The Ultimate Guide to Creating a Transportation Insurance Package

As a new independent agent or broker in the world of commercial transportation insurance, putting together a comprehensive transportation insurance package for a client may seem like a daunting task.

From different vehicle classes and commercial driver's license requirements to many other insurance complications, trucking insurance takes time and skill to navigate. Even if you're a broker coming from another sector of the insurance field, you most likely still will want to brush up on the specifics of commercial trucking insurance.

Most small trucking businesses or owner-operators will be able to quickly see through subpar comprehensive insurance packages if you don't have a strong grasp of the trade-offs that trucking insurance brokers have been balancing for decades.

By breaking down commercial transportation insurance into component parts, you can take a good look at what you should be concerned about as a new broker.

Commercial Transportation: The Basic Elements

There are a few elements of commercial trucking insurance that operators and trucking companies can't get off the ground without. The US Department of Transportation (USDOT) and the Federal Motor Carrier Safety Administration (FMCSA) won't let your clients cross the starting line without these basic types of insurance.

While commercial trucking insurance gets far more complicated than these simple beginnings, this is the best place to start. Once you're certain you understand what your clients need to get authorized, you can start to offer more complex insurance services.

Liability Insurance

Just like with private passenger cars, liability insurance is the bare minimum. This type of insurance is mandated for all types of vehicles using public roads and carries potentially heavy penalties if you're caught on the road without it.

Liability doesn't cover damage done to your vehicles or fleets. If you just have liability insurance, you'll still be on the hook for any repairs needed to your property because of accidents caused by you or your drivers.

Comprehensive Insurance

Comprehensive insurance covers damage to your trucks when there isn't another party to hold responsible. For example, comprehensive insurance might cover damage done to your trucking fleet by one of your own drivers. It might also cover damages caused by a hit-and-run accident, in which the responsible party is not able to use their liability insurance to cover the costs.

Comprehensive insurance isn't often sold without liability, as liability insurance is essentially a prerequisite. It makes a lot of sense to bundle these two together. Depending on the types of trucks and the size of the companies you deal with, you may want to adjust maximum value payments, premiums and the conditions that will govern a payout in the event of damage not caused by a collision.

Bobtail Insurance

Bobtail coverage can cover damage to the truck outside of the time it is actively transporting cargo. The term comes from what a semi-truck looks like without a trailer — a short-tailed cat such as a bobtail. While the origin of the term seems to indicate that bobtail insurance would only apply when a truck is without a trailer, this is not always the case.

Bobtail insurance can cover your clients whenever one of their employees is driving to or from a job site, delivery destination or another type of job. If the truck is not carrying cargo or on the job, the right kind of bobtail insurance can cover them.

This is also a useful type of insurance for small trucking businesses, owner-operators and family trucking businesses. Businesses with only one or two semi-trucks may have to drive their vehicles without a trailer more often while taking the vehicle to storage or driving it home.

Driving a truck in a bobtail state is more dangerous because all semi-trucks are designed to be driven with a massive multi-ton load in tow. Braking capabilities and maneuverability are both decreased when driving a bobtail, making it even more important that companies have insurance.

Motor Truck Cargo Insurance

Motor truck cargo insurance is the backbone of insuring the cargo that your client's company transports across the US Like so many other kinds of insurance, motor truck cargo breaks down into many different parts, all of which require finesse to navigate.

Most motor truck cargo insurance is categorized by the weight of the load. In other words, certain trucks are insured up to a maximum load limit. Overloading a truck can quickly violate a policy, resulting in a coverage gap. This is extremely important to communicate to clients.

From there, it is the responsibility of the transporter of the freight and the driver to ensure that their coverage max is higher than the value of the cargo that they're carrying. This is a basic but often overlooked point to communicate to your clients — especially if they're new to the business.

To navigate a package for a client, you'll have to work with them around different shipment values. For example, a client who carries a wide variety of cargo varying in value may want to insure different trucks in their fleet to different maximums. Those who carry exclusively lower-value cargos may be able to get away with lower maximum coverage.

In all cases, clear communication is essential to putting together a package that will work for all parties. As an agent, you certainly don't want to be put in a position where you're forced to deny coverage. Luckily, these problems can be avoided with good contracts and strong relationships.

Not all clients will need motor truck cargo insurance for all jobs. It's not unusual for the companies that own the cargo to also cover it with their own cargo insurance. It's important to have your potential clients check with the companies that they expect to contract with on a regular basis about who will be covering the cargo. The most important thing is that it gets done.

Federal Regulations for Interstate Commercial Transportation

Helping your clients understand federal regulations will allow you to put together a comprehensive package while creating trust with your clients. Here's what you need to know.

Past Traffic Violations and Accidents

When speaking with new clients, it's important to explain that transportation violations in their drivers' pasts may impact the cost of insurance. The same can be true of significant safety incidents in a company's history. And sugarcoating or omitting any of these problems won't make them go away. At some point, whether it's the certification with USDOT or FMCSA or a detailed investigation of a future accident, the truth will come to light, and the client could be liable for a lot more than they expected.

While not a lot of clients will openly lie about this type of past incident, there is a much higher chance that they may not fully understand the potential consequences of a mistake and the risk it poses to the viability of their business. To keep both yourself and your clients safe, you need to help them understand that it's their responsibility to provide full and accurate information to both you and all federal authorities. Even honest mistakes can cost millions.

One strategy to ease this part of the negotiation and encourage clarity in your relationship is to reinforce that disclosing traffic or transport violations may not disqualify them from receiving affordable coverage. You can tell them that if you have the full story, you may be able to cut them slack in other areas of their coverage. Commercial trucking insurance has many areas where you can adjust costs, and offering those cuts as occasional incentives can be a great way to encourage clients to work with you to solve potential problems.

Insurance Minimums

Federal authorities have strict regulations for the amount of coverage your clients need to have for certain categories of cargo and transportation. These minimums are often lower than the value of the cargo, making these regulations important to check but easy to follow.

As outlined by FMCSA, the insurance minimums for commercial trucking are:¹

• $300,000 for nonhazardous cargo in trucks under 10,001 pounds
• $750,000 for nonhazardous cargo in trucks 10,001 pounds and over
• $1 million for oil transported by for-hire/private carriers
• $5 million for other hazardous materials or explosives transported by for-hire/private carriers
• Additional cargo coverage for household goods transported is $5,000 per vehicle/$10,000 per occurrence

Trucking is an expensive business, in which both the cargo and the vehicles involved are often worth hundreds of thousands of dollars — if not millions. While these minimums may seem high at first glance, they make a lot of sense in context.

When speaking with clients about federally mandated insurance minimums, it can be useful to explain that these regulations end up keeping all parties safe from permanent harm or unpayable liability. It can be difficult and expensive to get started in the trucking industry, but FMCSA's rules keep everybody safe.

These regulations go hand-in-hand with federal commercial driver's license (CDL) requirements for the transportation of hazardous materials and the use of vehicles that take skill to operate.²

Negotiating Strong Transportation Insurance Packages

The most difficult part of this process is coming to specific agreements with your potential clients. While explaining the basics to them is extremely important, you'll probably spend most of your time working one-on-one with clients to sign a contract. There's a lot you can do to expedite the navigation of transportation insurance negotiation.

Treat Each Client as an Individual

While this might seem like a basic rule in customer relations, it's essential to keep in mind. Trucking businesses can have extremely different characteristics. Some are mom-and-pop operators while others are multimillion-dollar corporations. When preparing to negotiate a transportation insurance package with a new client, do your research beforehand, and do an in-depth entry interview.

The more you know about your client, the better you can serve their needs.

Understand the Pros and Cons of Constant Change

Transportation trucking insurance is a field where things change often. Even if it would be beneficial to you and your clients to lock in longer contracts, there are problems with this strategy as well. You should explain to clients that to get the lowest prices, you and the client will need to work together. Because each cargo is different, you might want to use different policies for individual cargos. This might take a lot of work, so it's important to let your client know you're ready to go the extra mile to secure the lowest rates for them.

Not everyone will want to take this approach. Some clients may want to sign contracts for as long as three years, pledging to stick to the terms outlined. While this is certainly possible, brokers should make it clear to clients the dangers of mistakenly going over the load limit or transporting cargo that exceeds their maximum insurance coverage.

Work to Cut Costs in New Places

Many clients may not have a great understanding of how some of the finer points of commercial trucking insurance work.

For example, sometimes truck drivers and owner-operators will try to overvalue their vehicles in an attempt to get more out of potential reimbursement after an accident. But this won't play out for them as they hope. Insurance will simply pay for the cost of a replacement of the same value after examining the accident. Explaining this to your clients can save them money.

Performing a cost-benefit analysis of comprehensively covering older vehicles is another way you may be able to save your client money. Not all vehicles are actually worth putting comprehensive coverage on. Sometimes it can be worth it to go over situations like this with clients to build trust and deepen your relationship.

When creating a comprehensive transportation insurance package with a client, there are two things that you need to do above all else: Know your client, and meet them where they are.

Knowing your client allows you to understand which parts of their complex insurance plan they are going to care about the most and which aspects you can cut costs on. If you don't know your potential client it can be hard to even get them to the table.

Meeting your clients where they are requires you to make compromises and sacrifices. Some of these compromises will go in your favor, but others won't. At the end of the day, transportation insurance isn't as simple as passenger vehicle insurance for private citizens, which allows more room for movement and negotiation.

By meeting your clients where they are, you can help ensure they'll come back to you year after year.