
As truck insurance premiums continue to rise, it’s important to understand how policies work, what coverage is required, and how companies can save on costs.
This guide will help you navigate the essential components of a commercial truck insurance policy, from coverage types to state and federal requirements.
Basic Insurance Terms
While you don’t need to become an insurance expert to compare policies, it is important to understand the basics. The four main components of any policy include:
Coverage
At the most basic level, what is covered and when? For example, will the policy cover a cracked windshield if a tree falls on it while parked or only during an accident? Are the frozen goods in your reefer trailer covered if the cooling system goes out or only if the trailer is stolen?
Premiums
This is how much the policy will cost on an annual or monthly basis. Typically, this will increase with broader coverage, lower deductibles, and higher policy limits.
Deductible
Most insurance policies have deductibles that require the insured to pay out-of-pocket up to a certain limit before coverage kicks in. For example, if a policy has a $2,000 deductible and a repair costs $5,000, the insured will pay the first $2,000 and the insurance company will cover the remaining $3,000. Most policies have deductibles that reset annually, meaning the out-of-pocket limit starts over each year.
Policy Limits
This is the maximum amount an insurer will cover on potential claims. This can be set for the entire policy, per incident, or even broken out by the type of coverage. For example, a policy may have a total limit of $1 million but limit each incident to $100,000.
Who needs commercial truck insurance?
Any business operating trucks for commercial purposes will want to carry commercial truck insurance. State and federal laws mandate that all commercial vehicles carry auto liability insurance. In most cases, additional coverage types are also necessary.
Typically a corporate entity is responsible for purchasing the truck insurance but individuals operating as sole proprietors still need commercial truck insurance if they own or lease a vehicle for business purposes.
Federal & State Coverage Requirements
Every trucking companies is governed by their state’s insurance requirements. However, for-hire motor carriers involved in interstate commerce and all carriers transporting hazardous material must also meet the Federal Motor Carrier Safety Administration's minimum liability requirements.
Below is an overview of the federal requirements for various types of motor carriers.
Source: TruckInfo.net
At the state level, insurance requirements can vary significantly. For example, New Jersey now requires liability insurance of $1.5 million. Texas on the otherhand, only requires $300k for non-hazmat vehicles weighing under 26k pounds.
Navigating state-level requirements can be challenging, but a licensed insurance agent can assist trucking companies in understanding their specific needs.
Types of Coverage
Every trucking company is unique and will require various types of coverage. However, most companies will need at least the following types of coverage.
Auto Liability
As covered above, auto liability insurance is required by law for commercial vehicles. This coverage pays for bodily injuries and property damage for third parties in the event of an accident.
Owner-operators that are leased onto a motor carrier will have their legally required liability insurance provided to them by the motor carrier but most owner-operators will still be contractually required to carry a secondary form of liability insurance that covers them when they aren’t driving under dispatch. This secondary liability insurance is typically referred to as bobtail liability or non-trucking liability insurance.
Physical Damage
Physical damage insurance covers the repair or replacement of owned vehicles or trailers due to covered incidents. The main types of coverage are:
- Collision Coverage: Covers road-related incidents.
- Comprehensive Coverage: Covers a wide range of non-road incidents, such as theft or damage while the vehicle is parked.
- Gap Coverage: Covers the difference between the vehicle's actual cash value and the remaining loan balance. This is typically required if the truck purchase is financed.
Cargo Insurance
Also known as motor truck cargo insurance, it protects trucking companies against the loss or damage of goods in their possession.
Trailer Interchange & Non-owned Trailer
For companies that haul trailers they don't own, one or both of these policies are needed:
- Trailer Interchange Coverage: Protects against physical damage to third-party trailers under an interchange agreement, whether attached to their truck or not.
- Non-Owned Trailer Coverage: Covers all third-party trailers while attached to their truck.
Trucking Financing & Insurance Requirements
Financing a new vehicle usually doesn't significantly change your insurance needs. The coverage required by the loan is generally the same as what is typically recommended. One exception is gap coverage, which isn't needed for vehicles you fully own. However, adding gap coverage typically has a small effect on your insurance premiums.