Tow Truck Insurance
Tow truck insurance is just like regular commercial auto insurance. Any business that owns a vehicle or has to drive as part of its function needs to have commercial auto insurance. The difference is that a tow truck also needs to be insured for the vehicles being hauled.
Tow truck insurance is similar to cargo insurance — goods being hauled on a truck. But instead of using the word “cargo,” insurance companies call it “on hook insurance.” Even cars on flatbeds are on hook; there’s no difference between the two.
We often recommend that many tow truck services should carry around $1 million in liability insurance. For the most part, there’s no actual state-level requirement for tow trucks, although some states may require $100,000 or $300,000. But when you consider the value of certain cars you could be carrying, tow truck owners need to have enough on hook coverage to protect themselves. Tow truck insurance covers the value of the vehicles involved, but only after a deductible has been paid by the insured first.
At minimum, the amount of insurance should at least cover the value of the average vehicle you tow. If you haul a lot of high-value vehicles, you’ll need a lot more insurance than if you haul low-priced or used cars.
Who Needs Tow Truck Insurance?
There are three types of tow trucks that can get coverage under this kind of policy.
- The mechanic who brings in a car to be fixed. These trucks are usually only allowed to haul cars on city surface streets.
- Trucks that are allowed to pick up cars on highways. Only certain companies are licensed to do that.
- Private tow trucks that are only for personal use, such as a collector of vehicles or a car dealer.
Flatbed trucks that haul cars are also considered on-hook but may need a different type of coverage because they haul bigger and more expensive vehicles or more than one vehicle at a time.
Even the auto haulers — the big tractor-trailers that carry several cars at once — are tow trucks that can be covered under this policy. Of course, they’ll need more coverage since they’re hauling several cars at once.
What Does Tow Truck Insurance Cover and Not Cover?
There’s a difference between a proper, originally-manufactured tow truck and a modified pickup truck that has a hook welded onto it. Many insurance companies will only cover originally-manufactured trucks. They don’t want to insure modified trucks because they don’t know how strong the weld is. Modified trucks can get insurance from some companies, but it will cost more to do so.
Getting the on-hook endorsement is critical for tow trucks. It’s not enough to get a commercial vehicle policy, because if you’re in an accident, you need coverage for the vehicle you’re towing, not just your tow truck. And if you don’t get an on-hook endorsement, you can be leaving yourself and your business open to significant claims.
This is why you should work with a professional insurance agent, rather than buying your own insurance online. You might not know which endorsements or special certifications you need, and you could end up buying the wrong insurance or even be uninsured. Then you wouldn’t actually be covered when you need it. Or you could even be over-covered and pay too much for your insurance, as much as several thousand dollars per year.
Finally, your coverage territory is also a factor in pricing because some territories are considered higher risk by insurance companies.
The Big Takeaway
Tow truck insurance is a must-have for any kind of vehicle that hauls other vehicles. Whether you own a mechanic’s truck, a highway-rated tow truck, a flatbed, or even an auto hauler, you need on hook tow truck insurance. It’s not just enough to have regular commercial auto insurance, your coverage has to extend to the cars you’re towing as well.
Tow truck insurance can save your towing service from a lot of expensive mistakes, but only if you have the right kind of coverage. You need the right amount of insurance to cover the average price of the vehicles you’re hauling.
To make sure you’re getting the right kind and amount of coverage, speak with a business insurance specialist who can tell you what you need and don’t need. They’ll make sure you have enough coverage to protect you and your business.