What Insurance Do I Need To Start My Authority?

Starting a motor carrier business can be an exciting venture, but it comes with a significant amount of responsibility, especially when it comes to meeting regulatory requirements. One of the most critical steps in this process is understanding and obtaining the insurance coverages mandated by the Federal Motor Carrier Safety Administration (FMCSA). Securing proper insurance at the right time is not only essential for activating your operating authority but also crucial for protecting your business from financial risks.

This guide will walk you through the required coverages, suggested policies, and step-by-step details for securing your DOT and MC numbers.

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Understanding FMCSA-Required Insurance Coverage

The FMCSA mandates specific insurance policies for motor carriers to ensure financial responsibility in the event of accidents, damages, or losses. Meeting these requirements is essential for obtaining and maintaining your operating authority.

1. Auto Liability Insurance

• Purpose: Protects against claims for bodily injury or property damage caused by your commercial vehicles.
• FMCSA Requirements:
  • $750,000 minimum for general freight.
  • $1,000,000 minimum for carriers transporting oil or hazardous materials in non-bulk quantities.
  • $5,000,000 minimum for carriers transporting bulk hazardous materials or explosives.
• Key Notes: Auto liability insurance is required for all motor carriers, regardless of the type of cargo or operation. This is a non-negotiable prerequisite for activating your MC number.

2. Cargo Insurance (Required for Household Goods (HHG) Movers)

• Purpose: Protects the goods being transported in case of loss, theft, or damage.
• FMCSA Requirements for HHG Movers:
  • $5,000 minimum per vehicle for loss or damage to cargo.
  • $10,000 minimum aggregate per occurrence.
• Key Notes: While the FMCSA mandates this coverage only for HHG movers, most brokers require general freight carriers to carry a minimum of $100,000 in cargo insurance. Securing cargo coverage can also improve your credibility with clients and partners.

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Suggested Insurance Coverages for Additional Protection

While not required by the FMCSA, these coverages are highly recommended to safeguard your business against potential risks:

1. Physical Damage Insurance

• Purpose: Covers repair or replacement costs for your truck and trailer due to collisions, theft, fire, or vandalism.
• When to Consider: Essential for protecting your investment in your vehicles, especially if they are financed or leased.

2. General Liability Insurance

• Purpose: Covers claims for injuries or property damage unrelated to vehicle operation (e.g., accidents at your business location).
• When to Consider: Protects your business from general operational risks and is often required by brokers and contracts.

3. Workers’ Compensation Insurance

• Purpose: Provides benefits for employees who are injured or become ill on the job, covering medical expenses and lost wages.
• When to Consider: Required in most states if you hire employees, regardless of whether they are drivers or office staff.

4. Occupational Accident Insurance

• Purpose: A cost-effective alternative to workers’ compensation for independent owner-operators, offering benefits for work-related injuries or illnesses.
• When to Consider: Ideal for independent contractors or small owner-operators who want basic coverage without full workers’ compensation policies.

5. Reefer Breakdown Insurance

• Purpose: Covers losses from spoilage caused by the failure of refrigeration units in vehicles transporting perishable goods.

6. Umbrella or Excess Liability Insurance

• Purpose: Provides additional financial protection by extending the limits of your primary liability coverage.

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When to Secure Insurance During the Authority Process

Timing is critical when obtaining insurance for your motor carrier operation. Here’s when to secure coverage during the process of applying for your authority:

1. Before Filing for Your MC Number:
   • Proof of insurance (auto liability and, if applicable, cargo) must be submitted to the FMCSA as part of the application process.
   • Without these coverages, your authority cannot be activated.
2. Before Registering Your Vehicles:
   • States require proof of insurance to issue International Registration Plan (IRP) plates and International Fuel Tax Agreement (IFTA) accounts.
3. Before Operations Begin:
   • Additional suggested coverages (e.g., general liability, physical damage, workers’ compensation) should be in place to protect your business from operational risks.

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Steps to Obtain DOT and MC Numbers

1. Register with the FMCSA:
   • Start by visiting the FMCSA’s Unified Registration System (URS) to complete your application.
2. Secure Your DOT Number:
   • Required for vehicles over 10,001 lbs. or those transporting hazardous materials or passengers.
   • The application requires details about your fleet, operations, and safety measures.
3. Apply for an MC Number:
   • Necessary for for-hire carriers operating in interstate commerce.
   • Proof of auto liability and, if applicable, cargo insurance must be submitted to activate your authority.
4. File a BOC-3:
   • Designates a process agent in every state where you plan to operate. This filing must be completed before your authority is granted.
5. Set Up IRP and IFTA Accounts:
   • These accounts are required for fuel tax reporting and registering your vehicles for multi-state operations.

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Final Thoughts

Insurance is not just a regulatory requirement—it’s a critical investment in the safety and stability of your motor carrier business. By securing the required FMCSA coverages and supplementing them with additional policies, you can protect your assets, reputation, and bottom line.

For more advice and  insurance solutions, contact Nelsons Insurance Agency. We specialize in guiding motor carriers through the process of obtaining coverage and ensuring compliance every step of the way. Let us help you hit the road with confidence!