How Much Does Physical Damage Insurance Cost?

You’ve just invested your hard earned savings into a new truck and trailer and you want to make sure they’re protected against anything that could drastically lower their value or render them useless before you’ve been able to recoup the money that you’ve put in.  That is perfectly understandable and is a very smart business decision. So how can you transfer that risk to someone else?  

That’s right, insurance!  But how much will a physical damage insurance policy cost you?  Physical Damage insurance on a truck and trailer will cost you between 6-10% of the value of your equipment.  As an example, if you believe that the combined value (not the cost) of all your equipment is $80,000 then your annual policy premium will be between $4800 and $8,000.

You may be thinking that this is a wide range but in general, the higher the value the better the rate you get.  Once total values pass the $60k-$70k mark then you’re usually looking at the lower range of 6-7% and, in some instances, some insurance carriers will even go lower than that.  For those that have equipment values of $10k-$25k then you’re likely looking at policy premiums on the upper end of that scale. Of course every carrier is different and you may find that your equipment valued at $20,000 gets a rate of 6%

What is physical damage insurance?

Physical Damage is the general term used for a group of insurance coverages that protect your vehicle against damage.  This is unlike your liability coverage where you are protecting other people against bodily injury or property damage. In this case, you are protecting your own vehicle.  The physical damage can be broken down into two simple components:

Collision insurance – just as it sounds, this insurance is triggered in the case your vehicle is damaged due to a collision with another vehicle or object, or if it gets overturned or rolls.  

An example of this coverage being triggered is if you are driving down the road and accidentally miss a stop sign, eventually hitting another vehicle.  Your Liability coverage (not included in a Physical Damage policy) will pick up the damage to the other vehicle and your Physical Damage coverage will pick up the damage to your vehicle.

Comprehensive insurance – is triggered when your vehicle is damaged by something other than a collision with another vehicle or object.  

Some examples of comprehensive coverage can include fire, theft, vandalism, mother nature (tornado, hurricane, floods, tree falling, etc), a rock cracking your windshield, and many more.

How to keep your costs low on physical damage policy

Some of these options depend on your risk tolerance levels, but you should always assess your current financial situation to see if these options are right for you.  In the end, the premium savings may not make sense for you to make these adjustments.

Increase deductible – by taking on a little more of the risk in the even of a claim, you are indicating to the insurance company that their risk has been reduced.  Since you are willing to have more “skin in the game” by increasing your deductible, you will see a savings in your annual premium.

Lower value of truck – if you have a current loan on your vehicle then this may not be an option for you as your lender may require that you have a certain amount of Physical Damage coverage on your vehicle, but if you aren’t bound by your lender then you can lower the value of your equipment.  As an example, you feel that the total value of your equipment is $80,000, but based on your driving record you feel that the chances you will total your vehicle is very low. You’ve built up a good amount of savings to reduce the Physical Damage coverage to $70,000 and self-insure any damage in excess of that amount.  If you were paying a rate of 10% of the value of the equipment then you just saved yourself $1,000 in premium.

Some insurance carriers will allow you to change the value while others will not, here are two main methods of equipment valuation:

Stated value – just as it sounds, with this valuation method you are telling the insurance company how much you want to insure the vehicle for.  This does not mean that you insure a vehicle that is truly worth $30,000 for $40,000 and pocket an extra $10,000 if the vehicle were ever totalled.  It doesn’t work that way.

Actual cash value – this value is NOT equal to the replacement cost value because it actually subtracts depreciation from the replacement cost.  The insurance company determines a time period of “useful life” and calculates how much “life” the vehicle has left on it. Once that has been determined, they multiply that by the value and determine the actual cash value (ACV).  

As an example, the replacement cost on your vehicle is $50,000 but the insurance company has determined that you still have 75% useful life on your vehicle.  You would then only collect 75% of the $50,000 replacement cost which is $37,500.

Shop it – having an insurance agent who can access quotes from several markets is critical to getting the best insurance rates.  Our agency has years of experience obtaining insurance quotes for trucking companies and we have the ability to obtain several quotes on your behalf.  We are not a captive insurance company who can only offer you quotes from one insurance company (think Statefarm, Allstate, etc). This ensures that you have quotes that truly reflect what the market is offering and ensures you are getting the best terms.

Is Physical Damage insurance required by law?

Physical Damage insurance is NOT required by law, however, if you are financing the purchase of your truck and/or trailer then your lender may require you to put the coverage in place.  This is a guarantee for them, in the remote chance that your vehicle gets damaged or totalled they want to know that they will recoup most or all of their investment.  

What is required by law for a transportation company is Auto Liability coverage.  The required amounts vary depending on the type of cargo you’ll be hauling, but the average is between $750,000 and $1,000,000 in limits.  You’ll also want to consider purchasing Cargo insurance and although it is NOT required by law, your shippers will not release a load to you without knowing that their cargo will be protected in the event something happens to it during transport.

Get competitive quotes

If you’re in the market for Physical Damage insurance quotes for your trucking company, we can help!  Our company only focuses on insurance for transportation companies which means we stay in tune with changes in the marketplace, we have a solid understanding of the coverages, we maintain strong relationships with our underwriters, and most importantly, we take care of our clients.

We can help with much more than Physical Damage coverage, we can also help with your Auto Liability, Cargo, General Liability, Workers Comp, Employer Liability, etc.  Give us a call and let us know how we can help!

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