We have spent the last three articles discussing the various insurance coverages that you basically have (or are required to have) to run your trucking business. Liability, Physical Damage and Cargo are the three legs of your insurance stool. Now that you are secure with the insurance that you have purchased, other than the monthly payment, the thought of insurance is soon out of your mind. The majority of you will never have an opportunity to use your insurance – it becomes out of sight, out of mind. But it is too late to think about your insurance after an accident or incident requiring the need for your insurance company to get involved, so you might want to look closely at your policy now and know what is (and what is not) covered, before it is too late. I know I have said this stuff before, but I can’t emphasize enough how important it really is.
Understanding the product is difficult, even for those of us that provide the service. So, how can the consumer understand the various parts that make up their policy, especially when only one in a hundred clients even read the policy and ask questions? Every year the same clients ask questions about their policy. The majority of you rely on and trust the knowledge of your agent or broker, but always keep two things in mind – you are (probably) shopping for the lowest price and the agent or broker wants to make the sale. If that is case, then you are just getting into bed with the lowest bidder. I am not saying that the lowest quote provides any less coverage than a higher quote, but what I am saying is that you have to be aware and understand what makes up the quote. I challenge my peers – when is the last time that you read the policies that you are selling your clients, and are you selling on price alone?
Insurance companies are rated by various rating agencies. The leader in the industry is A.M. Best – they provide such information as to their status, financial strength and financial size. What they can not provide you is their ability to respond to claims and their representation of their services to the client. Your agent or broker is usually the first link in the administration of any claim. He or she is usually the one that you report the claim to. They may be the only person that you will go to for help and clarification as the claim process works it way through the system. In the event of a claim, it is too late to evaluate your coverage if and when a claim is denied or settled at a lower amount. Each leg of the insurance stool has its own nuances. Do not assume anything when it comes to the insurance that you have purchased.
When you purchase your insurance policy, the coverages that you purchase usually come with a deductible. Deductibles are your part in the administration of a claim that you are involved in – consider the deductible to be your “first dollar” of coverage. Usually, deductibles range from $500 to $5,000. Some deductibles may be written as a percentage of the loss. The majority of all deductibles that we write are for $1,000. The concept of higher deductibles is to reduce the premium – the higher the deductible, the lower the premium. However, the savings you get from purchasing a higher deductible is typically so little, it does not justify the purchase.
Liability is usually written without a deductible. The insurance company is accepting the “first dollar” loss. There are some policies that do have deductibles, so make sure that you understand the coverage that you purchased. There are two parts to Liability coverage – Bodily Injury and Property Damage (Property Damage, in this case, does not mean damage to your equipment or the equipment that you are pulling). If a deductible is part of the policy, it might be on either or both coverages. Many of you that have dumping operations have a Property Damage deductible – this eliminates rock damage and windshield claims. Even though you have taken on the financial obligation of the first dollar, you do not have the ability to deny the claim. Your insurance company may pay the claim and than come to you for reimbursement of that money. Many insurance companies are now requiring a Liability deductible on risks that operate in the inner city to help eliminate the constant flow of small claims to the insurance company.
Your Physical Damage coverage (loss to your equipment) has two parts – Comprehensive or Specified Perils and Collision. The majority of the companies that provide this coverage has one dollar amount for both coverages. But, in some instances, they can be different amounts. The majority of all questions that come up regarding the Physical Damage deductible arise out of a claim which was caused by another party. The other party’s insurance may or may not pay the loss, or it may be subrogated. If your insurance company pays for the loss, there will be a deductible associated with it. If it goes to subrogation, and if the other party pays for it, you will be compensated for the deductible by the other party.
Cargo claims are usually the most difficult and usually create the most problems with any loss. Many companies are now attaching higher deductibles to theft, or even deductibles as a percentage to the value. Before there is any consideration to a Cargo claim, you have to go to the exclusions and conditions of the policy. If nothing else, you should read and understand the Cargo portion of your policy – thoroughly! Please, take it upon yourself to do this. The question that you should ask yourself as you read through your policy is, “Is this covered?” Look for things like a locked truck warranty, unattended vehicle, loss of entire load, only when attached, reefer breakdown, just to name a few. And always insure to value – you do not want to be caught in the situation regarding co-pay.
Think about a major accident that consists of a loss regarding all three parts of your insurance policy. That might mean three deductibles to cover! Ask your agent if the policy that you are purchasing has a combined deductible – one deductible covering any loss. If your coverages are split up with individual policies, written to lower the premium, each policy will have a separate deductible. That could hurt you in the end. Insurance is supposed to keep you whole, but without proper knowledge of the policy, you may be leaving yourself open to a catastrophic financial loss. If you have any questions or comments, I can be contacted through California Plus Insurance Service, Inc. in Modesto, CA at 1-800-699-7101.