On September 25, Simplex Group hosted part two of the Trucking 101 series. Alexandra Figueras, Director of CDL Defense, explained everything a new carrier needs to know about trucking insurance requirements, costs, and compliance.
Here are the most common questions from the session and the answers you need to understand insurance when starting your trucking company.
1. Why is trucking insurance so expensive for new companies?
Insurance for new carriers is considered high risk because insurers do not have a safety record to evaluate. According to Alexandra, rates are driven by several factors. These factors are:
- The commercial trucking industry is a high-risk sector and claims are on the rise.
- Insurance companies consider New Venture’s the highest risk to insure because of their lack of experience in operating a trucking company safely
- Due to regulations, insurance policy limits for commercial trucking companies are high.
This is why many first-year carriers see premiums ranging from $10,000 to $20,000 or more per truck.
2. What do I need to provide to get an insurance quote?
Before starting the quoting process, you will need:
- Your company information, DOT #, Operating Authority (applied for), cargo type, and operating radius
- A qualified driver and a copy of their driver’s license
- A truck and the following details – year, make, VIN, and GVW
- Sufficient funds to cover the down payment of your insurance policy’s annual premium – typically 20% (This is to bind the policy, but not needed to get quotes)
3. What are the main types of trucking insurance policies?
The essential policies include:
- Auto Liability: Mandatory, protects against damage caused to others (policy limits: $750K–$1M minimum)
- Motor Truck Cargo: Covers cargo losses (policy limits: often $100K or more)
- Physical Damage: Protects insured equipment from damages sustained from collisions and non-collision events
- Optional policies: Excess Cargo, Trailer Interchange, Towing and Storage, and General Liability depending on your operations
4. What is included in the quoting process?
The steps in a commercial trucking insurance quoting process are:
- Find an agent and provide them with your company and operations details, as well as driver and equipment information, so they can find you a quote with an insurer.
- Insurers underwrite to evaluate your data and determine whether to offer a quote.
- Insurers respond to your agent with their decision, to offer or decline a quote.
- You review quotes, comparing limits, coverages, deductibles, and premiums.
- You select your policies, then complete and sign policy applications and finance agreement, and pay the down payment to bind the policies.
- Once policies are bound, the insurer files the proof of insurance with the FMCSA.
- Wait for the 25 day waiting period to end for your Operating Authority to become active. The waiting period begins when you apply for your authority. You must have insurance on file with the FMCSA for your authority to become active after the waiting period.
5. What state has the cheapest trucking insurance?
There is no shortcut to cheaper premiums. Insurance must be written in the state where your business is domiciled, and costs depend on:
- Years in business as established trucking company
- Claims history
- Safety scores
- Drivers experience and driving history
- Cargo type
- Equipment type
- Operating radius
- Policy limits
While rates in some states may be more affordable, insurance companies price policies based on risk factors and safety records, not just the state of operation.
6. How can I lower my insurance premiums as a new carrier?
Alexandra emphasized three principles:
- Clean driving record
- Maintain strong safety scores
- Avoid unnecessary claims by training drivers and maintaining equipment
- Grow slowly during your first two years, since adding trucks too quickly can raise premiums
Practical steps include following rules and regulations, monitor driver behavior, enforcing safe driving policies, thoroughly vetting new drivers, and keeping detailed records.
Alexandra suggests working with a reputable company that can teach you how to operate your company safely.
7. How much money do I need to purchase trucking insurance?
Because insurance companies require policy premiums to be paid in full before offering coverage, it’s common practice to finance the annual premiums through a finance company that works with your agent and the insurance companies. Finance companies require the insured to pay a down payment of at least 20% of the total annual premium to offer financing. The balance is paid through monthly installments by the insured to the finance company.
8. Do I need general liability insurance for my trucking company?
No, but it’s a wise investment to protect yourself in case of an incident such as you damaging property, like a dock or equipment during delivery, or injuring someone while loading or offloading cargo, like dropping a pallet on a customer’s foot. Typical limits are:
- $1 million Commercial General Liability (CGL)
- $2 million aggregate
This is in addition to auto liability and may be required by some brokers, shippers, or lessors before doing with you. Ask for an agreement if they require GL.
9. How do deductibles work in trucking insurance?
A deductible is the amount you pay out of pocket before insurance coverage applies. Higher deductibles lower your premium but increase financial risk. Alexandra recommended reviewing deductible options and gap coverage with your agent before binding a policy.
10. How soon after binding insurance can I start running loads?
It depends on when you bind the insurance. The FMCSA imposes a 25 day waiting period on all new authorities. It begins the day you apply for your Operating Authority and ends after 25 days. If you bind your insurance during the 25 day period, you’ll have to wait until it is over for your authority to become active. If you bind your insurance after the 25 day period, you authority can become active within 1-3 days of the insurance companies filing of your insurance with the FMCSA.
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