Insurance is a trucking company’s backbone. The FMCSA requires proof of liability insurance for your Operating Authority/MC Number application. Most shippers and dispatchers will not book your company for loads without proof of insurance. Essentially, without an insurance policy, your company cannot move. Therefore, as long as your insurance is in place, you have a working trucking company.
Why do your customers care about insurance?
Insurance is one of the most expensive purchases for a trucking company. The premiums require a large amount of upfront cash and the monthly payments can be in the thousands. So why do you need something that is going to cut into your profits? Protection. Insurance protects not only your business but your customers’ as well.
When a customer gives you freight to haul, they trust you with their business. Your customer needs that freight to reach its final destination in pristine condition because that freight represents their profits. Damaged freight could put your customer out of business. However, insurance guarantees your customer will receive at least a part of their profits in the event of an accident. Having insurance shows your customers that you are able to protect their interests. It also protects yours since you will not have to pay for total damage costs out of pocket.
Insurance takes a great deal of planning. A best practice is to set aside a portion of money from each invoice you receive for your insurance payment. However, this can take a great deal of time to manage, ensuring you set aside the correct amount and you can get your payment made on time with no late fees, or even a cancellation. In addition, most down payments on insurance policies are around 25 to 30 percent, which can be a hefty sum of money to shell out at once.
This is where a Premium Finance company comes in handy. There are several different types of insurance financing companies out there, so make sure you find one that is full service and knows the trucking industry well. It is also important to look for one that connects you with actual insurance agents in order to get you the best price. What even more worry-free insurance management? Some Premium Finance companies work with factoring companies to set aside money from your invoices, save up, and actually make your insurance payment for you.
Insurance is a big part of the trucking industry. It not only protects your company but your customers’ companies as well. As long as you have a good policy in place and continue to make your payments, you have the ability to keep rolling.