What Is The Average Cost Of Commercial Truck Insurance? We Break Everything Down.

Commercial truck insurance is a large portion of your overhead expenses, and in order to turn a strong, healthy profit, you’re committed to keeping your expenses as low as possible.  As far as insurance is concerned, how do you know if you could be saving more money if you don’t know what the average cost of commercial truck insurance is?  

We’re sure you’re aware that not every transportation company has the same rate, that’s because there are many variables that come into play, so the best comparison is always against what your current rate is.  For new venture companies that are just purchasing insurance for the first time, this will give you good estimates for what you can expect to pay.

Average prices for commercial truck insurance

In general, the average cost of commercial truck insurance is between $8k-$18k in annual premium per truck.  We understand that this range can be very broad but allow us to break this down into two segments: 1) truck tractors with a gross vehicle weight (GVW) of 36,000 lbs and above, and 2) vehicles under 36,000 lbs GVW.

  1. For a transportation company with truck tractors over 36,000 lbs, the range is on the higher end with average premiums between $13k-$18k.  This range is broken down between three lines of insurance, the most necessary and costly being the Auto Liability, followed by Cargo insurance and Physical Damage coverage. 

    The Auto Liability on average will range between $11k-$15k per truck per year.  Assuming you haul general freight (most common) which includes items like paper products, plastics, canned goods, etc., you can reasonably expect to pay between $800 and $1,500 per year per truck.  Physical damage is not required by the DOT, but your lender may require this. Assuming an average value of $30,000, you can reasonably expect to pay between 6-8% of the value of the tractor per year, or $1,800-$2,400.  Adding these figures up, you get a total of $13,600-$18,900

  2. The second scenario is for companies utilizing trucks under 36,000 lbs GVW, this includes box/straight trucks, pickup trucks and other similar size vehicles.  Since the probability that you’ll cause as much damage as a tractor is less likely, your Liability premium is lower. The Liability will usually range between $6,000 and $10,000 and the premium for the other coverages will stay the same as above.  The total range adds up to $8,600-$13,900. 

Again, these numbers can vary based on your company’s individual risk profile, but these numbers are reliable and give you good insight into what the average cost of commercial truck insurance will run.  

If you’re in the market for renewal quotes for your company, or you are just starting out your venture and would like someone to help you through the process, we’d appreciate the opportunity to assist you!

How much would insurance cost me on a monthly basis?

When it comes to billing and invoicing, there are two types of insurance companies that you should be aware of.  Direct bill companies which will finance the entire premium for you, these are the companies that will allow you to make monthly installments to them directly so anytime you have questions about your bill, they would be your direct point of contact.

The other type of company is agency bill, who do NOT finance the premium for you.  These companies generally want payment in full within 10-14 days. If payment in full is NOT an option for you (it’s generally not for most companies) then the premium must be financed through a premium finance company.  They will fund the policy on your behalf and future monthly payments will be made directly to them.  

We mention this because many transportation companies don’t realize that with agency bill, when you add a vehicle to your policy, the down payment portion is due immediately whereas with a direct bill company they will automatically adjust your payments over the remaining term of your finance agreement.

To make a long story, well, long, you can typically expect your down payment to be between 20 and 25% of the policy premium and 9-10 monthly installments with interest payments ranging between 15-20%.  Here is what you can expect using the same numbers in the 1st example above:  

Down payment 20% and 9 monthly payments at 15% interest: 

Down payment: $2,720-$3,780

Payments: $1,390-$1,932

 

Down payment 25% and 10 monthly payments at 20% interest: 

Down payment: $3,400-4,725

Payments: $1,224-$1,701

What are factors that affect my insurance rate?

This is a great question to ask, especially since there are many factors that are within your control and only a couple of them are not.  

Loss history - for the insurance companies, this is probably the biggest predictor of what they can expect to see in the future.  When underwriting, they look at both frequency of loss and severity of loss. Both are frightening to them, however, frequency may look worse on paper.  

Frequency can give underwriters clues that management may not be enforcing strict rules with their drivers,allowing them to continue hauling products while causing claim after claim.  At a certain point when underwriters cannot justify profitability, they will unanimously decline to quote and you’ll find yourself paying high risk premiums which can quickly turn a company from being profitable to unprofitable.

Driver experience - when a young boy turns 16 years old and earns the right to drive, he is nearly guaranteed to be paying prices near the top of the charts.  This is because statistically he has the characteristics of the riskiest driver profile to an insurance company, the same is true for a new CDL driver.  

In addition, it is extremely important that you select drivers who have an impeccable record clear of moving violations and accidents.  Even one violation on their record can cause a premium increase of thousands of dollars or exclusionary wording to be placed onto the policy.  Drivers are your biggest asset, but remember, one large loss from a reckless driver and your insurance premiums could put your company at severe risk of unprofitability.

Commodities - some commodities have a riskier profile during transport than others do.  General freight, for instance, is less risky than hauling hazardous material.  Hazmat can cause much more damage, both in bodily injury and property damage, and has a more involved process in the event of an accident.  To contain and clean up an accident with hazardous material is more costly than if you ended up spilling eggs all over the interstate. You can see why an insurance company would charge more for this exposure.  If you’re considering hauling multiple types of commodities, our experience says to keep them as tight and specific as possible as it will reduce your premium and your likelihood of a claim.

Credit - this wasn’t always a rating factor but just recently was added to the mix.  Not every insurance carrier will take this into account but actuaries have managed to correlate a lower credit score with a higher likelihood of a claim.  Since it’s a very good practice to keep your credit score as high as possible, you should make an extra effort to get it as high as possible as it could save you thousands of dollars in premium.

Find a great agent - a great agent should be a key player in your transportation business.  Not only can they help you keep your shippers satisfied, but a good agent will have access to many insurance markets who can compete for your business and strong relationships with their underwriters.  Sadly, you may have an agent you’ve been working with for years, but if they don’t have a focus in the trucking space then they may be doing you a disservice and while we can appreciate the loyalty, it’s probably not the right fit for you.

Our insurance agency has years of experience in the trucking and transportation space, this has always been our focus and always will be.  Our years in the business has opened up opportunities with markets that many agencies don’t have, allowing us to access more insurance markets and obtain more competitive quotes.  If you’re in the market for a renewal quote, or your company is in search of a quote for the very first time, give us a call and we’d be happy to put our services to work for you!

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