The 3 Most Common Questions About New Venture Trucking Insurance
Going out on your own in the business world can be risky. New-venture trucking companies are no exception to the unpredictability of business ownership.
Thinking about starting your own trucking authority? Before you choose a company name or register with the DOT, here are answers to some of the most common questions about new venture trucking insurance!
1) Do I Really Need a $1M Liability Policy?
The short answer—yes. While the limits of auto-liability required by the FMCSA (Federal Motor Carrier Safety Administration) start at $750,000 (required limits start at $1,000,000 for registered hazmat-haulers), nearly all shippers and freight brokerages require $1,000,000 of auto-liability insurance—and at least $100,000 of motor truck cargo insurance—to even be considered when booking a load.
This $250,000 buffer protects both the freight broker and the shipper in the event of a loss. The increase to liability limits also shields you from overflow when accidents involve fatalities. $1M is the average cost for losses involving fatalities, here, but this figure can climb closer to $3M when you start to account for property damages, funeral costs, pain and suffering compensation, attorney fees, and more.
Even if the accident isn’t a fatal one, covering your bases with the right amount of liability insurance can protect your business’ reputation and your livelihood. Having anything less can end up costing you more in the long run.
2) What Other Coverages Do I Need?
Motor Truck Cargo
Often referred to as MTC, or simply as Cargo insurance, this line of coverage protects the goods you or your company are hauling. For example: in the event of an accident involving you and your load of building materials, refrigerated seafood, or any other cargo, MTC insurance would protect the cost of replacing those goods or paying out to the customer.
Most companies combine $1,000,000 of auto liability insurance, along with $100,000 of cargo insurance to cover what most in the industry refer to as, the basic necessities of trucking insurance. Having both auto liability and MTC make you eligible to haul for hire.
Comprehensive and Collision Coverage
Otherwise known as physical damage coverage or Phys Dam, this line of coverage will cover your truck and/or trailer for the appraised value at the time of the claim, in the event of damages incurred in an accident or while parked on a lot. The value of your truck is set by you, the insured, and represents a smaller percentage of the insurance premium for the year. Compared to auto liability, this coverage only makes up a small percentage of your total premium.
3) How Much Can I Expect To Pay?
Insurance costs vary from state to state. Premiums also ﬂuctuate heavily by a number of factors like driver experience, age & type of vehicle, your radius of operations, commodities hauled, motor vehicle reports for you and other drivers, safety scores and several other factors. Regardless, the average costs to appropriately insure your business from damage to others (in the form of auto liability insurance), damage to cargo (in the form of motor truck cargo insurance), and damage to your own equipment (in the form of physical damage insurance) can range between $8,000 – $25,000 per year.
This cost may surprise you. But even if you’ve been running under someone else’s authority, have years of experience under your belt, and millions of miles logged, new trucking companies still fall under the category of “high-risk” due to the lack of history tied to a particular DOT authority. If you’ve been running under someone else’s authority, you may be accustomed to paying $1,000 – $5,000 a year for insurance.
Remember, the insurance you need to purchase prevents you and your new business from entering into a ﬁnancial nightmare. Your insurance also protects your way of life. So, after you’ve made the decision to start your own trucking business, purchase (or lease) your new truck or tractor, apply for your DOT number and/or Motor Carrier authority, contact a licensed insurance broker. The right agency will shop the markets on your behalf and work to get you the insurance product you need to be successful on the road and beyond.