We commonly encounter clients who wish to “self-insure” their low value equipment, including tractors and trailers, for physical damage. When asked why clients often respond that they assume it will save them money. While it may be correct that rejecting physical damage coverage for older equipment will create a small savings in terms of monthly premiums, it is also important to consider the costly payout you may face in the event of an accident.
Let’s take an example of a tractor that is not insured for physical damage. In the event of a disabling loss, i.e. one where the tractor cannot be driven away from or the trailer cannot just be hooked on to another rig, in addition to the costs to repair or replace the tractor, an insured should expect to pay costs and associated with the following:
1.) Towing the equipment to the nearest repair facility
2.) Storage of the towed equipment until it is determined whether you will repair or simply replace the damaged equipment
3.) Extraction of pollutants that leaked from the uninsured equipment at the scene of the accident.
4.) Downtime or equipment rental while your tractor or trailer is being repaired or you are looking for its replacement
5.) Removal of debris removal and to clean up the scene of the accident.
If you take a tractor that is valued at $7,500 and apply a four cent physical damage rate to it (note: physical damage rates do tend to be higher for older equipment) you could expect to pay an annual premium of $300 for that particular vehicle. In the event of one loss, this premium will easily recouped just in the cost to tow (let alone hook up for towing or store) the tractor.
While insuring lower valued equipment might not be the right decision for every company, it can be very much in the best interest of a company who faces cash reserve challenges or does not have spare equipment on hand to use when their primary vehicle is out of service.
Would you like to weigh the costs of insuring your low value equipment? Call our office today at (800) 596-TRUCK (8782) to request your free quote. All of us at the Navigator Truck Insurance Agency work hard at being accessible, helpful and result-oriented.