If you own or operate a pickup truck and use it for commercial purposes, you have to buy a particular auto policy called hot shot insurance. Hot shot trucking involves the expedited delivery of different cargo, hence the policy’s name.
What does hot shot insurance cover?
If you own a pickup truck, you may open a small hauling-for-hire business. I must warn you that the competition in the hot shot business in the USA is really tight.
Moreover, hot shot deliveries are usually carried out from customer to customer within tight deadlines, thus involving higher risks.
Your hot shot truck insurance covers bodily injury that you or a third party may suffer while on dispatch, as well as physical damage to your pickup truck or to the third party’s vehicle:
Specific hot shot liability coverage limits
Here are some of the coverage limits required by the Federal Motor Carrier Safety Administration (FMCSA):
Cargo
The goods that you haul must be covered by at least $100,000 in cargo insurance. The absolute minimum required by FMCSA $5,000, but no shipper or broker will agree to work with you if you cover just that.
Special endorsements apply if you will be hauling flammable materials. In this case, the cargo coverage must be significantly higher.
Liability
The FMCSA requires at least $750,000 in liability coverage; most hot shot truckers hold liability policies worth at least $1,000,000. Thus, brokers and shippers will regard you as a reliable and predictable business partner.
Special coverage types
Depending on the specific nature of your pickup hauling business, you may want to add some of the following special types of coverage to your policy:
Downtime
With this add-on, you get compensations for every day on which your pickup truck is in the repair shop for scheduled maintenance or as a result of a road accident.
Sue & Labor
This special coverage is sometimes called loss mitigation. It covers any costs that you may incur while trying to prevent cargo damage.
Towing & Storage
If your cargo or vehicle gets damaged in a road accident, this extra coverage will take care of the towing and storage costs.
Earned Freight
If you manage to complete the delivery, but the cargo has been compromised in any way, the contractor has the right to withhold the payment or pay only part of the service. In this case, the Earned Freight coverage will get you covered.
Medical Bills & Family Emergency
Suppose you get injured in an accident while performing a hot shot delivery away from home. In that case, this liability add-on will cover your medical expenses and the travel expenses of your family, who may want to visit you in the hospital.
What documents do I need to apply for hotshot insurance?
An MC number (if your hot shot trucking business involves interstate commerce).
BOC-3 and MCS-150 filings (the former designated a process agent to accept legal documents on behalf of your company, while the latter defines the type of your business service).
To perform deliveries in Canada, you’ll need an International Registration Plan (IRP).
If you own a pickup truck with a trailer, prepare its Permanent Trailer Identification Number.
Get a Commercial Driver’s License (CDL) and take advantage of lower hot shot insurance rates
How much does hot shot truck insurance cost?
If you provide only the minimum coverages specified by the FMCSA, shippers, and brokers won’t give you any loads. The lowest hot shot trucking insurance premium is about $6,000 per year, while the ceiling reaches $20,000 a year.
Most hot shot truckers buy hot shot trucking insurance packages that cost between $12,500 and $15,000 per year.
You will be required to make a 25% down payment when signing your hot shot trucking insurance agreement.
After that, you can start paying your monthly premiums as per your plan. Before you secure a policy and start making monthly payments, you will need a 25% down payment.
How is the cost of my hot shot trucking insurance formed?
When brokers start calculating the total of your hot shot liability policy, they consider the following factors:
Your experience
If you are making your first steps in commercial hauling, insurers will naturally regard you with suspicion. As you gain some reputation, you may renegotiate lower insurance rates.
The class of your truck
Hot shot insurance on lower-class trucks typically costs more than the one on newer vehicles with bigger engines that are less likely to malfunction while on dispatch.
The types of coverage you may need
Check the list above for specific coverage types that you may need and ask your insurer about specific policy requirements. Truck and trailer coverage is usually pricier.
Your credit
Insurers closely inspect the applicant’s personal credit score to determine if they are responsible with money and will pay their monthly premiums on time.
Shop for commercial truck insurance wisely
Expensive as hot shot insurance is, there still are ways to make its cost more comfortable.
Determine the types of coverage that you need
Think of all the specific coverages you may need. Hazardous cargo typically requires the highest insurance coverage, but it also yields this highest pay. Make sure to add only the coverage that you will use.
Make sure that you have an adequate level of coverage. If you fail to meet the minimum liability requirements of the shippers and brokers in your area of business operations, you may find securing loads extremely hard.
Shop around
You can find some fantastic hot shot insurance deals online. Get in contact with the best insurance companies you can find and ask them for quotes. Make sure that the broker understands your insurance needs.
Pay your policy upfront
Paying in installments may be more comfortable, but at the end of the year, you’ll end up paying more than if you pay the total price of your policy upfront.
Be careful with your deductible
You should increase your deductible if you are 100% sure you can afford it. As a rule, a higher deductible involves higher business operation costs.