How Much Does Tractor Trailer Insurance Cost - What You Can Do To Get The Most Competitive Rates In The Market!

Insurance for transportation companies can be expensive, in fact, it’s usually one of the top 3 monthly operating expenses you have - even more than the actual truck itself!  In the best interest of public safety, the Federal Department of Transportation has mandated that every trucking company purchase tractor trailer insurance to activate and maintain their authority.

If your authority isn’t active then shippers will not give you loads to haul, so it’s extremely important that you not only buy the right kind of insurance, but that you also purchase the right amount.  

Everyone in the trucking space discusses their insurance rates, afterall, with a cost so great, you want to make sure that you’re not grossly overpaying.  We hear it all the time: “my friend has the same exact truck(s) and has been driving the same amount of time as I have, but is paying so much less…” We thought it would be useful to point out where these differences are probably coming from.

How much does tractor trailer insurance cost?

The average cost of tractor trailer insurance is between $7,500 and $15,000 per year for a $1M liability policy.  This is for a company with its own DOT number with a currently active authority, or looking to get your authority activated.  If you’re an owner operator who is leased onto someone else’s DOT authority then the average cost of tractor trailer insurance would be between $1,000 to $3,000 per year.

How much is truck insurance monthly?

Your monthly truck insurance payments can vary based on the insurance carrier you choose to do business with.  Our agency likes to remind our clients that premium shouldn’t be the only thing you focus on, you also want to focus on terms.

Some direct bill carriers will finance the policy for you, for the majority of the other carriers, you only have one of two options: 1) pay the premium in full, or 2) have the premium financed through a premium finance company.  If you choose the latter, just remember that you’ll be charged an interest rate for the loan, usually hovering about 15-20% of the loan.

If you choose to go with premium financing for the average policy of $7,500 to $15,000, you would reasonably be expected to do the following payment structure:

25% down payment = $1,875 - $3,750

9 monthly installments (20% interest to be conservative) = $750 - $1500

Of course these numbers might fluctuate, sometimes we are able to get 20% down payment or 10 monthly payments at 12% interest, but for the sake of keeping numbers conservative, the figures above are reliable.

What determines the cost of tractor trailer insurance?

Many business owners take active measures to keep their tractor trailer insurance as low as possible, but sometimes these measures don’t really address what underwriters are looking at.  Here are the main elements they look into when providing a quote:

Loss History - there is no industry that we can think of where experience isn’t the most important indicator of how well a company performs its services, and the trucking space is no different.  If your company has a claims frequency or severity issue then you will have a much harder time finding competitive quotes.

Company Age - new ventures are more risky in the eyes of insurance companies, you haven’t established yourself yet.  After two to three years of strong performance (no claims), you’ll notice that more markets are available to you and premiums should decrease

Cargo - the type of cargo you haul certainly plays a role in the premium you pay.  Hauling eggs isn’t as risky as hauling hazardous material, for example.

Drivers - these are the most important assets to a transportation business.  If the driver’s MVR is loaded with moving violations and/or accidents, you can be sure that the underwriter will either decline to quote or your rate will be through the roof.

Radius - a driver who transports goods locally will get a more favorable rate than one who drives from coast to coast.  The reason being because is because one that stays local tends to know their roads better than one who does not. Also coast to coast driving usually comes with tight deadlines and drivers may find themselves having to push driving time to meet these deadlines.

Vehicle Weight - a vehicle such as a pickup truck with a gross vehicle weight rating (GVWR) of 14,000 lbs can cause a lot of damage, but a semi tractor with a GVWR of 45,000 lbs has the ability to cause drastically more bodily injury or property damage.

Credit Score - actuaries have been able to link a strong credit score with profitability.  The higher your credit score the less risk you pose to insurance companies, which in turn means lower premium.

Garaging Address - some states have more favorable rates than others, these rates are based on where the company is domiciled and it assumes that all the vehicles will physically be garaged in the same state.  When vehicles are garaged in different states it can definitely have an impact on premium.

What can I do to get the cheapest tractor trailer insurance rates?

The good news is that you can take a proactive approach to your insurance rates by being cognizant of all the things (big and small) that can reduce your premium, here are some to name a few:

Save up for a good size down payment

Some carriers will actually give you about a 10-15% discount if you are able to make a payment in full, this could be a savings of up to $2k or more which is huge!  I’m sure you’d rather keep that in your pocket instead of giving extra to your insurance company. If you save enough for a large down payment you’ll also save on the financing charges which unnecessarily adds more to your overall insurance rates.

Ask about any available discounts

If you don’t ask then you won’t get, right?  Some insurance companies give discounts for things such as having current coverage in place.  They’ll even accept personal auto coverage. If this is applies to you then make sure you get the discount.  With other carriers you can get a discount for having an electronic logging device (ELD) to track your driving habits, why not ask?  You can even stack these for more savings.  

Stick to one commodity type

We understand the thought process, the more variety of goods you haul, the more profitable your company will be.  While that could be true, you’ll find it so much harder to find a competitive insurance carrier.

We’ve said it before but, every insurance company has their sweet spot, some only want exposure for dry goods and refrigerated goods while others might have some risk tolerance for things such as flatbed loads.  Once you start mixing all these different loads together then you’ll notice that your insurance options start to get much smaller, very quickly. You could find yourself paying much more in insurance just for the ability to haul different products.  It’s up to you to determine if that’s worth it.

Hire the right drivers

Drivers are everything.  If there’s one thing to be extremely thorough on, it’s making sure you hire the right people.  Doing proper background checks, drug checks and checking their driving record will give you a very good idea of the person you will be working with.  Remember, it just takes one bad accident with a large claim to make your premiums soar sky high. Rates can get so high that many times it actually cripples a transportation company.  Choose wisely!

Give it time

If you’re a new venture that is just starting out in the trucking business, or you’ve got less than three years in the transportation space then you’ve got to allow time for your company to season before you will see some noticeable savings in insurance premium.  Think back to when you were 16 years old and just got your drivers license, how were the rates back then? Probably the worst they would be because you have all the characteristics of a risky driver. The same is true with your new company. Typically after 3 years of clean loss history and a solid set of drivers can you start pushing for lower rates.

Shop it

This is key to getting the best rates available in the market.  Finding an insurance agent who has his pulse on the market and has access to the main players is critically important.  Have your agent shop your renewal throughout the network of trucking insurance companies and don’t just go to one dependent agency (Statefarm, Allstate, Country, for example) who can only access one insurance company.  Markets change their appetites and rates almost on a yearly basis, we see it all the time, so an insurance company that may not be good this year may be extremely competitive the next, but you would only know that by immersing yourself in this space, like we do.

If you’re looking for help from a knowledgeable insurance agency then we’d love the opportunity to help you out.  Trucking insurance is our main focus, we have access to all the main insurance companies and we maintain solid relationships with our underwriters.  What does this mean for you? It means we know where to go to get you the lowest market rates for your company. Call us today to discuss your insurance needs!

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