Tow Truck Insurance Costs And How To Get The Best Rates For Your Company


Once you’ve found the perfect tow truck for your company, you’ll need to find the right insurance policy. Your tow truck’s insurance costs per month could vary depending on where you’re located. However, they are an essential part of any successful towing business.

We spoke to Andrew Meinster, Senior Risk Advisor at Nottingham Insurance. He provided information about insurance and what prospective towers need to know about tow truck insurance costs.

“When I started as an agent, I was told to find my industry niche. I felt like my personality best fit the kind of business owner that liked to get their hands dirty,” Meinster said. “We have our own division here called the Automotive Services Division. It accommodates body and repair shops, towing companies, and auto haulers.”

After growing his business in the Philadelphia area, Meinster eventually began to write policies nationwide. Throughout his many years of experience, he continued to look for new ways to develop his specialty.

“I’m from Philadelphia, where things are very fast-paced,” Meinster said. “When I talk to a business owner from Kentucky, for example, it’s important to find common ground. I’ve enjoyed getting to listen to and learn from so many different professionals.”

When it comes to commercial tow truck insurance and wrecker insurance, Meinster knows it can make or break a business.

Understanding Tow Truck Insurance Costs

Commercial tow truck insurance is a necessary part of any towing business that assumes risk. An accident involving an uninsured or underinsured tow truck would be a devastating financial blow.

“Every towing company needs insurance,” Meinster said. “We recommend a $1 million combined single limit policy to all of our clients. Unfortunately, we have had a few claims reach that limit. A $1 million payout is not uncommon in today’s marketplace.”

The continual increase in insurance rates can be frustrating to say the least. Due to many reasons, including the rising number of auto accidents, Meinster says it is important to have an insurance partner that specializes in the industry and understands the risks it faces.

“We’re seeing insurance rates for tow trucks rise by an average of six to eight percent each year,” he said. “Having a team of specialists, however, allows us to negotiate those increases, especially if we’re working with an account that has minimal losses and risk management protocols in place.”

When you’re determining your overall tow truck insurance costs, it is important to factor in location. Certain municipalities, like New York City, may require higher limit auto and general liability policies.

“Sometimes, I’ve seen different municipalities and states require umbrella policies as an added layer of protection to a standard auto and general liability policy,” Meinster said. “If you’re operating in certain areas of Oregon, there is a $2 million umbrella requirement when working with police contracts due to a major accident that occurred five years ago.”

Consequently, having the right insurance can save your company from an expensive mistake. It could even prevent you from going out of business. It’s worth it even if it means having to pay a little extra each month.

Which Insurance Policies are Right for You?

We’ve covered the big ones, but there are a number of other insurance policies that are very important for tow truck operators to understand. Due to the fact there are different scenarios that haulers face, simply having a standard auto and general liability policy is not enough to protect your business.


On-Hook Coverage

On-hook coverage insures anything that involves carrier or wrecker towing jobs. It’s insurance for your customers’ vehicles while on the hook.

“On-hook and cargo insurance are two of the most important coverages for towers, especially in today’s world,” Meinster said. “A $50,000 on-hook limit is not enough, as cars have become more and more expensive. I highly recommend having at least $100,000-150,000 in coverage for light to medium-duty towers.”

Meinster says tow truck insurance costs may be lower for companies that specialize in hauling badly damaged or totaled vehicles, but that the opportunity to tow a more expensive vehicle is always out there so it’s important to be prepared for this possibility.


Garage Keeper’s Coverage

This is another important coverage to consider. Once the bed or hook of the truck releases the towed vehicle, whether it’s stored in a lot, garage, or yard, the on-hook insurance does not cover any damages. Meinster says this particular type of tow truck insurance cost is often overlooked. Even if your business doesn’t use a garage or lot, this coverage can be a lifesaver.

“For the amount that it costs, usually a couple hundred bucks a year, it’s well worth it,” Meinster said. “I usually include garage keeper’s coverage on every quote because it’s one of the most important coverages for a towing company’s exposure.


Workers’ Compensation Coverage

Unfortunately, workers’ compensation yields widespread misconceptions and misinformation in the towing world. Even if towers employ contractors, the roads are becoming more dangerous. They may still end up liable for a loss.

“Many towers don’t realize that if their contractor is injured or killed on the job, there is a good chance that their company will face some serious legal issues,” Meinster said. “I regularly hear, ‘I’ve got 1099 guys. I don’t need workers’ compensation coverage. Unfortunately, that’s just not the case.”

Without a workers’ compensation policy, your tow truck insurance costs could spike when you least expect them to.


Specialized Coverage Plans

For the larger operations, there are also plans that could include coverage for anything from underground utilities to environmental regulations. Wrecker insurance, for example, may include underground utilities coverage as recovery jobs could take place in areas of exposed fiber optic cables or pipelines.

How To Get The Best Rates For Your Company

Our current reality can shift on its axis at any given moment. Insurance represents a major financial commitment at the mercy of economic changes. Below are some helpful tips that may get you your desired rates and lower your average tow truck insurance costs.


Have Good Credit

The first step to potentially lowering your company’s tow truck insurance costs is through good credit.

“I would say this is the biggest cost factor when coming into the towing industry,” Meinster said. “A lot of insurance carriers that handle towing insurance calculate insurance rates based on the owner’s credit.”

The worse your credit score, the higher the rates could be.


Make Sure Your Driving Record Is Immaculate

Next, you’ll want to do everything you can to keep a clean driving record. Bad driving records heavily determine tow truck insurance costs. The more accidents you and your drivers have been a part of, the higher your rates could be. For Shelli Hawkins, Director of Market Engagement at TRAXERO, one solution is to start with roadside assistance work to build up your driving record.

“I’m seeing more and more of this in the industry. The liability is a lot lower when you’re not towing or transporting vehicles,” she said. “To get a year or two of roadside assistance under your belt would be a big step in the right direction.”

Incentivizing your drivers to maintain a clean driving record is another great way to meet this goal, according to Meinster. It could also lead to better business.


Calculate What You Can Pay Out-of-Pocket

Finally, it may be in your best interest to figure out what you could afford to settle without going through your insurance provider. This could lower your tow truck insurance costs in the long term.

“I have a friend in the industry located in Virginia. They hired a couple of drivers that were not good and it sent their rates sky-high,” Hawkins said. “The company made the decision to pay all claims out-of-pocket for a period of two years and it helped bring their insurance costs down.”

Meinster says a client of his in Florida pays any claim of $25,000 or less out-of-pocket. It’s crucial, however, to always keep safety on your mind when on the job.

“One bad insurance claim can completely destroy a business,” he said. “I’ve seen $1 million claims put companies out of business or force owners to sell trucks in order to afford the higher costs.”

Looking to catch up on the latest towing industry news and updates? Our blog features insights from industry experts, helpful tips for towers, and more.