Generally, an owner-operator usually works for a larger company and leases the truck from them. The large company provides the operator with liability insurance that protects an individual or their business against lawsuits and claims brought by others.
However, many small owner-operators operate as independent contractors and tend not to lease any equipment from a larger company. This type of independent contractor is considered a "non-trucking" business owner because they are not involved in the actual transportation of goods or services.
You've probably heard the term 'bobtail' and may even know someone who owns a bobtail truck. You might be wondering what bobtail insurance is?
Non-trucking businesses can choose not to purchase liability insurance and provide proof that they have planned by establishing high levels of customer and worker compensation insurance, which is what is known as "bobtail insurance." In this article, we'll explore 30 differences between bobtail insurance and non-trucking liability insurance.
Although bobtail insurance is only required in states that require trucking companies to carry bodily injury liability coverage, it can be the most cost-effective option for many non-trucking businesses. Because bobtail insurance is not intended to cover any damages or injuries in connection with the actual operation of your freight-carrying vehicle, there are fewer services included and less risk assumed by an insurer.
Whereas bobtail insurance provides $750,000 in combined single limit coverage, non-trucking liability coverage typically falls between $100,000 and $300,000 per occurrence. All commercial auto policies are required to provide at least $300,000 in combined single limit coverage. Non-trucking liability insurance also excludes coverage related to the physical damage of your truck, cargo, or freight.
If your business does not engage in interstate commerce, bobtail insurance may be an option for you. In some states, bobtail insurance is only required if the insured vehicle travels over 100 miles from its point of origin or more than 20 miles from its home terminal – whichever comes first – and that travel occurs outside a contiguous 12-month period. The requirement for interstate carriers is stricter: they are allowed to carry either a combination of non-trucking liability insurance and bobtail insurance with a combined single limit coverage amount of at least $750,000, or they may opt for bobtail insurance with a combined single limit coverage amount of at least $1 million.
When using bobtail insurance, you cannot purchase cargo/property insurance that would cover damage caused to your vehicle or the property inside it. This is why most carriers license their vehicles in one state and register their freight in another; doing so allows them to purchase cargo insurance that covers both the vehicle and the property, which would not be covered under bobtail insurance.
The only types of vehicles that fall under bobtail policies are commercial motor vehicles or CMVs (including trucks). These include any vehicle used to transport goods, equipment, products, supplies, materials, or people; these can be either privately owned or government-owned CMVs. It does not cover private passenger cars, vans, sport utility vehicles (SUVs), or other light trucks typically found in driveways across America.
A carrier cannot purchase cargo/property insurance in addition to its bobtail policy, and there is no such thing as a combined cargo/property and bobtail insurance policy in the industry.
A carrier can purchase both types of policies, but each one operates independently. If the company subscribes to non-trucking liability insurance, it must still purchase bobtail insurance because its coverage does not include trucks not being used for transportation purposes. Conversely, if it purchases bobtail insurance, it does not need to carry non-trucking liability insurance unless its vehicles transport goods or people over state lines.
Non-trucking liability insurance is required by law and covers all commercial motor vehicles, not just trucks. It protects the insured against claims of negligence that result in bodily injury or property damage inflicted upon others as a direct result of the operation, management, or maintenance of a CMV.
Only one vehicle may be covered per bobtail policy. If you use more than one CMV for business purposes, you must purchase additional coverages for each one. Each of these policies will have its limit of liability coverage – which can range from $1 million to more than $5 million – and the insured will need to meet its own state's minimum financial responsibility requirements.
You can purchase both types of insurance policies for the same vehicle, as long as each one is in force for a different purpose. A carrier could, for example, use bobtail insurance to cover his equipment. At the same time, it is being shipped and non-trucking liability insurance when transporting goods or people on behalf of a customer. Both coverages would be active simultaneously: bobtail insurance would protect against damage caused by moving parts, and non-trucking liability insurance would protect against negligence claims. While it may seem like an unnecessary expense, purchasing both types of coverage is the only way to protect your business.
A carrier cannot stack its limits of liability. If it purchases $5 million in bobtail insurance coverage, it cannot purchase another $5 million non-trucking liability policy for a total of $10 million in limits. The law requires carriers to choose between buying bobtail insurance or non-trucking liability insurance, but not both. If you purchase $1 million in bobtail insurance coverage, you can increase that limit by another $1 million without canceling your policy and paying a premium penalty. This would bring your total coverage to $2 million.
A bobtail insurance policy is written for a specific vehicle and does not transfer if the insured sells or transfers it to another individual. That means you cannot buy one type of coverage and "stack" it on top of another; if you purchase, switch, cancel or let your bobtail insurance policy lapse and then reapply, you will be starting from scratch with a brand-new policy that has its limits and rate schedule. The only way to ensure uninterrupted coverage is by maintaining non-trucking liability insurance at all times – which can help protect carriers against retroactive increases in rates due to accidents caused before the new policy was implemented.
Non-trucking liability insurance does not cover damage to the insured CMV. When considering which type of coverage you will need, ensure that your equipment is protected in the event of an accident or other loss. You can purchase complementary bobtail insurance that compliments non-trucking liability insurance; it can help keep your business running while protecting employees and other motorists on the road. Contact us today for more information about your commercial trucking insurance options!
Under the Federal Motor Carrier Safety Administration's (FMCSA) hours-of-service rule, drivers can only operate their CMVs for 11 hours per day. If they exceed that limit, they must rest for ten consecutive hours before driving again. Even though bobtail insurance is not dependent on whether you comply with this statute, it can be not easy to file a claim if you have already reached your daily maximum. To ensure uninterrupted coverage, make sure you always maintain non-trucking liability insurance as well! Call us today to learn more about how your business is covered under both types of coverage.
If you are sued because of an accident or another incident, your business will likely incur legal defense costs. Bobtail insurance does not cover these expenses and may even leave your company responsible for paying the judgment is awarded to the plaintiff. However, non-trucking liability insurance can provide financial security by covering defense costs and any related judgments. Contact us today for more information about which coverage option is best for your business.
Bobtail insurance policies are not continuous; carriers are only required to maintain this type of coverage while their CMVs are transported on public highways. Once they have arrived at their destination, they can cancel their bobtail insurance policy without charging any premium penalty. Non-trucking liability insurance policies are "continuous" – they remain in effect until the carrier chooses to cancel it by informing their agent or carrier representative.
Because bobtail insurance is written for a specific vehicle, all types of damage are covered with this type of coverage. That includes damages to tires, rims, lights, traffic signs, and signals, as well as airbags. However, if you have non-trucking liability insurance, you can purchase tire and rim coverage that will provide additional protection against potential damage during the time that your CMV is not in use.
Not only can the insured cancel their bobtail insurance policy whenever their current trip has ended, but they are also only required to hold this type of coverage while driving on public roads. Once they have arrived at their destination, carriers can cancel these policies even if there are still trips scheduled for the future. Non-trucking liability insurance policies are generally "continuous" – once an insured purchases a policy, it remains active until they notify their agent or carrier representative that they would like to cancel it.
In conclusion, bobtail insurance is commonly used by companies that transport their products. They can purchase a policy that will remain active if their CMV is driven on public roads. This type of coverage also covers damages to the vehicle's tires and rims, traffic signals, and signage – even airbags!
Non-trucking liability insurance, on the other hand, cannot be canceled at any time. This means that carriers are required to maintain a policy even when they're not transporting goods. These policies do not cover damages to the vehicle itself, but they do offer additional protection for those times when your trucks are parked or unable to be operated safely. Looking for other insurance types? We discuss a number of different policies in other articles. For example you may need hotshot insurance or owner operator insurance.