The Importance of Truck Insurance for Fleet Managers and Owners
As Jimmy Hoffa famously exclaimed, “If you got it, a truck brought it.” Even in the age of drones, self-driving cars, and super vehicles, most land transportation is still handled via trucks.
Trucks are the behemoths of the road, often weighing 10 to 25 tons, carrying cargo across all terrain and in any weather conditions. It doesn’t take much imagination to figure out everything that can go wrong under these circumstances.
While fleet managers do all they can to encourage safer driving behaviors and increase the maintenance of vehicles, there’s only so much they can do. When it comes to the rest, you can invest in a decent set of truck insurance policies. Here’s why this matters so much.
Financial protection for your business
Trucks are valuable property. When they are damaged, you have to pay an expensive repair and face facilitated depreciation. Once the truck is damaged and repaired, its resale value will never be the same (regardless of the quality of the repair in question).
Then, your truck will be potentially inoperational. There are laws and regulations about these things. Just because a mechanic says that you could still drive it technically doesn’t mean it’s safe or legal to do so. In other words, you have to face downtime (an expensive downtime).
Then, it’s not just about the truck. Trucks are massive, sturdy vehicles that don’t break as easily.
However, what about the cargo your drivers (or yourself if you’re a driver-operator) hauling? It is likely more fragile, and it could be quite expensive.
Still, it’s not just about the expenses either. Sure, you can cover the losses and compensate expenses, but what if this happens too often? How will this impact your profit and reputation? What will you pay it from, and how will anyone trust you that you can pay?
While trucks are sturdy, they’re not impervious to things like:
- Accidents
- Theft
- Vandalism
The burden of these problems always falls on your back.
Cargo-specific insurance
One problem with general liability insurance in the trucking industry is that it doesn’t cover nearly as many assets and scenarios as you need. The thing is that this industry is so variable, and road conditions are so unpredictable that it would take an insanely complex policy to cover all the moving parts of this equation.
Sometimes, the insurance must be specific to the type of cargo you’re hauling. Here are several examples of how this works.
Logging truck insurance
If you’re hauling logs, you need logging truck insurance. No matter how tightly fastened, logs can cause serious damage, so you need a policy that covers these complex circumstances.
While logs don’t appear fragile, they can get damaged or lost in transportation. Log theft is not nearly as rare as you think (especially with the current economic and energetic situation). Therefore, you need a specific type of cargo coverage that will handle this particular category.
Logging trucks usually require specialized equipment (winches, loaders, cranes, etc.). All this equipment is expensive, and you want it covered by your insurance policy.
Freight forwarder insurance
You may need freight forwarding insurance if you coordinate transportation for importers and exporters. Therefore, this type of insurance is mostly needed by freight forwarding companies, third-party logistics, and customs brokers.
The value of cargo coverage in this industry is usually significant. Also, because its cargo is likely hauled from half a world away, replacing it once damaged or misplaced is not easy. In other words, mishandling, misplacing, or damaging something will be incredibly problematic. This is all the more reason why you need this type of insurance.
One more part you shouldn’t miss is the coverage of errors and omissions. You would be surprised at how much documentation freight has to pass to reach its destination. This amount of paperwork leaves a lot of room for error.
Cold storage insurance
Temperature-controlled transportation is incredibly sensitive. Even if you do everything right, the goods may perish if the temperature isn’t set up properly (or if any part of the setup went wrong).
In other words, you can undergo sizable financial damage without an accident, with a slight misadjustment or misalignment. This is why, as a trucker specializing in the transportation of perishables, you can’t afford to get cold storage insurance.
It’s also important to understand that you must consider the entire journey (every step). It’s not just a refrigerated truck but the refrigeration every step of the way that makes a difference in medication and food protection. It’s a flaw that many truck company owners or owner-operators make.
Livestock insurance
If you’re transporting livestock as a part of your business, getting the right insurance type (with appropriate coverage) can make a difference. It is also legal and regulatory compliance for anyone who transports or wants to transport livestock, so you don’t have much issue here.
Accidents and extreme weather conditions can make even the most careful transportation end badly. The thing is that you need insurance to cover the risks associated with these events. For instance, you may have to pay for extensive veterinary care.
As someone in the transportation business, you protect client investments and your business reputation. Good livestock insurance can help you with both of these issues.
Hazardous materials insurance
Anyone transporting hazardous materials needs to have insurance. Why? Well, because the risk is always present (more present than in some other fields), and it’s not just your own risk. There’s also pollution liability since you can never be sure of the extent to which this problem can spread.
In the case of a spill or contamination, you’ll have to cover cleanup and remediation costs, which will be far from insignificant. This type of specific expense might not be covered by general liability insurance.
Containers, storage tanks, and equipment get worn out much more quickly. This depreciation is also a reason why adequate insurance is so relevant.
Legal compliance
Sometimes, it’s not a matter of choice (as we’ve mentioned several times already). There are instances where you’re mandated by law to get a specific trucker’s insurance to avoid facing legal penalties.
This is not a small matter since failure to comply with regulations may result in suspending your business operations. Driving trucks without proper insurance is illegal in the majority of jurisdictions across the globe. This is especially the case where you’re transporting one of the cargo types described in the previous segment.
There’s also a reputational issue at stake. Even if you can get by without one or two forms of insurance, what happens when your clients figure this out? They see you either as stingy or sketchy, neither of which looks good.
Liability coverage
Accidents happen, and you can do nothing to prevent this. People understand this, both clients and government officials. The key thing to focus on is how you act in the aftermath. For instance, you want to take the incident investigation as seriously as possible and start covering all the expenses caused by this event. When it comes to the latter, you’ll need the aid of your insurer.
- If there are injured parties, you need to cover their medical expenses.
- If there’s property damage, you need to pay for the repairs.
- In a case of a lawsuit, you have to pay for the legal defense. Then, if you’re convicted, you have to bear the financial brunt of potential settlements or judgments.
You must pay for all this out of your pocket if you have no liability coverage. Most truckers, trucking business owners, and owner-operators don’t have that money.
Don’t get us wrong, trucking is a lucrative business, and you’re working with expensive goods and equipment, but all your capital is tied up, and there’s not so much excess that you can comfortably pay up.
This is why good liability coverage makes a difference.
Worker protection
Whether you’re a trucking company owner, fleet manager, or owner-operator, worker’s compensation coverage is always on your mind. In the last scenario, it’s something that you’ll fall back to in unforeseen circumstances. In the first two scenarios, if you don’t have insurance, you’ll pay for it from your pocket.
This form of employee protection goes into the legal compliance mix we’ve mentioned several times.
From the perspective of a company owner or a fleet manager, it has one more hidden perk. Namely, you would be surprised at how contract-savvy veteran truck drivers can get. This means they’ll look for jobs with all kinds of benefits. Now, a trucker’s job is in huge demand, so you need to offer as much as possible to attract top talent.
In the end, if no other argument manages to move you, it’s an ethical thing to do.
The trucking industry comes with many risks which make insurance mandatory
Overall, the trucking industry is full of hazards, so insurance is mandatory from every legal, ethical, and common-sense perspective. Depending on the type of cargo that you’re dealing with, you may need a specific type of insurance, but the principle remains the same.
