While large trucking companies typically have a team of employees who analyze the firm’s exposure to loss and the best way to handle that risk, owner-operators or independent contractors are typically on their own to make those decisions – often with limited information or input from others.

Welcome to the world of the INDEPENDENT contractor! For good or bad the decisions made are yours. If your outcomes are not what you hoped for, the person in the mirror is usually the one to blame. Trucking risks for the independent contractor or owner-operators are real and can be handled in many different ways.

Let’s look at the process you go through in hopes of making the best decision when it comes to minimizing risk to loss. They include:

• Your personal situation and appetite for risk
• Financial considerations
• Your exposure to loss
• Contractual and statutory considerations

Let’s look at a quick overview of this process with some real-world examples of what we are talking about.

Everyone’s appetite for risk varies. Some folks are comfortable assuming significant amounts of risk, and others are not. The simple rule of thumb to consider is, “What keeps you up at night?” If it is greasy, Truck Stop barbecue then you know what to do. If it is something else, then you need to dig a little deeper. If it is exposure to loss that is seemingly outside of your control, then that is where your insurance decision may come into play. But understand, insurance is not your only solution – you can:

If the exposure to loss is something that you have identified and are comfortable paying for out-of-pocket, and your personal financial situation allows, then this may be an option for you.  For example, you may have a lease agreement with your motor carrier that holds you responsible for the first $5,000 of loss due to an accident that they deem is avoidable. You may have a fully-funded emergency fund and decide that it makes financial sense to self-insure this exposure to loss. 

Avoid the Risk Altogether as an Owner-Operator

Let’s use the same example above where your lease agreement holds you responsible for the first $5,000 of loss due to an avoidable accident. You can make the business decision to find another motor carrier whose lease terms and conditions do not include holding the owner-operator responsible for this exposure.

Mitigate the Trucking Risk as an Independent Contractor

This technique for handling exposure to loss involves actions you take to reduce the chance of an accident happening or minimize the financial impact of a loss that does occur. You are regularly do these things every time:

• Perform a pre-trip inspection
• Service and maintain your tractor
• Maintain proper following distance while driving
• Avoid speeding
• Wear your seat belt

These and other common-sense steps you take to drive safely are all techniques for mitigating or reducing your exposure to loss. In our example above, if you never have an accident then your motor carrier will not seek reimbursement for the first $5,000 of loss – because the loss never occurs.

Transfer the Trucking Risk

This is where insurance may come in… I say “may” because, just as the motor carrier has transferred $5,000 of their loss exposure to you in the lease agreement that you’ve signed. You always have the right to negotiate that condition out of the lease agreement… Okay, we all know that’s not very likely to happen, but you can try to negotiate with your motor carrier to remove language you don’t like. Assuming your motor carrier is like 99.9% of all motor carriers and refuses to budge on contract language, then you have the option (at least our Mid-South Truckers Group program) to purchase Motor Carrier Deductible Buy-back insurance that reimburses you for monies you are contractually obligated to pay the motor carrier for a nominal premium cost.

We’ll dig deeper into this topic in future articles, but this gives an overview of the process that everyone goes through when analyzing their exposure to loss and the best way to handle it.

To learn more about how we can help your trucking business secure the right coverage for your risks, give us a call today at 1-888-321-1015. Trucking risks for the independent contractor are real, and we have the expertise to help you assess what you need to do for your business.