Insurance is a foundational element of the trucking industry, providing crucial protection for assets, liability, cargo, and workers while ensuring regulatory compliance and mitigating financial risks. However, it's important to acknowledge that insurance can also be a significant cost for trucking companies, making it imperative to strike a balance between obtaining adequate coverage that meets business needs and ensuring affordability. This is especially crucial for trucking startups, as insurance costs can be exceptionally high.
The most important insurance in trucking is Auto Liability Insurance. It offers essential protection against claims arising from injuries and property damage caused to others. There are three popular types of auto liability policies in trucking: Scheduled Insurance, Revenue-Reported, and Mileage-Reported policies. In this blog post, we will explore the nuances of each type and help you understand which might be the best fit for your trucking business.
1. Scheduled Liability Insurance:
Scheduled auto liability insurance is a specific type of insurance where each truck operating under a trucking company's authority must be individually listed or scheduled on the insurance policy.
Maintaining an accurate and up-to-date list of trucks and drivers covered under the scheduled liability insurance policy is vital. Insurance providers may periodically verify the Federal Motor Carrier Safety Administration (FMCSA) records to cross-reference inspections and identify any discrepancies between the scheduled policy and actual operations. If they discover unreported trucks or drivers during these checks, it could lead to insurance cancellation or other penalties.
While it may seem tempting for some trucking companies to not report all of their trucks on a scheduled insurance policy to save money in the short term, it can lead to severe consequences in the long run.
2. Revenue-Reported Liability Insurance:
Revenue-reported liability insurance is a coverage option based on the revenue generated by the trucking company. With this type of policy, the insurance premium is determined by a percentage of the company's total revenue. The advantage of revenue-reported liability insurance is that it offers flexibility for growing businesses. Additionally, if revenue declines, the insurance cost may also decrease, providing some cost savings during slower periods.
3. Mileage-Reported Liability Insurance:
Mileage-reported auto liability insurance is a type of insurance that is calculated based on the number of miles your trucks have traveled. Depending on the insurance provider, this can be determined and reported in various ways, but the most common method is through IFTA (International Fuel Tax Agreement) quarterly reports. When you perform IFTA calculations, they provide information on the number of miles your trucks have traveled, which is then used to calculate the insurance premium.
Which is Best for Your Trucking Business?
The choice between scheduled, revenue, or mileage liability insurance depends on the unique characteristics of your trucking business. Consider the following factors to determine the most suitable option:
Years in Business: For most new trucking companies, scheduled insurance will be the only choice since insurance providers often have limited options specifically tailored for startup trucking companies.
Fleet Size: Larger fleets with a longer operating history typically tend to opt for either mileage or revenue-based policies, as they can offer potential cost savings.
Distance Traveled: If your company primarily handles local loads with fewer miles on average, mileage-based policies might be the best choice for you.
Ultimately, there is no one-size-fits-all answer to which type of trucking liability insurance is the best. Each option has its merits, and the decision should align with the specific needs and objectives of your trucking business. It is essential to work closely with an experienced insurance broker who can help assess your risks, evaluate your fleet's dynamics, and guide you in selecting the most appropriate coverage.
Remember, having comprehensive liability insurance is a crucial aspect of running a responsible and sustainable trucking company. It not only protects your business from financial losses but also ensures the safety and security of the public you serve on the open road.
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