Top 3 Mistakes When Searching for a Commercial Auto Insurance Policy

Navigating commercial auto insurance can be daunting. With so many policy options available, it’s easy to find yourself overwhelmed. As you work to protect your operations from expected and unexpected risks and liabilities, the search for affordable coverage can lead to some risky choices.

Here are the top three mistakes commercial transportation companies make when searching for a commercial auto policy. By understanding these common missteps and hidden risks, you can work to avoid them and keep your operations moving smoothly.

1. Inadequate coverage

A significant challenge for transportation businesses is having insufficient insurance coverage due to not understanding how the policies work. For example, many companies mistakenly believe their policy covers all their vehicles, as well as their drivers. Make sure to consider:

• Independent contractors and owner-operators: If you hire in these categories, you want a policy that covers the vehicles they use. Any claims related to their operations could affect your company’s liability.
  
  
• Rental vehicles: If your company ever relies on rentals, ask how the insurance works for those vehicles. Look at the provisions related to:
  
  
  • Temporary vs. long-term rentals: Understand the distinctions in coverage based on the rental duration. Short-term rentals may have different insurance requirements compared to long-term agreements. Ensure adequate protection for both.
  • Liability coverage: Verify the rental company’s insurance meets your business’s liability needs. Rental agreements often include basic coverage, but you may need more expansive insurance to safeguard your company in the event of accidents and damage.
  • Maintenance coverage: Ask how the policy works when vehicles are under maintenance or repair. Gaps in coverage can lead to lost revenue when you need the vehicles most.

Even with robust coverage, the fine print can contain restrictions that limit how much your policy actually protects you.

2. Restrictive policy language

The allure of a lower premium can sometimes lead businesses to overlook restrictive language buried in the fine print of insurance policies. For example, with an aggregate limit in place, each claim reduces the amount of total coverage available. This potentially could leave your business fully exposed and responsible for covering large settlements or lawsuits out-of-pocket.

Additionally, some policies contain “defense within limits” clauses. In this scenario, the insurance company deducts the costs of defending a claim (such as attorney fees) from your claim settlement. This reduces the amount available to cover damages, potentially leaving you with inadequate coverage.

Restrictive commercial auto insurance policies can lead to financial loss in the long run. So, review every detail with your broker to understand your coverage thoroughly.

3. Incorrect DOT filings

Wrapping your head around the fine print in your insurance policy can feel overwhelming. Navigating the Department of Transportation’s (DOT) regulatory labyrinth can be even more complex. However, DOT regulations and insurance coverage go hand-in-hand.

DOT filings are essential documents required for businesses operating as motor carriers. They serve as proof of insurance coverage and compliance with federal regulations for transporting goods across state lines. These filings demonstrate the motor carrier has the necessary liability insurance to cover potential claims arising from their operations.

Problems occur when businesses don’t provide accurate information about their operations. This can lead to issues with insurers during the coverage application process. If a broker or agent misrepresents the types of vehicles, operators, or operations covered under the policy, your company could face claim denials or even legal penalties.

To avoid these outcomes, follow these best practices:

• Maintain open communication with insurers: Make sure insurance brokers and carriers know the specifics of your operations and the scope of the coverage you need.
  
  
• Stay informed: Keep up to date with DOT regulations and requirements. Understand how interstate commerce applies to your operations, and submit all necessary filings on time.
  
  
• Conduct regular audits: Periodically evaluate your insurance coverage and DOT filings to identify gaps or discrepancies. Promptly address any issues to maintain compliance and adequate protection.

Staying abreast of the regulatory environment will help make your DOT filing experience smoother.

Be strategic to avoid common mistakes

In the transportation industry, the margin for error is razor thin. Perform due diligence when choosing insurance policies for your business to make sure you’re getting the right coverage for your specific risks. Having adequate insurance can make the difference between business stability and financial disaster.

Want to learn more?

Connect with the Risk Strategies Transportation team at transportation@risk‐strategies.com.