How’s your insurance coverage? Are you confident you have the right amount of insurance to protect your rig and your trucking business? If you’re not sure, you could be compounding significant risks to your business and yourself. An underinsured trucking company, as the word implies, is one that doesn’t have sufficient coverage to adequately protect the business. This exposes owners and operators to risks that can be avoided with proper insurance coverage. Let’s look at each of these major risks in more detail.
Legal and Compliance Risk
Proper insurance coverage is vital to avoid potential legal pitfalls. Local, state, and federal laws mandate liability insurance coverage for commercial trucking, and failing to maintain the appropriate level of coverage can result in legal action. High fines, revocation of licenses, and more could be levied against your trucking business if you don’t maintain the minimum mandated coverage.
Many owners understand that these mandatory minimum coverage limits are not nearly enough to properly protect their business, but when you are first starting out, it can be tempting to choose the minimum coverage to save some money. But legal action is not the only risk that comes with being underinsured.
Financial Risk
In the event of a major incident or nuclear verdict, being underinsured can be devastating for your business. Without the proper amount of insurance coverage, your business may not be able to recover from the financial impact of these incidents, and you’ll have to shutter the business you’ve worked so hard to build.
Even for minor incidents, such as damage to the cargo you’re carrying, not having the proper coverage could leave your business with the responsibility of compensating the shipper for the damaged freight. This could be a major loss that could quickly put your business at risk.
Finally, these claims and incidents increase your insurance premiums, which can place a greater financial strain on your business.
Reputation Risk
Even if your business survives a major incident and the losses suffered from being underinsured, you could miss out on future contracts due to the damage to your reputation. Shippers may not want to contract with a business that has a history of being underinsured. This tarnish to your reputation can eventually lead to the business failing.
Avoiding major incidents still doesn’t keep being underinsured from costing you business. Shippers don’t want to take on unnecessary risks, and working with a trucking company that is underinsured is avoidable for them. If a company is shipping freight, they are likely exploring several options to find a carrier that best fits its needs. If you’re an obviously underinsured carrier, you’re a high risk that many companies will avoid.
Loss of Business
If you are underinsured, you also risk missing out on potential work. Shippers may require minimum insurance, and if your insurance doesn’t meet those requirements, you won’t have a chance to win contacts from them.
Why Are Some Trucking Businesses Underinsured
With the risks of being an underinsured trucking company being so obvious, why do some businesses remain underinsured? There are several factors that lead to trucking companies being underinsured.
Cost of Insurance
We understand having the proper insurance is not cheap. But, having the right type and amount of coverage in place is an essential business expense. Some commercial trucking companies will opt to be underinsured simply to save some money upfront, to their detriment in the long run. Fortunately, we make it affordable to get the right coverage! We offer premium financing options that meet your needs to ensure you get proper coverage.
Unsure of the Amount of Insurance Needed
While a few businesses may choose the lowest cost option knowing it leaves them underinsured, some businesses may be vulnerable because they are unaware of just how much insurance they actually need.
Whether there’s been a change in your business that may require additional insurance, or you simply are unsure of how much coverage you need, you rely on the insurance agent to have your best interests at heart. If you’re not certain you have the right amount of insurance, have your agent get appointed with us, and be sure you’re getting the coverage you need!
Undervaluing Power Units, Assets, and the Business
One of the reasons your business might be underinsured can be hidden. If you’ve upgraded your units, are taking on bigger contracts, or are hauling more valuable freight and haven’t updated your insurance policy, you may be underinsured. As your business grows, your insurance needs to grow with it. Your agent should check in regularly and ensure that your growth and success are adequately protected!
How To Avoid Being Underinsured
With all the risks of being underinsured, you want to do what you can to avoid it. Having the proper insurance offers peace of mind, knowing your business and livelihood are protected in the event of an incident. There are several ways to make sure you have the proper insurance coverage you need. Let’s break them down.
Get Multiple Quotes
The first way to ensure you aren’t underinsured is to get multiple quotes for your insurance. Not only do multiple quotes allow you to compare pricing from different insurers, but you also get the benefit of seeing apples-to-apples comparisons, which can point out where some quotes may be lacking.
Understand Your Business’s Needs
Although it seems basic, having a deeper understanding of your business’s insurance needs can help you identify areas where you are at risk of being underinsured. A trusted agent can help you identify the types and amounts of coverage that you need to cover your truck or fleet.
Appropriately Value Your Assets
As we noted above, undervaluing your assets and business can lead to being underinsured as you outgrow coverage. To properly cover your needs, it is vital to accurately assess the value of what you are insuring. Your accountant, attorney, or insurance agent, can help to determine the true value of your business and ensure your coverage meets your needs.
Wrapping Up
While it is tempting to choose the most inexpensive insurance policy to save in the short term, the risks and long-term costs quickly add up and can have devastating effects. However, getting the right insurance for your business at the right price, with competitive financing options, isn’t difficult!
If you’re interested to see a competitive quote for the right amount of insurance with Cover Whale, tell your insurance agent that they can get appointed to start binding commercial trucking policies today. With Cover Whale, they can quote and bind a policy in a matter of minutes so that you can get the insurance that is right for your business!