What You Need To Know About Hot Shot Trucking Insurance Requirements

If you are just getting your CDL or enjoy driving but would rather stay more local while still being able to make good money hot shot trucking could be a good opportunity for you. With lower overhead and less experience needed upfront, it’s a good foundation to build from if working in the commercial trucking industry is how you want to make a living.

What is Hot Shot Trucking?

Hot Shot Trucking involves using a smaller vehicle (typically a one-ton truck and trailer) to move smaller LTL loads in a very short amount of time. There are times when a load will be dispatched and loaded on a trailer within an hour to get to its destination. The term originated in Texas in the oilfields when the equipment would break down and they would need to get parts moved in quickly in order to keep production moving smoothly and couldn’t wait for big trucks to get there.

There is good money to be made in the hot shot industry as most people are willing to pay more to get products moved quickly and you have lower overhead costs such as fuel and maintenance.

What Insurance Do I Need for My Hot Shot Trucking Business?

Hot Shot Trucking is still considered a commercial entity as you are hauling other people’s products for hire. This requires you to have commercial insurance that meets FMCSA’s requirements, as well as some requirements your shippers might ask for.

Auto Liability: FMCSA requires a minimum of $750,000 in Liability but most shippers will require $1,000,000 before you will be able to book a load. This coverage will cover any expenses caused by you in an accident for other parties involved including physical damage or medical bills.
General Liability: Shippers are beginning to require general liability much more frequently than they used to. This coverage is for when the wheels of your vehicle are not moving. If you were unloading your trailer and you throw a strap over and don’t realize there is someone on the other side and you hit them, General Liability coverage will come into play.
Cargo Coverage: This is the line of coverage that will cover what you are hauling on your Bill of Lading. FMCSA only requires you to carry $5,000 of coverage, but most shippers will require a minimum of $100,000 depending on what you are hauling.

Outside of the minimum coverages required there are some other coverages you may want to add to your policy if you’re able to just to give yourself greater protection in case issues arise.

Add coverage to cover any ramps, tarps, chains, or other equipment you may need for your loads.
Non-Trucking/Bobtail Liability: This covers your vehicle when you are not under dispatch.
Physical Damage Coverage: This coverage includes your comprehensive and collision coverages that would replace or repair your vehicle in case of an accident, or comprehensive damages such as wind or hail.
Downtime: When your wheels are not turning you are not making money. If your truck or trailer is in the shop there is coverage you can get that covers at least part of your downtime for up to 30 days.
Towing & Storage: If your vehicle needs to be towed and then stored afterward this is a coverage that can benefit you tremendously at the moment. If your vehicle is broken down and you are being charged storage fees without money coming in, it can really affect your cash flow.
Debris Removal: Depending on what kind of freight you would plan on hauling would help you make the decision if this is a coverage you want to add to your policy. If it is a product that would require a lot of clean-up in case of an accident it could be worth it, if not it might be something you wouldn’t need to worry about.
Earned Freight: This coverage comes into play if for any reason cargo can’t be delivered due to a cargo loss and you are still out of the income you should have received from that load.

There are lots of different options and endorsements that can be put on a commercial insurance policy and it's important that you find an agent that works specifically in the industry to make sure you have the right coverage for when you might need it.

Be prepared to put a large amount of your business income into covering your business with the proper insurance. This is not a place where you want to simply buy the cheapest policy available. If you are new to the industry and just starting out expect your rates to be quite a bit higher. After you get a few years under your belt and build up a good BASIC score with the FMCSA you can usually find better rates.

It’s a lot like when you first turn 16 and start driving for the first time and have no history or insurance score for the company to base your rates on so you get thrown in with everyone. Proving that you can drive safely, comply with paperwork, pass inspections and make your insurance payments on time will all help your insurance score going forward.

Interstate versus Intrastate Requirements

If you are planning on crossing any state lines with your coverage you will need an MC number and DOT number registered with the FMCSA. This applies to most carriers. Although hot shot trucking is typically not long-haul there are still a lot of instances where you would need to cross state lines.

Intrastate Authority is when you pick up in one state and deliver within the same state without ever crossing state lines. This requires a bit less paperwork and only requires you to file with that particular state.

In regards to requirements, the only real difference is that if your vehicle’s gross weight is not over 10,001 pounds, not all states will require you to have a CDL. I would still highly recommend that you have one as this is a great opportunity to gain years of experience in case you would ever want to move up to a big rig. Many companies will not be able to hire you without at least 2 years of consecutive CDL experience.

No matter where you are in your business journey, Truckbase can help you build your trucking business by reducing your office time which enables you to spend more time on the road. Check out our demo today!