Insurance is a hot topic in the transportation industry. It can be confusing what insurance is required and the cost is never cheap. There are standard insurance policies that all businesses need. There are various insurance requirements for asset-based businesses. Freight brokers and 3Pls also have their own set of requirements.
Although some types of insurance are not legally required, it is extremely risky to disregard policies that are meant to protect third-party companies. When claims arise, most insurance companies start naming anyone involved in a shipment in their lawsuits. Even if your business is not the cause, it takes a lot of time and expertise to prove it.
Start with standard business insurance.
This insurance is not specific to transportation but just good practice for any type of business. Do you own your building? Then you need Property Insurance. General Liability Insurance will cover injuries and property damage occurring on your premises. You should look at umbrella policies for these. Everyone has office furniture and computer equipment. Get insurance for the value you need to replace everything in your building if something were to happen.
Due to recent ruling in lawsuits naming third-party companies, you should check into Vicarious Liability Insurance. This type of policy protects brokers named in lawsuits. Your insurer will be there to defend you and the policy will pay if you are found liable.
Another protection policy is an Errors and Omissions Policy (E & O), sometimes called Professional Liability Insurance. This covers brokers if found liable in giving incorrect information to the carrier resulting in financial damages. For example, one typo in a temperature given to a carrier on a refrigerated load can result in a large claim.
Workers Compensation Insurance and Contingent Cargo Insurance policies are necessary for transportation brokers but are not as simple as you would think. Further explanation on these in upcoming blog posts.
Depending on your business plan and assets owned, you may need Vehicle Insurance, Receivable Insurance, Business Interruption Insurance and more. It is always a good idea to consult with your insurance professional to see what insurance policies are necessary for your specific business. Although your local insurance agent may be able to help with some policies, it is recommended that you talk to an insurance expert in the transportation industry.
Don’t forget to send your current insurance policy information to the Federal Motor Carrier Safety Administration (FMCSA) to keep your Broker Authority active.
All policies have a wide range of what they cover and the costs associated with them. You will need to evaluate the risk of what you do. This is a very important area of your business that you need to give a lot of thought into and make sure you cover all aspects of your business.
This is #4 in our Series on Starting a Transporation Brokerage Business. Leave a comment or question below.