Long-haul trucking is the backbone of the supply chain as it keeps goods moving across vast distances. Without these services, the American industry can come to a standstill as trucks move nearly 72.6% of freight by weight in the country.
The business vertical is thriving, with 592,286 long-distance freight trucking businesses operating in the US as of 2023. The year-on-year growth rate is an impressive 5.3%, making it an attractive proposition for entrepreneurs.
However, before launching a fleet business, you must understand that it comes with significant risks. According to the Occupational Safety and Health Administration, the industry hazards in this domain include unsafe highways, risks during loading and unloading, hazardous materials, and sub-optimal vehicle maintenance. Statistics show that 4,768 fatal truck accidents occurred on American roads in 2022.
Insurance coverage is imperative in the sector besides being a regulatory requirement. As a beginner, you may fall short of the knowledge about insurance requirements and products for long-haul trucking. We have a comprehensive guide that offers an overview of long-distance trucking insurance for new fleet business owners.
Understanding Long-Haul Trucking Insurance
Long-haul trucking insurance is a specialized commercial auto insurance that offers coverage for vehicles and cargo traversing long routes. It is a critical part of the fleet industry as it helps businesses avoid losses stemming from accidents, theft, and damage. As a beginner thinking twice about the coverage cost, you should learn more about the coverage to understand the value it offers.
According to Infinite Risk Management & Insurance Solutions, comprehensive insurance protection is essential in the transportation industry. Businesses sustain losses due to crowded roads, a lack of experienced drivers, and the proliferation of smartphones and distracted driving. Lawsuits, jury awards, and settlements add to the burden, making proper coverage more vital than ever.
A 2022 report by the American Transportation Research Institute indicates a 47% increase in insurance premium costs per mile for trucking businesses over the last decade. However, it is not something you should skip. The best piece of advice is to create room for this expense in your budget and have peace of mind.
Coverage Types for Long-Haul Trucking Companies
Compared to local companies that operate in nearby areas, long-haul providers require more coverage to address additional risks. It should be tailored to meet specific business needs. After all, your vehicles, drivers, and cargo are on the road for an extended time, translating into greater risk.
Here are the coverage types you should seek as a part of a long-haul trucking insurance plan:
- Primary liability insurance: Coverage for the expense of property damage and bodily injury when the driver is at fault
- General liability insurance: Coverage for non-trucking liability such as property damage and bodily injury when the truck is not on the road
- Physical damage insurance: Protection for the truck from damages due to collisions, theft, vandalism, fire, or natural disasters
- Cargo Insurance: Coverage for the cargo being moved in case of damage or loss during transit
- Workers’ Compensation Insurance: Coverage for medical expenses and lost wages for employees injured on duty
- Non-Trucking Liability (NTL) insurance: Coverage for the driver when using the vehicle for personal or non-business use
Factors Influencing Insurance Costs
According to a recent article, multiple carriers report that the rising cost of insurance and claims are hurting their margins. A fleet owner just starting their business must find ways to reduce insurance costs for your startup. Here are the deciding factors you should consider in this context:
Age and Experience of Drivers
Older and more experienced are often viewed as less risky to insure by the providers. Consider hiring them to lower your expenses in the long run, even if you have to pay them more. As a bonus, you get peace of mind regarding your vehicles and cargo being in safe hands.
Driving Record
Clean driving records typically result in lower premiums, making them a critical element of the hiring process. A clean record showcases the driver’s commitment to safety and makes them a favorable prospect for insurers and employers.
Type of Cargo
Certain types of cargo may pose higher risks, leading to a higher premium value. For example, lightweight cargo is less risky compared to heavy or hazardous materials. You may need extra coverage with hazmat insurance when transporting hazardous freight.
Vehicle Type
New and well-maintained trucks may qualify for lower premiums. If you are considering used trucks for your long-haul fleet business, think twice because you may end up spending more on insurance premiums down the line.
Coverage Limits
Higher coverage limits and lower deductibles also lead to higher premiums because they increase the risk for insurers. You can optimize it by balancing coverage needs with your budgetary constraints. Discuss the option of tailoring coverage to address specific risks while lowering costs and compromising necessary protections.
Long-haul trucking insurance is a significant investment that trucking companies should not skimp on. However, as a beginner, you must understand coverage, work with a trusted provider, and seek a tailored plan to get adequate protection without breaking the bank. Informed decisions can help you achieve your coverage goals within your budget.
Article and permission to publish here provided by Daniel Washington. Originally written for Supply Chain Game Changer and published on March 5, 2024.
Cover photo by Seb Creativo on Unsplash.