Are Trailers Covered Under Commercial Auto Insurance?

Depending on your business, your trailer – and the tools and equipment on it – may be worth more than your work truck. That’s why it’s important to make sure you’re protecting your wallet with enough commercial auto insurance coverage. 

Unlike cars and trucks, not all states have minimum liability insurance requirements for non-motorized trailers and nearly every jurisdiction provides an exemption for farm equipment.

You may be thinking, “Why should I pay for coverage I’m not required to have?” However, when your trailer is linked to your livelihood and you’re hauling for commercial purposes, it’s best to consider the costs of forgoing additional coverage. 

Generally, you should add a utility trailer or large flatbed trailer to your commercial auto insurance policy and consider add-on coverage for items like equipment. Without it, you face paying 100% of costs out of pocket in the event of theft or accident. Plus, your state might have specific requirements for insurance minimums based on what you haul or tow or the size of your trailer.

Many insurance plans provide nominal liability coverage of small, lightweight trailers as an extension of the towing vehicle’s policy. But it’s not uncommon for a business to need more coverage. 

In this article, we’ll explain why you may consider separate trailer insurance and look at the differences between liability and comprehensive commercial auto coverage and trailer insurance. We’ll answer questions like:

• What kind of insurance do you put on a trailer?
• Do some states require additional coverage for trailers?
• What is trailer interchange insurance coverage?
• How much does commercial trailer insurance cost?

First, let’s recap three key terms you’ll want to know when exploring commercial auto insurance: 

1. Liability Insurance: Covers the damages of the other party if you are at fault in an automobile accident (or your trailer hurts someone or damages their property). 

2. Comprehensive Coverage: Insurance for non-road related incidents such as theft or vandalism.

3. Collision Coverage: Pays to repair or replace your vehicle and/or trailer if damaged in a vehicle accident, regardless of fault.   

Auto insurance is but one aspect of the commercial insurance coverage you may need for your business. 

Do I Need Insurance Coverage on a Utility Trailer?

Utility trailers, unlike motorized vehicles, typically do not require separate insurance coverage. Your commercial auto liability coverage for the towing vehicle usually extends to the trailer, offering protection if you’re liable for accidents. But there are some important – and potentially costly – caveats to this. 

While commercial auto liability insurance often covers incidents involving towing a trailer, it doesn’t protect the value of the trailer itself or its contents. Additional insurance ensures the trailer is safeguarded, especially against scenarios like theft or severe weather damage.

For your commercial auto liability insurance to apply, the trailer is protected only when being towed or hooked up. That means if you don’t purchase a separate policy inclusion and the trailer rolls and causes damage when not connected to your vehicle, it’s likely not covered.

Keep in mind that some lenders may require separate commercial trailer insurance even if your state law does not.

Additionally, the size of your trailer affects whether your commercial auto liability insurance will kick in automatically. This is usually determined by Gross Vehicle Weight (GVW) and insurers commonly set the threshold at 2,000 pounds. If you own a trailer that weighs 2,000 pounds or more and use it for business purposes, you should tell your insurance agent so that the property can be fully covered in your commercial auto policy. 

Should a Trailer Be Insured?

Some states set minimum liability and bodily injury insurance requirements related to commercial trailers. Most often, these laws center on the size of the trailer and/or the type of cargo. For example, many states have extra requirements for tow trucks and property carriers moving hazardous material. Other states set specific minimums for freight or fleet vehicles.   Even if you don’t legally need separate insurance, adding a trailer to your commercial auto policy might be a smart move.

Here are some common situations where you’re taking on risk by not insuring your trailer: 

• Job site storage: You unhitch your enclosed trailer at your job site to conveniently store your tools for the week. A thief breaks into it and steals $12,000 worth of tools, damaging the trailer in the process.

• You owe money on it: You financed a $10,000, 16-foot telescopic dump trailer. Your crew takes turns hauling it to and from the dump. One gets in a wreck and it’s his fault. Your truck is covered but the brand-new trailer has hydraulic system damage and a bent frame. 

• Expensive materials: You load a full trailer of materials at your warehouse for delivery. The client is delayed so the trailer is parked off-site. A fire overnight destroys the trailer and $40,000 of uninsured materials.

What Kind of Insurance Do You Put on a Trailer?

Opting for commercial liability, collision, and comprehensive coverage for your trailer offers a range of protection related to hauling and towing. 

Discuss your specific needs with your insurance agent, who can help you decide what coverage is best. Some common add-on coverage types are:

• Inland Marine: Property insurance for your equipment and tools 
• Hired/Non-Owned Auto: Covers incidents when using rented or borrowed equipment to pull your trailer
• Cargo Coverage: Insures goods and materials you’re hauling
• Earned Freight Coverage: Covers loss of income if the property you haul would have been sold but the shipment was damaged or stolen
• Mobile Equipment: A policy endorsement to cover specific equipment like a forklift being moved on a trailer 
• Environmental Insurance: Covers job site pollution or material spills on the road like a dump trailer losing its load

What is Trailer Interchange Insurance?

Trailer Interchange insurance is not necessary for all types of commercial trailer use. This coverage applies specifically to trailers that are exchanged between trucking companies for transportation. It protects against damages or losses to the trailers while in use by a non-owner. Trailer Interchange Insurance focuses solely on the trailers involved in interchange agreements. 

Now that you’re more familiar with why you might need trailer insurance, you’re probably wondering how much it will cost. Let’s take a look. 

Commercial Trailer Insurance Cost

Commercial trailer insurance expenses fluctuate based on factors like what state you live in, what you carry or transport on your trailer, the trailer’s hauling capacity, and how far you typically drive it for business.

Various elements influence insurance costs:

Driver history: If a business has drivers with clean records, it reduces risks, leading to lower premiums. Experienced drivers with commercial licenses pose lower risks than novices.

• Where you drive: Greater distances and interstate transport can increase premiums.
• Policy limits: The more valuable your property, the higher you probably want your coverage. Higher coverage maximums entail higher premiums.
• Deductibles: You can pay less for your premium if you accept a higher deductible but that might mean you pay more overall in case of an accident. 
• Payment plan: You may be able to save considerably if you pay your premium upfront annually. 
• Insurance company: Costs vary among insurers, influenced by size, age, and reputation.
• Discounts: Ask your agent about safe driver or CDL discounts as well as how much you can save by bundling all your commercial insurance needs. 

To ensure you’re getting the best value on commercial auto insurance and trailer insurance, it’s best to shop around. 

At Independent Insurance Associates, we will help you identify any commercial trailer insurance requirements and find the best liability and auto coverage for your business. We’ll work to understand your needs and build a commercial policy package that provides value as well as peace of mind. Call us today to get started!