Local and Long Haul Trucking Insurance Overview
A story about trucking insurance:
Carl is a long haul truck driver, carrying cargo anywhere from a few hours to a couple thousand miles. He owns his own tractor, but hooks it up to any trailer that needs it hauled to its final destination. Once there, he unhooks and then reconnects to the new trailer. Carl hauls cargo an independent driver contracted by different trucking companies and freight forwarders.
One night, as Carl is driving down the highway. His truck hits a patch of ice, causing the truck to jackknife and slide off the highway. The trailer tips over and nearly all of the cargo is smashed. The trailer’s damaged, and probably not repairable. Carl receives minor injuries, checked and treated at the scene by paramedics, and kept overnight in the hospital for observation. Luckily, no other parties are hurt or involved in the accident.
Because Carl owned his truck, but was hauling someone else’s trailer with another party’s cargo, several insurance policies cover the various parts of the accident, and several companies that all have some skin in the game. Let us look at a few of the particulars about local & long haul trucking insurance.
What is Local and Long Haul Trucking Insurance?
Trucking insurance is almost the same as commercial automobile insurance — the kind a corporation might have on a company car, or a Realtor will have on their agency’s vehicle. If you drive a tractor-trailer or other large truck, the law requires you to carry trucking insurance.
Trucking insurance consists of two areas: liability and physical damage, together considered full coverage.
Coverage for Third Parties (Other vehicles, someone else’s property)
Liability insurance is coverage for third parties, and comprises two sections: bodily injury and property damage.
Bodily injury
has two minimums, and every state has a different required minimum. In New York, those limits are $25,000 and $50,000 — $25,000 is the amount paid out per person, and the $50,000 is the total amount paid per accident.
Some states have lower minimums, like $15K/$30K, and some even have $10K/$20K. However, those increase in increments — $25K/$50K, $50K/$100K, $100K/$300K, $250K/$500K. Anything above that, often around the $1 million range, and the limits turn into a single amount called the combined single limit (CSL). Then, it covers any combination of bodily injury and property damage costs up to that limit.
In reality, there are three limits. The bodily injury limit is $25K/$50K, and the property damage goes in correlation. In NY, the lowest property damage minimum you can have is $10,000. That amount increases in increments to $25K or $50K. Almost 95 percent of the population has one of those three amounts. We tell our clients that the more assets they have, the higher those limits should be.
You are free to choose whatever amount you want otherwise. If your business owns your car outright, or if you are financing it, you can choose your own limits because you own the vehicle. However, if you are leasing the vehicle, the bank owns it, and they typically require $100,000/$300,000/$550,000 limits.
Property damage
has a $10,000 minimum — is the damage you cause to someone else’s property, including their vehicle, but not their cargo. There is a separate policy for that. It is also possible to increase the amount of your property damage coverage without increasing your liability costs, so be sure to ask your insurance professional about it.
In our story above, Carl’s trailer is covered under this, because it wasn’t his trailer to begin with. Most independent carriers have to meet a required minimum of coverage before allowed to carry for a particular company.
However, the cargo Carl carried is not covered under this policy. That falls under the cargo policy.
Cargo insurance
Cargo insurance has its own limits, $1,000 to $100 million. It does not only apply to trucks, it can also cover rail, ships, and air. (There is a separate policy for livestock, although that’s considered cargo. This policy includes transportation and mortality of the animals. That way, if a farmer transports 100 cows, and they all get stricken with a disease and die, they are not out of business.)
Whenever anyone hires you to move cargo, they will expect your policy to be at least the valuation of the goods you are hauling. Therefore, if you need to raise your limit, your insurance company can do it relatively quickly, unless what you are hauling is unique. If you were in a situation where your cargo limit was $500,000, and you needed a $1 million limit, you can just call your insurance agent, and they will take care of it for you.
The only time this becomes difficult is when you are a household goods mover (that is, a moving company). Household goods is a very difficult classification, because they are all personal belongings, and people’s perceptions of what things are worth differ from person to person. It is not a brand new good, like most other cargo. If something is brand new, we know what it’s worth. Nonetheless, if used, that number can vary, regardless of the actual condition.
Local and Long Haul Trucking Insurance Coverage for Your Vehicle and Property
As we are talking about liability insurance, keep in mind that these two areas have nothing at all to do with your vehicle. This is only for the coverage of others’ vehicles and property, not yours (that is physical damage). Liability insurance covers your car hitting another vehicle, a wall, a light post, a fence, or even a building.
Physical damage has two coverages: comprehensive and collision. When you take these two areas and combine it with liability, which is full coverage insurance. Comprehensive coverage is for your vehicle, usually for things like theft or vandalism. Collision covers any accidents involving your vehicle.
Beyond that, you can choose to add rental and towing coverage. That is, getting your truck towed and having a car to rent while your vehicle is in the shop.
Finally, there are two other areas of coverage under physical damage: underinsured and uninsured. This comes into play if you are involved in an accident, and the person who hits you does not have enough insurance to cover your damages, or they do not have any insurance at all. Then, your policy will pick up the limits. Those limits are the same as your base limits, so $25,000/$50,000.
Who Needs It?
Whether you drive a tractor-trailer as an independent driver, or own an entire fleet of trucks, you need trucking insurance, complete with all the riders and policies (below), to cover every possibility that might happen when (and after) you climb into the cab and turn the key.
If you own a distribution center with your own trailers, but no tractors, you need cargo and warehousemen’s insurance, as well as insurance for the trailers. While this may not fall strictly under trucking insurance, it’s related enough that you need to ask your insurance agent about it.
What Does Trucking Insurance Cover?
When it comes to insurance for motor carriers and freight forwarders, there are two types of filings you must provide to your state. This must happen as you are start your policy. There is the MCS-90 and the BMC-91X. After your insurance policy is opened, our insurance company files these for you.
MCS-90 – The MCS-90, is an endorsement attached to a trucker’s commercial auto policy. The Federal Motor Carrier Act of 1980 created the MCS-90. The FMCA says that each motor carrier that participates in interstate “for hire” commerce. That is, truckers hired to carry cargo across state must show proof that they have some kind of insurance (self-insurance, a surety bond, or a regular insurance policy) that equals or is greater than the minimums set by each state. You would need an MCS-90 endorsement if you own your own truck and trailer, or if you own the rig and hire independent drivers to drive them, like a trucking company.
BMC-91X – The BMC-91X shows the DOT that you have enough liability insurance to cover the increased risk of transporting cargo or people across state lines, and your insurance is provided by more than one company.
We can file both of these endorsements with the DOT on your behalf, when necessary.
There are a few other endorsements and policies you will need for your trucking operation, whether you are a single operator or own an entire fleet of tractor-trailers.
Separate Endorsements
Bobtail endorsement
Bobtail endorsement is for the return trip. Let’s say you’re deadheading back from Texas to New York. You have insurance on the trip down for your load, but you’re not covered by it when you’re not hauling anything. The Bobtail endorsement is a separate one for when you are not on dispatch, just in case the trailer turns over, or if you are on your way to pick up another load to bring it back on your return trip.
Trailer Interchange
Trailer Interchange is for hauling a load. But you do not own the trailer, and it belongs to someone else (like Carl’s situation). Because some motor carriers own the tractor and trailer, they haul goods within their own trailer. Some of them pick up a trailer and drop it off and pick up a different trailer on the trip. Others, unload and return with the same trailer.
In fact, there are different types of policy/endorsement/rider for every possible iteration and method of driving your truck, pulling a trailer, and hauling cargo. There are riders and endorsements for storage of cargo, pulling the trailer, putting the rig on the trailer, loading/unloading the cargo, and so on. You need a policy to cover each of those situations.
There are so many types of endorsements and riders for independent truck drivers. Because of this, we have a checklist of questions we ask. Do you own the truck? Do you own the trailer? Are you hauling for one place (i.e. a contract carrier), or do you work for many different places? And do you pickup and drop off different trailers?
All of these will affect your insurance coverage. Be sure to talk to your insurance agent about every possibility you think you might see in the coming year. Moreover, call them immediately if it looks like anything is going to change.
What Does Trucking Insurance Not Cover?
There is not much trucking insurance will not cover, assuming you have the right kind of insurance. Remember, there are a lot of riders, policies, and exceptions to trucking insurance. You’re not covered without the necessary additions. As long as you are operating your truck in a lawful and responsible manner, and your insurance is up to date and complete, you’ll be covered.
The Big Takeaway
Hauling a tractor-trailer can be very risky, not only because of the value of the products being hauled, but because accidents can be devastating. Therefore, drivers, owners, and company owners all need plenty of coverage to handle anything that may come their way. Because trucking insurance can be tricky, it is very important that you speak to an insurance professional. This will ensure you have exactly the kind of trucking insurance you need.
Conclusion
This article is by no means an exhaustive discussion about the kinds of trucking and long haul insurance you might need. We want to give you an idea of some of the different options and endorsements you will need. Every situation is different.
Rather than trying to figure everything out yourself, say, on one of those “buy your insurance online” websites, it is important that you speak to a professional insurance agent that specializes in helping business owners and truck drivers protect themselves.
