Understanding the Requirements for Trucking Insurance: A Guide for Small Business Owners

Many businesses think of trucking insurance as yet another expense they have to pay every month. Still, it is a valuable safety net that can keep your operations afloat when something goes wrong. The various types of available insurance coverage only add to the confusion for business owners who are already trying to make sense of the constantly changing regulations in the trucking industry.

We’ve gathered what you need to know about federal requirements and best practices for trucking insurance.

The Federal Minimum Requirements

The Federal Motor Carrier Safety Administration (FMCSA) sets a baseline for trucking insurance. It’s important to note that the minimums vary depending on the type of cargo involved, but for general freight, most businesses will need at least $750,000 in liability coverage. When the materials being hauled are hazardous, the minimum will be significantly higher.

However, assuming that meeting federal minimums provides sufficient coverage for the actual needs of trucking operations can be a costly mistake. Many of these requirements were set based on the needs of bigger carriers, but what works for a 500-truck fleet won’t necessarily offer a proper degree of protection for smaller businesses that only operate a handful of vehicles.

Motor carrier liability insurance mainly covers the bodily injury and property damage caused by the truck during business operations. It is different from a standard car insurance policy because it specifically addresses the distinct risks involved in commercial trucking operations. The coverage is only in effect when the truck is being used for business purposes, which includes everything from actively hauling freight to deadheading between loads.

State-Specific Variations

Federal requirements may be a good starting point, but many states have their own requirements that smaller operators may overlook. For example, California and Texas are known for their complex rules and filing requirements, while New York has exacting provisions governing trucks that operate in high-density areas.

Another important distinction is interstate versus intrastate; trucks that never need to cross state lines may have less complicated insurance requirements. Nevertheless, interstate commerce is defined in a rather broad manner. Consequently, trucks that never leave their home state could still be considered interstate if they handle goods that came from or are headed to a different state.

Additional Coverage

Smart trucking businesses know that meeting minimum requirements isn’t enough to maintain the protection they need. One important additional type of policy is physical damage coverage. This offers protection to the trucks themselves against collision, comprehensive losses, and other types of physical damage. It is especially important for smaller operations, as each truck makes up a significant percentage of their assets.

You should also make sure that you understand your cargo insurance requirements. While some shippers will supply their own coverage for cargo, others expect truckers to carry it. Because the coverage amount you need depends on the value of your typical load, it is important not to underestimate your exposure here.

What happens if your truck is involved in an accident but not under dispatch? Non-trucking liability, also known as bobtail insurance, can provide coverage in cases where a driver gets into an accident while running a personal errand using the truck. These types of situations are generally excluded in standard motor carrier policies.

Filing Requirements and Paperwork

The FMCSA requires trucking companies to file their insurance properly, typically through Form MCS-90 endorsements. Although insurance companies generally handle most of this paperwork, it is important to make sure your policy includes the necessary endorsements and that all of your filings are current. Any lapse in coverage or improper filing can result in your operation being shut down.

Keep in mind that proof of insurance is often required for freight arrangements, with shippers and brokers alike asking for current certificates before they agree to work with a specific carrier.

The True Cost of Inadequate Coverage

Insurance premiums are undoubtedly expensive for small trucking companies, particularly compared to similar insurance for cars. However, the cost of insufficient coverage could be much higher and potentially even catastrophic.

The legal fees for accidents that don’t cause major damage or injuries can still run into six figures, and the current litigation environment tends to be rather hostile toward trucking companies. Minimum coverage amounts often fall short when it comes to the high awards and settlements that are characteristic of the present legal environment.

Find the Right Coverage through an Agent Who Understands Trucking Insurance

Now that you understand trucking insurance requirements, it is clear that working with insurance agents who are knowledgeable about small trucking operations is essential.

At John M. Glover Insurance Agency, our experience working with trucking operations enables us to provide customized advice for all the hazards your business encounters.

Don’t let insurance complexities put your business at risk. Reach out today to find out more about the right coverage to protect your business.