How Much Tow Truck Insurance Costs & How to Save On It

How Much Tow Truck Insurance Costs & How to Save On It

Tow trucks are integral to our transportation system, assisting after an accident, recovering vehicles for lenders after a loan default, and moving vehicles between dealerships or auctions. Tow truck operators have very specific needs regarding insurance, covering their drivers, trucks, and other drivers on the road, and protecting the customer’s vehicle while towing.

Every company has a different risk level and tolerance for risk, so it’s important that operators understand the factors that affect their premium.

How Much Does It Cost To Insure a Tow Truck?

Numerous factors go into a commercial tow truck insurance premium, and many of them are specific to the nature of your business and where it’s located. That’s why it’s vital to have a local insurance agent on hand to explain the various costs.

Driving Distance

As with any auto insurance, premiums increase the longer you’re out on the road. More miles mean more opportunities for accidents. For this reason, tow truck insurance costs are higher for rural operators. Those premiums go even higher if your business involves crossing state lines, as coverage minimums differ from state to state.

Hours of Operation

Your drivers are more likely to have an accident at night, which means premiums go up for tow truck businesses that provide 24-hour emergency services.

Owning an Impound Lot

If your business only involves picking up and dropping off vehicles, your liability exposure is fairly limited; the cars are only in your possession for a short time. Things get more complicated if you own the lot where the vehicles are stored. You need to worry about keeping them safe for days or weeks. If you’re involved in repossessions, former vehicle owners might try to steal their car back, which is both a security and financial risk for you.

Business’s Location

More cars on the road lead to more accidents, so insurance companies typically charge higher premiums to tow truck companies operating in dense urban areas compared to less trafficked rural ones. The number of uninsured drivers in your area is also considered, with a higher percentage of them increasing your premiums.

Age of the Business

Insurance companies are experts at assessing risk, but if you’ve only been in business for a year or two, there’s not enough information for them to make an accurate judgment. Even if your record isn’t completely spotless, insurance companies feel more comfortable offering lower premiums to well-established businesses.

Types of Tow Truck Insurance Cost Per Month

There are numerous risks involved with operating a towing business, and several different types of insurance are necessary to comply with state regulations.

General Liability Insurance

Tow trucks are required to carry liability insurance just the same as private vehicles, but given the nature of their business and the number of miles they log daily, the cost is considerably higher. The average cost of liability insurance for a tow truck is $450/month.

Physical Damage Coverage

This is the same as collision and comprehensive in the non-commercial auto insurance market, covering any damage done to the towing vehicle. It covers you in the event of an accident, a fire at the shop, or theft of the vehicle, and it’s required if you finance your tow truck. Depending on the value of your vehicle, physical damage coverage adds around $200/month to your insurance premium.

On-Hook Insurance

On-Hook coverage insurance tow truck operators against each damage that they might do to a customer’s car while it’s being towed. It is separate from the liability insurance that covers the operator in the event of an accident. The cost of this on-hook insurance depends on your level of coverage and the size of your deductible. On-hook insurance is usually bundled into the price of tow truck insurance but adds around $50/month to the premium.

Garage Keepers Insurance

If your business is involved in storage, as would be the case with a body shop, you’ll need insurance to protect a customer’s car while it’s disconnected from the tow truck and awaiting repair. This type of coverage varies depending on the number of vehicles stored and the location of the garage. Usually, coverage costs between $60 and $160/month.

Workers Compensation

Driving a tow truck is an inherently dangerous line of work, and accidents do happen. To protect the livelihood of their employees after an injury, tow truck operators are required to carry worker’s compensation insurance. The minimum coverage is different in each state, and if your drivers are crossing state lines, they’ll need coverage that meets or exceeds the requirements for that state. On average, worker’s compensation insurance costs employers 8% of their employee’s salaries. If your drivers make $50,000/year, insurance for each employee will be around $330/month.

Lowering Your Tow Truck Insurance Costs

Operating a tow truck is never cheap — the average cost for just one truck doing towing and recovery is close to $1000/month. However, there are a few things responsible business owners can do to lower their premiums.

Hire Drivers With a Spotless Record

Accident claims and citations are one of the first things any insurance company will look at when deciding your premiums. Hiring drivers with clean records and instilling a culture of safety goes a long way in lowering your insurance costs.

Update Your Fleet

Newer trucks are more likely to come with safety features like accident avoidance and blind spot monitoring systems. Statistics show that accidents are less likely with trucks manufactured in the last 10 years, and insurance companies recognize this. If you want to lower your tow truck insurance costs, it’s a good idea to sell off some of the older vehicles in your fleet and replace them with newer and safer models.

Opt for a Higher Deductible

As with any insurance policy, the fastest way to lower your premium is to accept a higher deductible. Unfortunately, it may not be the best choice for your business, especially if you don’t have a lot of capital saved up. Choosing a plan with a higher deductible means you’ll have higher out-of-pocket costs should one of your drivers get into an accident. If you don’t have enough cash on hand to pay for the repairs, you could be down a vehicle and losing out on potential revenue. If your drivers have excellent records and you’ve budgeted for those

How Much is Tow Truck Insurance with InsurA?

InsurA offers a variety of insurance options to protect tow truck operators and their cargo. Whether you’re an owner-operator, a private carrier, or running a fleet of tow trucks, InsurA has a policy that’ll fit your needs. Contact us today to speak with one of our insurance representatives or visit us online to learn how we can get you the coverage you need.

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