Tow Truck Insurance

Understanding the Essentials of Tow Truck Insurance

The Fundamentals of Tow Truck Insurance: 

Who Needs Tow Truck Insurance?

Tow truck insurance functions in a manner similar to standard commercial vehicle insurance. It is imperative for any business that operates a vehicle or incorporates driving into its services to have commercial auto insurance. However, tow truck insurance has a unique facet, as it must also provide coverage for the vehicles that are being towed.

This specialized insurance is akin to cargo insurance for trucks that carry goods. The insurance industry refers to this specific type of coverage as “on-hook insurance.” This applies to vehicles carried on both hook-and-chain tow trucks and flatbeds. There is no distinction made between these methods of towing in the context of on-hook insurance.

We usually advocate for towing companies to maintain a liability insurance policy of at least $1 million. While specific state regulations might only mandate coverage levels of $100,000 or $300,000, it’s essential for towing businesses to adequately insure themselves considering the valuable nature of the vehicles they could be hauling. After the policyholder pays a predetermined deductible, the on-hook insurance will cover the value of the towed vehicles.

At the bare minimum, your insurance policy should cover the average value of the vehicles you tow. If your business specializes in towing luxury or high-value automobiles, you will naturally require more extensive coverage than a service that primarily deals with lower-end or used vehicles.

Types of Tow Trucks Eligible for Coverage:

Three main categories of tow trucks can avail themselves of this specialized insurance:

  1. Tow trucks operated by mechanics, typically limited to city streets for hauling vehicles to repair shops.
  2. Tow trucks licensed to operate on highways, usually provided by specific companies with the appropriate permits.
  3. Personal-use tow trucks, which might be owned by collectors or dealerships.

Additionally, flatbed trucks, which often tow larger and more valuable cars or multiple vehicles simultaneously, can also be insured under this type of policy. Moreover, large auto transporters that carry multiple cars are also considered eligible for this type of insurance and naturally require higher coverage limits due to the number of vehicles they transport.

Coverage Specifics and Exclusions: There’s a notable distinction between tow trucks that are factory-produced and those that have been modified, such as a pickup truck fitted with a welded hook. Many insurance providers prefer to insure only factory-produced tow trucks because of the uncertainties surrounding the strength and safety of modifications. Modified tow trucks can still be insured but often at a higher premium.

Obtaining an on-hook endorsement is crucial for tow truck operators. A general commercial vehicle policy will not suffice, as you’ll need coverage for both your tow truck and the vehicle being towed. Neglecting to secure an on-hook endorsement exposes your business to significant financial risks and claims.

It’s highly recommended to consult a professional insurance agent rather than attempting to procure insurance online yourself. An experienced agent will guide you through the nuances of what specific endorsements or certifications are required, ensuring that you neither underinsure nor overinsure your operation. The area in which you operate could also influence your premium, as some territories are considered high-risk by insurance companies.

Key Takeaways

Tow truck insurance is indispensable for any business or individual engaged in towing vehicles. Whether you operate a mechanic’s tow truck, a highway-rated tow truck, or even a vehicle carrier, it’s not enough to have basic commercial auto insurance; your policy must extend to the vehicles you are towing.

Final Thoughts

The correct tow truck insurance policy is vital in shielding your business from costly mistakes. The right level of coverage should match the average value of the cars you’re towing. To ensure that you’re adequately insured, it is advisable to consult with an insurance specialist familiar with business policies who can customize your coverage according to your needs and potential risks.

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