| ASSIGNED
RISK
In recent months, my office has experienced numerous calls from new drivers who have just earned their Class-A License. These new drivers are looking to join the trucking industry as owner operators. Most insurance companies require two or three years experience before they will commit to writing insurance. Almost all insurance companies will require previous driving employment history. This puts the new driver, wanting to become an owner operator, between a rock and a hard spot. If you want to join the ranks as an owner operator, be prepared for major insurance premium shock. It will take you several years to get into the preferred insurance market. Liability through the Assigned Risk Plan is limited to only $750,000 unless you need higher limits for hazardous materials. Many of you may need limits of $1,000,000 (which may be a requirement from those that you will pull for). Excess limits to $1,000,000 can be purchased separately. The cost is almost prohibitive. The last excess policy, for an owner operator, that I wrote over assigned risk had an annual premium of $5,000. My advice for those that do not have driving experience is to go to work as a line driver for a major trucking company (at least for a while). Let them train you. You will be money ahead. The assigned risk plan has three tiers of rating. Within those tiers, rates are governed by garaging and highest rated cities traveled through. The following example was compiled using the greater Los Angeles territory as the base model. The San Fernando Valley is higher and the rest of the state is lower. Each territory has its own rates, developed by the Assigned Risk Plan. The annual liability rate for a tractor/trailer operating within a 50 mile radius is approximately $15,748. Increasing the radius to 200 miles would create a premium of approximately $20,389! Now, if you travel more than 200 miles, long haul rates apply. The annual premium in this situation (using the highest rated cities traveled through) would be approximately $8,145. As you can see by this example, the long haul rates are considerably less than both the local and intermediate rate. It makes no sense that their rating structure is backward, but that is the way the game is played. If you use the plan, it is important to note, that all policies written through the Assigned Risk Plan will be audited. If you are running less than a 200 mile radius, the policy will be endorsed to the higher premium. If you are traveling through higher rated cities than what was initially rated, again, the rates will be adjusted. I can’t emphasize this point enough: they will look at each and every log sheet. It is a pain, but for some of you it (the Assigned Risk Plan) is the only answer. Financing Assigned Risk policies has become impossible. Thankfully, the Assigned Risk Plan does offer a direct bill program, which requires 25% down and five monthly installments for the balance. They will charge you a handling fee of $5.00 per installment. On the bright side, it is cheaper than interest on a financed contract. No brokerage fees can be charged when you purchase an Assigned Risk Policy! The balance of your insurance needs can be purchased through Lloyds of London. Physical Damage is based on the values that you are insuring. The rates are structured as a percentage of these values. Annual premiums run from 8% to 10%, plus taxes and fees. If you are purchasing new equipment, physical damage coverage may be available through your dealer’s finance company. Cargo Liability is the last part of the coverage that you may need. Again, this coverage can be purchased through Lloyds of London. Cargo is based on the product hauled and its value. The average cargo policy is for $100,000. That seems to satisfy most carriers. Ironically, the premiums for this type of coverage are similar to the standard market rates. As an average, the annual premium will run from $1,500 to $2,500 plus taxes and fees. Both the Physical Damage and Cargo policies can be financed through most premium finance companies. If you are put into the assigned risk category, your insurance will run in excess of $1,000 per month, and many of you will pay a great deal more. Two recommendations I would offer for your consideration are: 1) If you are a new driver, without experience, go to work for a company as a line driver for a while; and 2) If you are put into this situation because of your driving habits, take control of yourself and clean up your driving record. If you have any insurance-related questions or comments, feel free to contact me through California Plus Insurance Service in Modesto, California, by calling 1-800-699-7101. |