for repairs, and the garage burns down, and the truck burns with it. Vandalism to a truck and flood damage: These are examples” of physical damage that would be covered.
LaVoie repeatedly stressed that a commercial truck owner “should not assume that everything is automatically covered” by an insurance policy. Insurers differ in the types and amounts of coverage that they offer; some carriers offer optional coverage.
One optional coverage is called “GAP coverage,” he said. Such coverage would “pay the difference if the trucker owes the bank more than” an accident-damaged truck is worth, LaVoie explained. “This is important to ask your agent about. Truckers often have fairly large loans on their trucks. With GAP coverage, the insurer would pay the loan balance if it was greater than the value of the truck.
Insurance requirements are less regulated for companies “hauling their own products,” LaVoie said. “For example, in structuring an insurance program for a wholesaler, you would use a Business Auto Policy rather than a Motor Carrier Policy, and the insured and their agent would have more flexibility.
Among the other types of insurance needed by motor carriers and truck owners are:
• Cargo insurance. “This applies to your own goods as well as the goods of others,” LaVoie said. “The key thing to look for in your policy is exclusions.”
He explained that exclusions “are lists of things that your insurance policy does not cover. Examples of common exclusions are currency, firearms, and tobacco products.
“You don’t want to find out after a loss that your insurance doesn’t cover a particular cargo,” LaVoie said.
“Cargo policies are all different. Check with your agent to find out what is excluded. If you’re hauling a type of cargo that’s not covered, you should attempt to get the exclusion eliminated, and if that is not possible, you might have to find another insurance carrier for cargo. If you’re a trucker, you want one policy that covers all your loads.” he said.
LaVoie recommended that in addition to what types of cargo are excluded, a truck owner should also ask their agent what “perils are excluded.” He noted that “wetness of load” could be an excluded peril; “if the trailer develops a leak and the cargo gets soaked, you would not be covered if your cargo policy had this exclusion,” he said.
“These are the kinds of things you want to look for with the advice of your agent,” LaVoie said.
Motor carriers or truck owners employing others usually have to carry Worker’s Compensation. “You should check with your agent to find out if you need it,” LaVoie said. The fine for not carrying Worker’s Compensation is significant, and if a company does not have such coverage and an employee “gets injured that is entitled to Worker’s Comp, you and/or your company will probably be liable to pay the injured employee,” he said.
Motor carriers should also carry:
• General Liability which covers non-motor vehicle liability for bodily injury and property damage
• Building insurance if you own a building used in your business.