Question
I have read alot of the past posts and I have not seen one with this type of question. I hope you can help.
I am looking into starting my own business. I will file for my own authority but will use owner operators for the first couple of years. I have had my cdl since 1991 and it is still current. I have been out of the truck officially since 2001 but have remained in this industry since and have a spotless MVR . An agent indicated that I should use my driving history to start up my insurance policy, even though I will not be driving. Is this legal? They soft quoted me with 1 truck running approx 6,000.00 yearly with 1,750.00 down. The coverage is 1,000,000 liability and 100,000 cargo. I would like to contact you in regards to getting a quote also, if that is possible? If I add a 2nd truck will my yearly double, if not what kind of increase should I be looking for? I also understand that the O/O is responsible for their own BT insurance should I obtain that under my policy and then charge them for that? What are the pros and cons of setting it up that way? And finally last question, an O/O that has indicated that he would like to drive for me says that he is currently being charged, by the company that he is driving for, cargo and liability insurance. He already had bobtail insurance before he signed on with them. Is this the norm? Thank you for any information that you can give me. I want to do this by the book and be fair and honest with my potential O/O,s and still be in business a few years from now.
Answer
1. As long as you have a valid CDL (as owner) of the business, you cannot be excluded as a driver. The fact that you have not been driving actively the past 2 years, can present a problem.
2. You can get a quote based on your experience and there is nothing wrong with that. It is perfectly alright.
3. Yes, you can contact us for a quote.
4. Liability and Cargo rates are based per unit. Hence, you can figure for start-up that if 1 truck = $6000, 2 trucks = $12,000.
5. O/O can obtain the Bobtail (and/or Non-Trucking Liability), but should provide you with proof of coverage, which you should verify and monitor.
6. Liability and Cargo are a business expense to the Motor Carrier, but somewhere this cost is pasted back the owner-operator either in a lower percentage or rate per mile. In some cases, the Motor Carrier will pay the O/O a higher percentage or rate per mile, but charge the Liability and Cargo to the O/O. It's 6 of one and half dozen of the other.
Feel free to call me with any additional questions or concerns.
Answer
My husband and I are working on developing our business plan, etc., to start a carrier company based on onwer/operator leased trucks. We're done with the first draft, and have done the related forecasts including cash flow for each year of forecast. Now we're trying to double check our figures, estimates, etc. Unfortunately, I have the feeling (based on my experience with them) that the one group of people I know locally who have carrier business experience are probably not the best "advisors," so I'm reticent to rely on the answers they give me.
Also, our forecasts are designed to add lessors over a period of time, and to control the growth (we don't want to get ahead of our headlights!). It's my understanding I can get cargo/liability locally for about $6300/truck/year, and that the down payment is 20% with the balance spread over 10 months. My confusion come after insuring the first truck.
Do I need to forecast paying 20% down for insurance on each truck we add when we add it then figure out the next 10 payments on that truck?
What's the typical schedule for the installments (i.e., do they start 30 days after the insurance downpayment is made?)
If you've been a good little carrier and maintained a decent safety rating so you can actually renew your insurance with the same company (the guys I worked for failed to do that part!), do you have to factor in new downpayment(s) each year?
Are trucks added on after the initial start of the policy pro-rated for the remaining balance of your policy?
Thanks in advance,
NagiPHG
Answer
1. Remember that the forcasts for premiums are just indications. Quotes may vary at the time you obtain coverage as the coverage will be based on the specifics, most especially the driver particulars (age, experience and driving record).
2. 20% down and 10 payments is not my experience. I generally see 25 - 35% down and 9 installments, but each company is different.
3. When adding vehicles it differs from company to company, but figure on a down payment and only the number of installments remaining from the original. So, if you've already made 6 payments and have 4 remaining, figure a down payment + 4 installments and the down payment could be greater than 25% based on the period of time that has past since the inception of the policy.
4. Payments are usually due monthly following inception, so if your effective date is the 1st, expect payments to be due on the 1st of each month (that means the premium is received by the agent and/or insurance company by that day)
5. Renewing with the same carrier depends on the developments during the policy year, sometimes is it very advantage to stay with the same carrier, other times it's not. Your agent can best advise you.
6. Yes, plan on a down payment every year unless you're insurance carrier has a payment plan other than the basic one we discussed above.
7. Changes to an existing policy are usually pro-rated and you are billed or credited accordingly.
Good luck with your new venture.
Answer
Thanks for the speedy reply. I didn't expect it. Your response prompted a couple more questions:
To make sure we've allowed enough to cover the starting insurance costs, what percent contingency would you suggest we pad the premium amount with. 10%? 20%? We already have an overall 20% contingency reserve in the startup costs, and a 10% overall contingency reserve in the annual projections.
Also, when I was working for the carrier company, I had to turn down some loads that paid well, but required higher coverage levels than we had. Is it possible to get a policy that allows for the purchase of additional coverage on specific loads? There weren't enough of those loads to warrant raising our coverage levels in general.
Tied for first place in what was the ultimate demise of the company I was working at was their failure to have a safety and compliance program in place or to deal swiftly when they had problems (their first DOT audited landed them a "conditional" safety rating), and the fact that they couldn't afford to renew their insurance. Their rates spiked through the roof because of "loss reserves" (?) their original insurer reported on their loss runs (?).
Obviously having the preventive measures in place is part of the solution, but is that the only solution? What else can be done to protect the company?
Thanks, again, in advance!
NagiPHG
Answer
Without specifics it's impossible to get a firm insurance indication and consequently planning a contingency. I recommend planning high by estimating $8500 - 10,000 annually per tractor/trailer combination. As for premium increases year to year, that's too tough to call at this stage of the game, but if you can afford to go with 10%, but realize that premiums could go down in specific situations.
High valued cargo could be a problem for a new motor carrier depending on the specifics of your operation and the specific cargo and value. A questions better served by asking your agent when you get a quote.
The best piece of advise I can give you is to put safety first and run your business like a business. There's no room for friendship in this business. Haul smart. Set your standards for drivers that conform to your insurance company guidelines AND STICK TO THEM. Asking for special consideration on a driver could send a message you're willing to forego safety for profit and that's not the message to send the insurance company.
And find yourself a good insurance agent that understand trucking.
Good luck.
Answer
Thanks, so much. I'm copying into my "notes" file now!