Do you need affordable insurance coverage as a truck driver? If YES, here are 12 best insurance policies for self employed truck drivers and their cost.
Starting and managing your own truck business comes with a lot of benefits: you get to be your own boss, keep all of your profits, and you have no set limits when it comes to success and profitability. When planning or getting ready to become a self-employed truck driver, it’s very crucial you do not ignore the practical and logistical considerations of this business.
5 Factors to Consider Before Buying Insurance as a Self Employed Driver
a. The first thing to consider is the issue of truck. A brand-new semi truck starts at $80,000 and runs up to $200,000 or more, and as such buying a used commercial truck is much more economical for new truck drivers.
A perfect rule of thumb is to purchase the best used commercial truck you can afford. Starting out as a self-employed truck driver can be financially risky, that is why you have to minimize debt by avoiding a truck payment that is beyond your means. But also have it in mind that if you spend too little, you may end up with an unreliable truck that needs frequent repairs and keeps you off the road way too often.
b. You should also consider setting up your business as an LLC. This because an LLC will protect your personal assets from liability and help you get legally structured as a legitimate business. Registering as an LLC will also make it possible for you to legally subcontract work to other truck drivers as your business grows.
c. Meanwhile, getting adequate insurance for your truck business is a major investment you shouldn’t undermine. To keep your insurance cost down while also being properly protected, you will have to consider a lot of factors and also choose a reliable agent.
d. Note that your driving record is a key factor in determining your truck insurance cost, so it’s very necessary to follow best practices on the road. For example, follow the speed limit, don’t use your phone, and maintain a proper stopping distance. Knowing your safety rating and remaining proactive to pass safety inspections will keep your insurance rates low. Also, be sure to religiously maintain your log.
e. New businesses tend to struggle to afford truck insurance because they represent a higher risk to insurance companies. This can cause new owner-operators to rely on risk retention groups, or RRGs. RRGs often offer assessable policies that can lead to surprise expenses at the end of your policy term.
Assessable policies allow the insurance provider to impose a surcharge on the premium. Unlike a premium increase which represents payments for future coverage and can be rejected by the insured, these premium increases are for prior coverage, and the insured is legally liable to make payment.
In the event of a bad underwriting year, you may find yourself paying additional premium. Startups that are willing to restrict their radius of operation will find more coverage options and less burdensome premiums. A radius of 500 to 600 miles will normally open many more doors for the newly-formed trucking company.
12 Best Affordable Insurance for Self Employed Truck Drivers and Their Cost
Trucks are generally not cheap, and they can cause damage that can get to hundreds of thousands of dollars, so it’s easy to understand why owner-operators may want to avoid being underinsured. However, you don’t want to pay for more than you need.
Do not forget that your insurance coverage needs to match the value and scope of your business. So a very small operation does not need to be over insured with millions in coverage. But a large operation cannot expect to carry only a $1 million policy, which is typically the smallest. Below are the top insurance coverages every self employed truck driver should have;
- General Liability Insurance
General liability insurance, sometimes known as public liability insurance in the trucking industry, covers third-party bodily injuries and property damage that comes from/during business activities that aren’t related to truck driving.
For example, general liability covers medical or legal bills if a customer dislocates their shoulder tripping over boxes in your office. According to the Federal Motor Carrier Safety Administration (FMCSA), owner-operators with authority, freight forwarders, and motor carriers are mandated to carry public liability insurance by law.
But, the coverage is a necessary option and a good idea for any business owner because it pays for a number of common business risks. Drivers under lease do not usually need general liability insurance; most are covered by the motor carrier’s policy.
Public liability insurance is further divided into two: bodily injury and property damage. The minimums are driven by types and weight of freight. Remember that acquiring the FMCSA minimum doesn’t necessarily mean you are ready to start hauling freight.
- Typical Coverage Limits: $1 million
- Typical Annual Premium Range: $750 – $7,000
- Trucking Liability Insurance
Trucking liability insurance, most times called a primary liability, takes care of the cost for injuries and property damage you may cause others when operating your truck. Interstate truckers who haul non-hazardous goods are federally mandated to have a minimum of $750,000 of truck liability insurance.
Intrastate truckers have to carry the minimum as mandated by their state’s laws. Trucking liability policies usually require every truck to be scheduled, or listed on the policy. Insurance companies will not pay claims if the truck is not scheduled.
- Typical Coverage Limits: $750,000 minimum for interstate truckers
- Typical Annual Premium Range: $2,500 – $4,000 per tractor
- Non-trucking Liability Insurance
This particular insurance covers damages and injuries to third parties that occur when you’re driving your truck for non-business purposes, such as running personal errands. If you have a truck accident when you’re not working, non-trucking liability pays for the other person’s medical bills and property repairs. Note that this coverage is majorly for drivers under lease with a motor carrier.
Even though they are typically covered by their motor carrier’s general liability insurance, that policy is only for business activities like hauling cargo, dead-heading, or traveling for maintenance. Drivers still need non-trucking liability insurance to cover non-business driving.
- Typical Coverage Limits: $250,000
- Typical Annual Premium Range: $450 – $5,000 per tractor
- Bobtail Insurance
Bobtail insurance is liability insurance that protects you and your truck when you’re driving for business but not hauling a load, like when you’re traveling between jobs. The policy pays your legal bills if someone sues after an accident.
Bobtail insurance is often confused with non-trucking liability coverage. Both cover gaps in the liability insurance commonly provided by motor carriers. However, bobtail insurance covers business-related driving, whereas non-trucking is for personal driving. Some examples of accidents that trigger bobtail insurance include:
- Accidents on the way to pick up your first load
- Accidents after you drop off a load and are on your way to pick up the next
- Accidents on your way home after a delivery
- Typical Coverage Limits: $1 million
- Typical Annual Premium Range: $350 – $450
- Physical Damage Insurance
Physical damage insurance pays for damages and repairs to your truck caused by certain covered perils including accidents, natural disasters, theft, and vandalism. It’s not legally required, but it is recommended for all drivers. Plus, most lenders require physical damage insurance for financing.
All owner-operators need physical damage insurance to protect their investment in their trucks, and this includes drivers under lease. Most motor carrier’s liability insurance extends to drivers, but that doesn’t cover physical damage to the driver’s truck. Physical damage insurance comes in two parts:
- Collision: Pays for damage to your rig when it collides with another vehicle.
- Comprehensive: Pays for damage caused by most other perils, including theft, hail, vandalism, and fire.
- Typical Coverage Limits: Actual or stated value of the truck
- Typical Annual Premium Range: 2.5% to 5% of truck’s value
- Motor Truck Cargo Insurance
Motor truck cargo insurance covers your responsibility for the cargo you carry, typically paying out when it’s lost or damaged. The coverage is not a legal requirement, but it is recommended for all owner-operators and for-hire motor carriers. Basic triggers for motor truck cargo insurance include: Fire, Collision, Theft, Water damage, Equipment breakdown, Striking of a load.
- Typical Coverage Limits: 5,000
- Typical Annual Premium Range: $500 – $1,000
- Workers’ Compensation Insurance
This insurance is a state-mandated coverage that pays employees’ medical costs and lost wages if there are work-related illnesses or injuries. Typically, only motor carriers and owner operators with employees have to get workers’ compensation, but some states may require coverage for business owners in high-risk industries.
Depending on state law, injuries covered by workers’ compensation typically include: Traumatic injuries after a truck accident, Repetitive stress injuries from loading and unloading cargo, Work-related illnesses from exposure to harmful chemicals etc.
- Typical Coverage Limits: 8% – 15% of the salary.
- Typical Annual Premium Range: $4,560 – $8,550 per year.
- Trailer Interchange Endorsement
Trailer interchange insurance pays for physical damage you cause to another person’s trailer. It is important for truckers and motor carriers that regularly enter trailer interchange agreements. This endorsement is usually added to a liability policy to cover damage caused by fire, theft, explosion, collision, or vandalism.
- Typical Annual Premium Range: $20,000 and $30,000
- Hazmat Truck Insurance
Hazmat truck insurance isn’t always a separate policy or endorsement, but it’s worth noting that hauling hazardous materials is strictly regulated. Federal law increases the mandatory minimum liability coverage to $1 million for any trucker hauling hazardous materials such as fuels, chemicals, or fertilizers.
- Typical Coverage Cost: $1 million
- Livestock Cargo Insurance
Hauling live animals creates a unique set of risks, including the possibility that your cargo will suffer an injury, escape confinement, or die enroute. These risks are typically excluded from standard truck insurance policies and make a specific livestock cargo policy necessary for drivers who transport animals. Policies typically pay for dead and injured livestock as well as carcass removal.
- Typical Annual Premium Cost: $6,000 and $12,500
- Trucking Umbrella Insurance
The amount of damage a semi can cause means claims often exceed your truck liability limits, and this makes trucking umbrella insurance a valuable coverage. Like other commercial umbrella policies, this policy extends the limits of underlying liability policies. If a claim costs more than what your other insurance covers, umbrella liability pays the rest.
- Typical Annual Premium Range: $1,234.35 – $2,637.44
- Uninsured & Underinsured Coverage
Uninsured and underinsured motorist insurance covers your costs after an accident with another driver who is either uninsured or whose limits aren’t high enough to cover your damages. It’s also the least expensive coverage but well worth the cost if you end up needing it.
No matter how you see it, individuals who own and operate their own trucking businesses need truck insurance, but which policies they need depend on whether they operate under their own authority or lease through a carrier. For example, carriers provide liability coverage for truckers working under permanent lease, while truckers working under their own authority need to get their own.
Have in mind that getting the best semi truck insurance for your business requires focusing on value, not price. The cheapest policies are not often the best. Also, insurance coverage that is too low can hurt your business if you’re driving under your own authority because it can prevent you from getting jobs with freight brokers. Owner-operators who want the appropriate coverage should work with an agent with experience in truck insurance.
Commercial truck insurance average costs vary widely because there are several coverages truckers may need. Truck drivers’ insurance costs can also vary due to ownership status. For leased owner-operators, annual truck insurance costs from $1,500 to $2,000. Owner-operators with authority pay between $8,000 and $12,500 each year.