Being leased to a motor carrier doesn’t reduce the insurable risks you come across on a daily basis. The one thing that can be said about anyone who’s a Leased Owner/Operator, he’s always the first one on the scene of an accident involving his rig.

There isn’t a trucker who intentionally plans on being in an accident or having a mishap occur for which he’s going to be financially responsible. But just like the poor deer with the target marking on its side, a ‘bummer of a birth mark,’ every commercial vehicle on the road has a similar target called ‘one million dollars in liability insurance coverage’ required by the DOT. While this is usually covered under the trucking company to which you are leased as an auto liability policy, there are insurable risks which you have that the trucking company either doesn’t or can’t cover under their policies.

As I’ve said previously: Insurance is a unique relationship between you and your insurance company. You’re betting that something is going to happen which will require financial reimbursement, your insurance company is betting that the incident won’t occur. This is one bet you don’t want to win.

So what are these different coverages that are available to you as a Leased Owner/Operator?

1. Non-Trucking Use Insurance: As a rule, most permanently Leased Owner\Operators carry Non-Trucking Use Liability insurance. Most people still refer to this coverage as bobtail insurance. In reality, true bobtail insurance is not widely available. The purpose of this insurance is to cover the Leased Owner/Operator during times he is not under dispatch but needs to relocate his truck for any reason. Please understand, you can be pulling an empty trailer and not be covered by the Motor Carriers Auto Liability Insurance. This occurs when you’re not under dispatch’s directions. Examples: you are moving your truck and trailer to a location you feel has a greater opportunity for better load availability, but your motor carrier didn’t dispatch you to this new location, or you’re empty and deadheading to the house. Keep in mind, if dispatch calls you at home to deadhead to a location to retrieve a load, this puts you under dispatch and you’d be covered under the Motor Carrier’s Auto Liability Policy. Note: you can be empty and under dispatch, so the operative word is, are you being directed by the motor carrier to move the truck to a new location? If the answer is yes; you’re under the motor carrier’s auto liability insurance; if the answer is no, you’re under your Non-Trucking Use Insurance. NOTE: Many trucking companies offer truck insurance programs as a savings and convenience to their Leased Owner/Operators. However, this should not preclude you from purchasing your insurance on your own if you so desire. The same holds true with finance companies. You do not have to buy your truck insurance in conjunction with the loan on your truck.As the lessor, you are not required to purchase any products or services (Non-Trucking Use Insurance) from your carrier as a condition of your lease. You must fulfill their insurance requirements, but if you can do so through the company of your choice, the motor carrier can't force you to buy their insurance.

2. Physical Damage Insurance: This covers loss or damage to your insured tractor and /or trailer caused by collision, fire, theft or vandalism on an actual cash value basis. Regularly review the policy with your agent so you know what coverage you have and what it does and doesn’t cover. You should do an annual review of the market value of all your insured vehicles to make sure you have them insured correctly. You can also control your premium costs by selecting higher deductibles. Remember Physical Damage Coverage pays the lesser of these amounts on a claim:

A. Stated values in the policy
B. Market value of the vehicle at the time of the accident
C. Cost to repair or replace.

Additional Coverage: Optional Downtime Insurance – Provides extended protection for periods of downtime due to repairs following a covered physical damage claim, other than theft. Most policies have limits of a few hundred dollars per day with a maximum payout not to exceed 60 days, as a rule. There is usually a waiting period of two weeks before you can make a claim for downtime coverage.

3. Lease/Finance Value Insurance: During the first half of a five-year lease or loan, your payoff is usually higher than the actual cash value of your unit, and insurance policies are typically only obligated to pay the actual cash value amount. Any difference is your personal obligation. Lease/finance value coverage responds after a total loss to pay off the cost of a lease or loan when it exceeds your unit’s actual cash value.

4. Rental Reimbursement Insurance: If you suffer a loss, you may need replacement equipment to continue operating. This policy covers the cost of renting replacement tractors, trucks, or trailers when the loss is covered under your physical damage policy. But remember you must add this coverage, and there’s usually an additional premium amount due.

5. Miscellaneous Equipment & Electronic Equipment Insurance: Many Leased Owner/Operators have binders, tarps, tie-downs, chains, pads, pallet jacks, dollies or other equipment used in the course of performing their trucking duties. If you don’t own the trailer you’ll need separate coverage for these items. Miscellaneous Equipment Coverage provides full comprehensive and collision coverage. The Electronic Equipment Insurance is used to extend your tractor physical damage coverage to include certain electronic items not automatically covered in the policy, such as permanently installed computer systems, fax machines, video cameras, satellite tracking systems, two-way radios, etc. Always check with your insurance agent to be sure all your miscellaneous equipment and tools are covered from loss under your policy. If the item is important to you being able to perform your job, it most likely is important enough to insure against loss or damage.

6. Deductible Reimbursement Insurance: You can also add optional deductible reimbursement insurance. This product is designed for Leased Owner/Operators in order to reimburse them for deductibles that motor carriers contractually require. In many cases a motor carrier will have a high deductible that is either totally or partially transferred to the Leased Owner/Operator involved in an accident. These can be as high as $5,000 to $10,000 dollars—an amount that can be devastating to the trucker. This insurance coverage protects you against the financial upheaval one accident or mishap could cause.

7. Occupational Hazard Insurance: This coverage is offered to Lease Owner/Operators as an alternative to workers compensation insurance. It’s a choice for you as a Leased Owner/Operator, and at a greatly reduced cost. (Check with your state labor department to see if you are able to obtain this coverage; some states won’t permit the use of Occupational Hazard Insurance.) This insurance covers accidental death, dismemberment, paralysis, disability, and medical expenses for injuries sustained while performing the obligations of a Leased Owner/Operator under dispatch. IMPORTANT: While less costly than workers compensation insurance, Occupational Hazard Insurance is a limited benefit policy and generally does not provide coverage equal to Workers Compensation. Workers Compensation Insurance has loss of income possibilities and lifetime medical care benefits, Occupational Hazard Insurance doesn’t.

8. Workers Compensation Insurance: Provides payments to injured workers without regard as to who was at fault in the accident, for time lost from work and for medical and rehabilitation services. It also provides death benefits to surviving spouses and dependents.

If you hire casual labor from time to time, or on a regular basis as a Leased Owner/Operator (household movers, produce haulers, special commodities haulers, etc), you may be required to carry Workers Comp to cover your help.

Each state has different laws governing the amount and duration of lost income benefits, the provision of medical and rehabilitation services and how the system is administered. Be sure to work with an insurance expert knowledgeable in Workers Compensation for the state in which your trucking company is located.

Workers Compensation insurance must be bought as a separate policy. Although Package Policies can be written for most of the previously mentioned lines of coverage, they don't include your Workers Comp coverage. In some states, you may not be required to carry workers compensation insurance. Nevertheless, it is always a good idea to elect Workers Compensation coverage if you hire any help to assist you in loading or unloading, because the helpers always have the right to sue for their injuries.

Keep in mind the purpose of insurance is to protect you from financial catastrophes, not smaller expenses you can afford to pay. In general raising your deductible will lower your premium. So one way to reduce your insurance costs is to consider increasing your deductibles to reduce your insurance premiums, just be sure the higher deductible isn’t going to put you behind the financial eight-ball. In regards to insurance premiums and deductibles, always look at worst-case scenario when you’re making your coverage decisions.

Insurance is like that trusty road atlas; very boring until you need it. Insurance needs to be studied, researched, and reviewed on a regular basis. When the insurance premium is coming due, review your coverage; whenever you add or remove a vehicle or an insured, review your coverage, or when your situation changes, review your coverage. This way you’ll never be paying for coverage you don’t need, or get the unpleasant surprise of not being covered when you need it the most. Don’t assume a trucking company has your best interests in mind, be sure if you’re paying for insurance you have a copy of the policy with your name listed as either an insured or additional insured. Also, know that a trucking company can’t require you to purchase through them the coverages we’ve discussed here. You can shop and compare insurance through any insurance agent you want. Just be sure the coverages meet the limits and standards the trucking company and DOT require. Sometimes a trucking company has the best deal and sometimes not;0 be sure and do your research so you know you’re getting the best coverage for your money.

For an insurance agent to underwrite the most effective combination of policies at the most cost-saving rate requires a working knowledge of the industry along with the expertise of trucking insurance. Your family’s financial life depends on the business relationship you have with your insurance agent. It requires a constant review of your operation and its risks to be confident you’re correctly covered. And while this article is a good overview of available coverages for your trucking operation, it is not a replacement of the working relationship you need to have with a trucking insurance expert—an expert who’s working for your best interests and protection.

Remember, it’s your company, your truck.

Timothy D. Brady is a 20 + year trucking veteran and AMSA’s 2002 Super Van Operator of the Year HHG. He’s the “Trucker’s Business Advisor” on Sirius Road Dog Network’s “Open Road Café” Wednesday mornings. He has held a Fire and Casualty Insurance License for over a quarter of a century. Brady has authored several trucking business books and is available for speaking engagements and to conduct workshops. Join him for his next “Starting Your Own Trucking Company” I.C.E. (In-Cab Education) ® Workshop. For a workshop schedule go to www.truckersu.com
Contact him at tbrady@writeuptheroad.com or (800) 292-8072.