The cost of tow truck insurance is an important factor to consider as it affects your business costs.
Generally, the insurance cost includes vehicle coverage such as vehicle liability and business insurance such as insurance for garage keepers. But how much does the tow truck insurance cost? Let’s find out in this guide.
How Tow Truck Insurance is Calculated
There are several factors that insurance companies use to determine the risk and therefore, the cost of tow truck insurance. These include:
- Urban area rates. People who reside in an urban area pay higher rates of insurance due to the high rate of accidents.
- Type of vehicle. Is your truck a light-duty or heavy duty truck like a 50-53 footer trailer? Is it a rollback or under-lift wrecker carrier? The bigger the vehicle, the higher the cost of insurance.
- Towing items. The higher the value of the truck, the more expensive the insurance will be.
- Employed safety programs. Most federal and state laws require your business to follow certain federal and state laws.
- Emergency operation hours. Do you offer towing services 24 hours a day? If yes, you will pay higher towing premiums than someone else who operates only during the day.
- Number of drivers and their safety records. The safety record of your driver will influence the premium cost. If you would like to keep your premium cost at the minimum, it’s advisable to only hire experienced drivers with a good safety record. If your car is driven by multiple drivers, you will pay higher premiums as compared to a truck with fewer drivers.
- Number and age of trucks in your fleet. This will also affect the premium you pay. The older tow truck models usually have a lower value and may be less expensive to insure.
- Length in business. If you are just beginning the towing operation, you may be required to pay more premiums until you establish a safety record. After demonstrating that you can run a safe and responsible towing business, the cost of your premium will go down.
- How your company implements safety programs. There are some applicable federal and state laws that require your business to comply with different safety protocols. The insurance premium you pay will be determined by the safety program you follow.
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Importance of Tow Truck Insurance
The NHTSA reports that that tow truck drivers have an average risk that is twice the national average in terms of occupational injuries and fatalities. One of the most common injuries for tow truck drivers is being hit by other vehicles.
The drivers also get injured when loading cargo such as wrecked vehicles that expose them to jagged edges of the windshields and broken glasses. Since tow trucks work even in extreme weather conditions such as ice and snow, the chances of accidents are always high.
Therefore, tow truck drivers face a lot of concerns just like other commercial drivers. However, they have some risks that are unique to their profession.
Companies offering these insurance have a better understanding of the risks and therefore, offer various types of insurance that meet their needs.
There are different kinds of insurances available and therefore, you can speak to an agent to get a cover that meets your risks.
What is Covered in The Policy?
The law requires that commercial tow truck operators should carry a minimum amount of liability insurance.
Since they are responsible for the wellbeing and safety of the people working for them, they will also require coverage that is beyond the minimum and fully mitigate them from potential claims.
By working with an informed agent, you can easily understand the nuances of tow truck insurance and the requirements of your business.
If you are found to be the cause of the accident or if the car you are towing gets damaged or if you damage other cars causing bodily harm when driving, you can be held responsible. To mitigate these risks, it’s advisable to have:
- Liability insurance. This insurance covers damage to property or bodily injury caused by your driver. Where you are involved in a lawsuit, this coverage will also pay your legal fees.
- Medical payment coverage. The insurance covers injury to your driver or passengers in case of an injury while on the job. It pays for hospital bills that accrue as a result. Since tow truck passengers or drivers are injured on the job, this insurance will pay for the medical bills arising. Since tow truck drivers carry vehicle wrecks, this can be an important coverage.
- Physical damage coverage. If there is damage to your truck, no matter who causes the damage, this will be covered under the physical damage policy. If your vehicle is financed or leased, the lender may require you to have this kind of insurance.
- Comprehensive policy. This policy takes care of the damage that occurs as a result of noncollisions. For instance, if the truck gets vandalized, burnt, or is damaged by a natural disaster, it will be covered by this policy.
- Uninsured/underinsured motorist protection. This policy protects you from other drivers on the road who may not be insured or those who may not have enough insurance for the coverage.
- Garage service protection. In case you keep the truck in a covered location, the policy will protect you from losses as a result of vandalism, collisions, fire, or theft.
- On-hook insurance. In case a vehicle gets damaged when towing it, this coverage will protect the owner from loss. It also covers damages resulting from vandalism, explosions, fire, theft, and collision.
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The coverage you get will depend on the limit chosen for the policy and other deductible amounts from the tow truck insurance policy.
It is important to match your risk and tolerance for risk with your ability to pay for any damage before choosing the right policy for you.
How Much Does Tow Insurance Cost?
On average, the cost of tow insurance in 2020 was around $450 which translates to $4500 to $5000 per annum for one tow truck used in basic roadside and recovery towing.
But it’s worth noting that most states also require general liability insurance which can cost anything from $97 to $159 per month for a small tow truck business.
Like we have already noted, the monthly premium will depend on various factors such as the nature of your business.
For instance, if you owe an autobody or automotive repair shop that complements your tow truck business, you will pay an average premium of around $7,500 per year for each of your trucks.
If you also engage in repossession as part of your tow truck service, you will pay average premiums of $10,000 per truck as there are additional risks involved.
These costs are based on nationwide statistics and aren’t a true representation of what you should pay for similar coverage. The cost varies depending on the business needs, operating risks, and other factors.
You should bear in mind that the prices are averages and the insurance may cost you more or less. Also, remember that the above prices are for one tow truck operation. If you have several tow trucks, the cost may go higher.
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Tips on Lowering The Cost of Insurance
Tow truck insurance is a kind of commercial insurance, a major expense for tow truck companies. Fortunately, there are some tips that you can use to cut your tow insurance.
- Ask for driving logs
Where tow truck drivers have worked for long hours without a break, the risk for accident increases. The more the number of claims filed by your company, the more your insurance premiums will increase.
This is why we advise that you create a strict schedule that limits the number of days and hours. Ensure that all drivers are maintaining the log of hours worked.
- Hire competent drivers
One of the major factors that put towing companies out of business is bad drivers. You should therefore remember that not every driver with a CDL is a competent driver.
You should instead check the driver’s background, their reference, and compliance with the licensing requirement in your state. Also perform drug tests, if deemed necessary.
Ensure that there are only professional drivers in your two truck business who understand why it is important to have a clean and safe driving record.
Don’t hire bad drivers who keep hopping from one job to the next as they can destroy your relationship with your insurance company.
- Carry out continuous training
If you will maintain a clean and efficient team, you should provide continuous training for your drivers always.
How often you train your drivers can reduce the tow insurance rates. This is because a good driver will not make a lot of mistakes and will always value safety.
- Protect your business and drivers
You can save money on tow truck insurance by keeping records of all accidents and incidents even when they are caused by another driver.
Ensure that you take pictures of the accidents covering all areas including skid marks. Take pictures of the other vehicle too and the weather condition.
You can take the folder to the insurance company or always have it when it’s required. This can also help to protect yourself and your driver from unwanted lawsuits.
- Carry out regular vehicle maintenance
To lower the risk of drivers getting stranded on the road, you should perform preventative maintenance of the tow truck.
Calling for roadside assistance or repair will cost your business money and productivity. On top of that, it will increase your tow truck insurance.
This is why you should maintain a regular maintenance schedule for all the vehicles in your fleet and always ensure compliance.
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- Shop around
Insurance companies don’t charge the same rate for tow truck insurance. By shopping around you can easily get a good deal on your tow truck insurance.
You can use various online tools that connect you to independent insurance agents who will give offers for the cost of insuring your business.
You should also work with your agent to determine good coverage for you and the amount of insurance you need to mitigate the risk.
Here are frequently asked questions on tow truck insurance
What is included in on-hook coverage?
On-hook coverage pays for the repair and replacement of a client’s vehicle when damaged by fire, theft, explosion, and vandalism during hauling or towing.
What is a rigging floater?
Riggers liability is a narrower type of insurance that covers specific rigging, handling, and moving activities.
On the other hand, the floater is a bit broad and covers these activities as part of the work erected, installed, or fabricated by a contractor until the purchaser accepts the installation work.
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What is trailer interchange coverage?
This is a type of insurance that provides coverage against the physical damage coverage for the trailer being towed under the trailer interchange contract.
This means the insurance covers against physical damage for trailers that aren’t owned by your business.
It protects you in case the trailer gets damaged through collision, theft, fire, and vandalism. On average, you may require a trailer interchange limit of between $20,000 and $30,000.
The type of coverage you need for tow truck insurance will depend on various factors. To understand the cost of tow truck insurance, you should speak to a qualified insurance agent.
They will help you determine the coverage you need, redesign where necessary, and provide you with a competitive quote.
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