Insurance Limits

Welcome back and thanks for reading The Bottom Line! Today I want to talk about insurance limits.

The current statutory $750,000 limits are quickly becoming outdated. An increase in judgment frequency and an increase in overall cost of judgments is quickly creating a problem for too many trucking companies who have traditionally purchase $1m limits.

A poor economy always increases lawsuit frequency as people look for money anywhere they can find it. For the trucking industry this spells certain cost increases as ‘all trucking companies have plenty of insurance money behind them’.

Additionally, a severe increase in the cost of medical care means that a $1000 emergency visit 10 years ago now costs $5000. Extrapolate those cost increases over an entire industry and the overall cost of claims as a result of non-fatal accidents have gone up 370% in the last 10 years.

Lastly, inflation causes the same $1m 10 years ago to be worth close to $750,000 today.

The combination of those factors has the FMCSA batting around an increase in statutory limits from $750,000 to $2m in the coming year or so.

The net overall effect of this statutory increase is yet to be seen, but my prediction is that it will affect your insurance costs 5-15%. Normally purchasing another $1m in coverage could cost you 20-25% of your overall liability premiums, but when the statutory requirements go into place and every carrier has to purchase the coverage, more premium dollars going to pay for that risk layer should decrease relative cost somewhat.

All of that being said; I recommend to each of my clients that they purchase $2m in coverage already. Blowing through $1m in coverage isn’t nearly as hard as it use to be. A couple of sizeable accidents in a single year (which happens all the time) is extremely plausible. Protecting your assets and the business you’ve built by spending another .10% on additional limits always looks like a no-brainer in hind-sight…especially in the extremely soft insurance market when prices are as low as they were in 2000.

The Bottom Line: It’s best to fix your leaking roof when it’s sunny out…translation: If you’re concerned about making sure your business is properly protected for the best possible cost, purchasing $2m limits while prices are low and before you have a ‘rainy day’ is the best way. And the time is now.

Hopefully you’ll check back soon to see our weekly updates. And always, if you have any questions for the Truck Insurance Pro…please just let us know and we’ll get back to you ASAP!

Keep on Rollin’!

 

Jason Stevenson
Truck Insurance Pro
a division of
The Hoffman Group
800.826.4006
jstevenson@thehoffmangrp.com