The U.S. domestic freight trucking industry reached $987 billion in revenue in 2023, according to the American Trucking Associations. As consumers demand faster deliveries and the barriers to market entry remain low for small-scale owner-operators, local freight trucking has become an essential part of logistics.
While over-the-road and regional vehicles cover vast areas and cross state lines, local trucks operate within metropolitan areas. Due to their concentrated territory, local freight truckers face unique challenges, such as navigating narrow roads, congestion, and potential accidents. Hazards include one-way streets, pedestrians, cyclists, roundabouts, traffic lights, tight loading docks, and varying loading and unloading processes based on the customer and location.
Given these challenges, securing the right local freight trucking insurance is critical for your trucking company’s financial stability.
Insurance Requirements for Local Freight Trucking
Most states mandate that local freight trucking companies carry some form of commercial trucking insurance, typically commercial auto liability insurance. This policy covers damages caused to others or their property while operating a company vehicle. However, commercial auto liability does not cover vehicle damages or employee injuries. To cover these areas, you’ll need vehicle physical damage insurance and workers’ compensation insurance, respectively. Workers’ compensation is required in nearly every state, depending on your company’s size and the type of drivers employed.
To protect your assets beyond the minimum required, consider additional coverages:
1. Physical Damage Insurance
This coverage includes collision and comprehensive protection for your company vehicles. Collision covers damages caused by accidents, while comprehensive protects against non-collision damages like theft, fire, or vandalism (unless excluded).
2. General Liability Insurance
This policy covers damages or injuries caused by your operations when you’re not driving a company truck. It can help with costs like legal fees, settlements, medical expenses, and the restoration of your reputation.
3. Motor Truck Cargo Insurance
If you’re hauling goods, this insurance protects the value of the cargo in case it’s damaged, lost, or stolen. It also covers debris removal and freight charges if substitute transportation is needed. Premiums vary based on the cargo type. Common exclusions include contraband, live animals, and goods that degrade due to poor packaging or handling.
Special Considerations for Local Freight Trucking Insurance
Local trucking varies based on truck types, usage, and the nature of operations. Some specialized policies may be necessary, including:
1. Nontrucking Liability (NTL)
Owner-operators working independently or under a contract with a motor carrier may need nontrucking liability insurance for personal use of the truck, as most general liability policies cover only business use.
2. Bobtail Insurance
Bobtail insurance provides coverage when you’re driving the truck cab without the trailer attached. This is more common for drivers under lease agreements. Check your policy for specifics.
3. Trailer Interchange Insurance
If you don’t own the trailers you’re using, this insurance covers physical damage to the trailer while it’s in your possession.
4. Commercial Fleet Insurance
If you operate multiple trucks, commercial fleet insurance is often more cost-effective than insuring each truck separately.
5. Umbrella Insurance
For severe accidents or lawsuits exceeding the limits of your primary liability policy, umbrella insurance offers an additional layer of coverage. It doesn’t cover property damage but protects against claims for injuries or death.
6. Refrigeration Breakdown Insurance
If you have refrigerated trucks or equipment, this insurance covers cargo loss due to refrigeration equipment failure.
7. Permanently Attached Equipment Insurance
If your trucks have custom equipment like electronics or accessories, this coverage will help replace or repair them if damaged by covered events.
8. Specialized Hauling Insurance
Depending on the type of goods you transport (e.g., logging trucks, tanker trucks, or refrigerated trucks), specialized insurance policies may be necessary for specific risk factors related to those goods.
9. Business Owner’s Insurance
For truckers who own businesses, business owner’s insurance is crucial. This may include commercial property insurance and employment practices liability insurance. Commercial property insurance covers physical locations, and employment practices liability protects against employee-related issues.
Price and Cost Considerations for Local Freight Trucking Insurance
The cost of local freight trucking insurance depends on several factors, and understanding these will help you budget wisely:
- Truck Type and Age: Newer, more advanced vehicles may qualify for lower premiums due to better safety features, but repairs or replacement can cost more.
- Cargo Type: Hazardous materials or high-value cargo often come with higher premiums due to increased risks.
- Driving History: A clean driving record across your fleet can help lower insurance costs, while past accidents or violations will increase them.
- Operating Radius: The more densely populated and urban the operating area, the higher the chance of accidents, impacting rates.
- Coverage Limits and Deductibles: Choosing higher coverage limits and lower deductibles will increase premium costs but provide more protection.
- Technology Usage: Fleets with dashcams, GPS tracking, and telematics may qualify for discounts due to their proactive risk management.
Working with an experienced trucking insurance agent can help you customize coverage based on your unique business operations while finding the most cost-effective solutions.
Navigating the Complexity of Trucking Insurance
The insurance requirements for local freight trucking depend on factors such as the type of freight, business operations, and whether you’re an independent owner-operator or a business owner. Working with an experienced local trucking insurance agent can help you tailor the right coverage for your needs. They can explain exclusions and provide a plan that fits your business’s specific operations.
