This month I am going to focus my article on those of you that provide only the power source (tractor) and the insurance associated with your type of risk. The owner operator is typical of the business that we write and consists of the majority of the clients that we service. There are some very important things that you should understand about the coverages that you have purchased. Knowledge of your policy is the most important thing that you, as a business owner, should be concerned with. As I have said for 30 years, “It is too late to read and understand your coverage after a loss has occurred.”
With that said, less than 1% of those that purchase insurance for their trucking endeavor has ever asked for an explanation of what they have purchased or what the terms and conditions are, other than the liability limit, cargo limit and physical damage amounts. Your agent will provide a brief explanation of the coverage in the quote and refer to the policy in the transmittal letter, but the nuts and bolts of the policy are rarely ever discussed. It is blind folly to trust without questioning or asking for an explanation of the policy, which is full of exclusions and conditions that will greatly affect a loss. Each type of coverage (Liability, Physical Damage and Cargo) has its own set of exclusions and conditions associated with them. Now is the time to review and understand the insurance policy that you have purchased!
The majority of all claims fall into the basic structure of the policy. Liability, to include third party claims (Bodily Injury and Property Damage), loss to your property (Physical Damage), and Cargo. But, what about those claims that the exclusions and conditions apply to, and what exactly are they? Those are the ones that you should be concerned with the most. Typically, you might only provide the power unit, but in all cases you probably provide all of the indemnity for not only your operation, but for those that you are pulling for.
In your quest for purchasing insurance you probably go through a list of insurance agencies, dialing one after the other, giving the same information to the various agents. After a certain length of time you start collecting the quotes. It’s a pretty simple decision – pick the cheapest. Just remember, you get what you pay for, not only in the policy that you have purchased, but the agent that you are placing your faith and trust in. Many times you fudge on the information and many times the agent, in his or her quest to write business, fails to provide for the complete risk. This is not true in the majority of the business that is written, but it does exist, so be careful.
The coverage that you start with is Liability – it is the basis of your insurance and provides the necessary filings for your operating authority. Many factors come into play when underwriting or rating this coverage – your age, driving record, driving experience, product hauled and radius of operation, to name a few. There are two things that you should be concerned with other than the limit of liability that you requested: 1) Radius – does your policy have a strict radius endorsement? In this case, no coverage exists out of the radius; and 2) Deductibles – the majority of liability that is written does not have a deductible in it. Some companies, however, may provide for deductibles for a lesser premium and some other companies have a policy of only writing coverage that contains a deductible. This should be explained to you. Do not confuse this deductible with the deductibles that you have for your physical damage on your equipment. The deductible can also be associated with Bodily Injury, Property Damage or both.
Physical Damage provides coverage for your equipment, as well as the equipment that you pull. Generally, you do not own the trailer, so that coverage is provided as a non-owned or unidentified trailer. In some situations, the coverage is covered through a trailer interchange agreement. Never leave an unattended trailer parked anywhere (especially on the street) without the power unit attached. This coverage, written as a non-owned or unidentified trailer, simply does not provide coverage if the trailer is detached from the power unit. The majority of all coverage, written for these trailers, is provided through this part of the insurance contract. If coverage is provided through a trailer interchange agreement, coverage would exist since all trailers in your care, custody and control are covered. A written trailer interchange agreement has to exist between you and the owner of the trailer, with the coverage indicated in the policy and a premium charged. Trailers that are owned by you have to be identified on the policy. You cannot fudge here, thinking that you have coverage if your policy only provides coverage for an unidentified trailer.
Cargo coverage provides protection for the product that you are transporting. This one coverage creates the majority of all problems associated with insurance. Each type of product hauled has its own set of circumstances and conditions. Deductibles can be written in several ways – as a specific amount or as a percentage of the loss, whichever is greater. It can also have separate deductibles (like for reefer breakdown). As with the physical damage, coverage does not exist if the trailer is detached from the tractor. Each policy handles the conditions differently in regards to how the refrigeration unit must be maintained. This one condition is important, and it is imperative that you fully understand it. If your policy is written with a co-insurance clause, any claim will be adjusted as a percentage of the loss to the limits of your cargo policy. If you under-insure, the loss will be adjusted as a percentage to the limits of the policy.
You should take the time to understand the exclusions, terms and conditions of all of your coverages, but especially the cargo policy. I don’t have the room in one article to look at the total picture, but this short article should stimulate you enough to be more active in the understanding of the insurance that you purchase. If you have any comments or questions, I can be contacted through California Plus Insurance Service in Modesto, CA at (800) 699-7101.