Should Owner-Operators Carry Physical Damage Insurance As Part Of Their Commercial Trucking Insurance Policy?
Commercial trucker insurance can be confusing, but at least some of the decisions are made for you — for example, you're required to carry a certain level of liability insurance in order to operate a truck. Physical damage insurance isn't one of those types of insurance. Unless you're required to carry it as part of the financing agreement for your truck, then purchasing this type of insurance is solely your discretion. To help you make the decision about whether or not you should carry physical damage insurance as an owner-operator, here's what you need to know about it.
What Is Physical Damage Insurance?
Physical damage insurance refers to a combination of collision insurance and comprehensive insurance. Its purpose is to cover you if your truck is ever damaged by circumstances outside your control — for example, it will pay to replace your truck if it is stolen or totaled in an accident. It also pays for damages caused by fires or vandalism. Unfortunately, it doesn't pay for mechanical repairs.
How Does Stated Value Relate to Physical Damage Insurance?
When you apply for physical damage coverage with your commercial trucking insurance carrier, you'll need to tell them the stated value of your truck. When your truck is totaled and you file a claim, your insurance carrier will compute the actual cash value of your truck. If the actual cash value is less than your stated value, you'll only receive the actual cash value of your truck.
Since your insurance premiums are based on the stated value and you're not able to insure your truck for more than it's worth, it's very important to carefully calculate this number when you purchase physical damage insurance. You can use online tools to search for trucks similar to yours and see what their value is, making sure to update the stated value every year as your truck depreciates.
Should Owner-Operators Carry Physical Damage Insurance?
Since most owner-operators put a substantial amount of savings down in order to purchase their truck, carrying physical damage coverage is an excellent idea. If your truck was totaled in an accident, stolen, or destroyed in a fire, would you be able to afford to replace it? If losing your truck would mean the end of your trucking career, it's a very good idea to carry physical damage coverage. Going without it would mean that your financial livelihood is constantly at risk.
However, there is one situation where you may not need physical damage coverage. If you already have a large amount of money saved and are just waiting until your current truck needs major repairs or an engine rebuild before junking it and buying a new truck, then physical damage coverage may not be necessary. However, carrying physical damage coverage in this situation would give you additional money to put towards your new truck if you needed to file a claim.
Overall, owner-operators should definitely consider carrying physical damage insurance as part of their commercial truck insurance policy. Since your truck is your livelihood, it's risky to leave it vulnerable to being stolen or destroyed in a collision. Premiums for physical damage insurance can be reduced by carefully calculating your truck's stated value, making sure that it isn't higher than what your truck is actually worth. If you're not carrying physical damage insurance, speak to a commercial truck insurance carrier — it's a valuable way of protecting your source of income.