Trucking is not the easiest industry to get into. It’s not just starting up the business itself. It’s the insurance. Truck insurance can be a challenge. There are a lot of coverages you have to think about, of course, but it’s also the cost. Truck insurance is expensive, especially for new ventures. This is why it’s important for business owners of new ventures to understand some of the things that affect their truck insurance rates. It’s all part of navigating a cost-effective way to start a business.
4 things that can affect insurance rates for new ventures.
1. Location.
One question that comes up a lot is if the state where the business is located affects its insurance rates. Is it cheaper insurance-wise to start the business in Georgia, or Alabama? What about South Carolina? It’s true that the location of the business can have an effect on the insurance rates, and it may be less expensive to start the trucking business in one state versus another. The location of the trucking business does play a part in its insurance rates.
(Another thing to consider – when you’re setting up your business, you might want to set it up as an LLC as opposed to a sole proprietorship. This protects your personal assets because if you have an LLC, there is a buffer between you and any liability that could arise.)
2. Type of trucking.
If you are going to start up a trucking business, you also have to consider what kind of trucking you are going to do. The type of work you do affects your insurance because of the risks associated with different types of trucking. To give an example, auto hauling can be one of the most expensive lines of work to be in from an insurance perspective. Car hauler insurance rates will vary from cargo insurance and hot shot insurance. When a business owner is starting out, they have to consider exactly what they want to do, understanding that the work they do will impact their insurance rates.
3. Contracts.
If you’re going to be in the trucking world, you are going to need jobs. That means you are probably going to be looking for contracts. As a new venture, the contracts that you get will also impact your insurance rates. This is because your contract is going to require you to carry a certain amount of insurance. (For example, you may need a specific limit of liability insurance and a specific limit of cargo insurance or on-hook insurance.) And if that required limit of insurance is high, it is going to cost more. Getting $1 million of insurance will cost more than getting $300,000 of insurance.
(A lot of people ask why that $1 million of insurance costs so much. But if you weigh the premium that you’re paying against the possibility that the insurance company will have to pay out $1 million for a claim, it starts to make a little more sense.)
4. Driver quality.
Another factor that you have to be aware of when you’re starting up a new venture is your drivers. The quality of your drivers is really important. Having drivers who have clean driving records and plenty of trucking experience can help you get lower insurance rates. (They’re seen as being less of a risk and less likely to get into an accident.) At any rate, be careful and thorough when you’re hiring drivers for your business. You want to make sure that you have the right people behind the wheels of your trucks.
These are some of the things that new ventures have to consider as they’re starting out when it comes to insurance rates. A business’s truck insurance rates can be affected by its location, the type of work it does, its contracts, and its drivers. That is why it’s important to work with a trucking insurance agent, like those at our agency. We can help you get off to a good start with your business, and that’s what we like to do.