How To Become An Owner Operator Chapter 2
If you have been following this series of articles you already know Conostoga Dispatch Trainig
that in parts I and II we covered the first four steps in becoming an O\O. They
1) Decide what kind of operation you want.
2) Choose a carrier.
3) Spec your equipment.
4) Finance your equipment.
Once you have completed those four steps you’re now ready for steps five and
six: Researching your insurance options and signing a few contracts, such as
the sales and finance agreements and the lease with the carrier. While you are
signing the contracts you are going to have to make decisions about insurance.
Therefore, step five, determining your insurance options, needs to be done well
in advance of signing the contracts. You will be offered some different forms
of insurance from the dealer as well as the carrier. You are not required to
accept insurance from either. Conostoga Dispatch Trainig If you have done your homework, you will be able
to make the right decisions.
Before we go any further, let’s go over a few basics on insurance policies.
This assumes that you will be leased to a carrier who provides liability and
cargo insurance when you are under dispatch. Given that scenario, the policies
you need to be concerned with are:
Physical damage or comprehensive: This policy will cover your equipment in case
of fire theft or accidents. It will pay to repair or replace your equipment.
You need to know if the policy will pay replacement cost or book value.
Non trucking liability (a.k.a. deadhead or bobtail insurance): This policy will
pay for bodily injury or property damage done to someone else if you are
involved in a crash while not under dispatch, i.e., driving to the shop or home
after a trip.
Work accident or worker’s compensation: This policy pays a percentage of your
wages if you are injured on the job. The laws about worker’s comp policies vary
from state to state, so be sure you know the laws in your state.
Health insurance: Coverage to pay your medical expenses due to illness injury
When you sit down to sign the finance agreement, the dealer will ask you if you
want credit life and credit disability insurance. We strongly recommend you
decline these policies. Even though it sounds like a wonderful deal at the
time, a policy for credit life on $55,000 — $75,000 loan may run around $800
— $900. This policy will only pay the remaining balance on your loan if you
should die. This sounds great and there is nothing wrong with having the loan
paid off if you die, but this is just a very expensive form of life insurance.
Decline this policy and talk to your insurance agent to make sure you have
enough term life insurance for your needs. The same goes for credit disability,
you can get a better rate through your agent. You will also be offered a
physical damage policy at the time you sign the finance agreement. Once again,
it sounds like a great deal because they just add your insurance premium to
your monthly payment. Don’t accept this option just because it is the easy way.
You need to know ahead of time how much a policy for that piece of equipment
will cost so you can compare. If you do accept this policy, make sure at tax
time you remember to tell your tax preparer that part of your payment goes to
insurance. Also when comparing costs you need to factor in the interest you are
paying on your insurance because it is a part of your loan. When you sit down
to sign your lease agreement with the carrier, you may have the option to buy
one or all of these policies through the carrier. Again, this may or may not be
your best option. The point Conostoga Dispatch Trainig we want to make is, know ahead of time what your
options are so you can make the best choice. Before you accept any policies
through the carrier, talk to a good insurance agent who really knows the
Health insurance is a very complicated issue and has changed somewhat in the
last couple of years. The IRS is now allowing what is called an MSA. This
stands for Medical Savings Account. This policy allows you to put money aside
tax free to pay for medical expenses. We are strongly recommending them to our
clients. If you are interested in an MSA you need to act fast. The IRS has only
opened this program up on a limited basis. All of the ins and outs are too
complicated to go into here, but if you want more information we would be happy
to discuss these policies with you on the phone.
If you have any questions or would like a list of the insurance companies and
associations that specialize in Owner\Operator insurance, just call our office
and we will be happy to help you.
Step six is going to be the signing of the contracts. These documents can have
a huge financial impact on your tax situation, so you want to have your
attorney, tax preparer or financial advisor look them over before you put ink
to paper. When you tell the dealer or the carrier that you want your attorney
or financial advisor to look over the documents they may tell you it’s not
necessary. Don’t listen. They may also say it is a “standard contract” . Don’t
listen. There is no such thing as a standard contract. Even if there were, you
don’t have a standard life. The same contract can have a different impact on
you than it does on somebody else. Take the time and spend a few dollars to
have them reviewed.
Well, that should give you plenty to keep you busy for now. Remember these are
only guidelines, if you have specific questions feel free to call our office
and we will be happy to help you through the process. We have also written a
manual that covers everything you need to know to get started and run a
profitable business. You can call our office for details at 866-438-7825 or
visit our website at www.43truck.com
Click the chapter bar to go to Chapter 4.