What Types of Insurance Does a Towing Business Need?

Broken down, abandoned, or repossessed vehicles are issues that often require the help of a towing company. Regardless of the scenario, customers depend on a trustworthy and timely towing business, making towing a lucrative and in-demand service. However, while assisting customers, tow truck companies encounter several risks and need good insurance coverage to protect themselves from financial hardships.

Related: How to start a towing business

What Are Some Risks for a Towing Business?

Some of the risks that towing businesses may encounter include incidents such as

• Car accidents
• Employee injuries
• Damaged equipment
• Customer injuries
• Robberies 

Car Accidents

Damage, liabilities, and injuries from car accidents are the greatest risks for towing businesses and can put a significant financial strain on the business. And since drivers are continuously on the road, the business will have increased exposure to car accidents.

At-fault car accidents are a business hazard because they can cause expensive liabilities. Some of the more common causes of at-fault car accidents include

• Distracted driving
• Driver fatigue
• Poor visibility
• Poor weather conditions
• High traffic
• Poorly maintained roads

Certainly, many car accidents occur while driving, however, accidents can also happen while loading a disabled vehicle. For example, vehicle removals may sometimes occur in high-traffic areas, such as interstates and busy intersections, making an accident more likely. Additionally, inclement weather and removing vehicles from tough spots (i.e., ditches, narrow shoulders, or bodies of water) can heighten the risk of being struck by a passing car since the tow truck may be positioned in the line of traffic.

Car accidents can physically damage the business’s fleet of tow trucks. Physical damage hazards are costly because the tow trucks are expensive to repair and replace. Further, a non-active tow truck can limit the business’s availability, limiting potential income even more.

Although collisions are a major source of physical damage, some additional sources of physical damage include

• Uneven or shifting loads that cause a turnover
• Break failures and blown tires
• Vandalism or theft
• Wind or hail
• Exceeding the tow truck’s hoisting capacity 

Employee Injuries

Employee injuries are another risk for towing businesses and may lead to extensive medical bills and potential lawsuits against the business. Although office workers experience injury hazards such as slips, trips, and falls, tow truck drivers will be more exposed to injuries.

The primary injury concern for tow truck drivers will be car accidents that cause severe or lifelong injuries. Additionally, tow truck drivers that perform repossession services are at risk of confrontation and injury from angry car owners who become physically aggressive with the driver. 

Injuries can also occur while assisting a customer with their disabled vehicle. For example, hooking and loading a car onto the tow truck is hazardous for employees because they risk being struck by a passing car. This risk increases if the disabled vehicle is located on high-speed, high-traffic roads or on a narrow shoulder. Additionally, being hit by a passing car may be more likely to occur during times of poor visibility, such as darkness, heavy rain, or fog.

Other injuries while loading a vehicle include 

• Back injuries from lifting heavy objects 
• Maneuvering in tight or awkward areas
• Slips and falls
• Contact with hazardous materials

Damaged Equipment

Towing businesses use specialized equipment to hook, load, and remove vehicles. This expensive equipment moves between locations and is at an increased risk of damage, loss, or theft. For example, damage or loss can happen due to the following:

• Car accidents
• Theft
• Vandalism
• Breakage

Customer Injuries

Customer injuries are a risk that can result in bodily injury liability claims against the business. For example, customers can be injured on-site from slips, trips, and falls. These accidents may occur in the office, such as a reception area, or in the tow yard where vehicles may be stored.

Another potential customer injury hazard occurs during a repossession. For example, some drivers who perform repossession services may be armed for self-defense. However, if the driver inappropriately uses their weapon, the employee may cause injury or harm, which the business would be liable for. Additionally, repossessing the wrong vehicle or using means that disrupt the peace can further put the business at risk of liability lawsuits.

Robberies

Towing businesses have a risk of robberies both on-site and with the drivers. Many towing businesses transact with cash, although credit and debit transactions are also common. Regardless, towing businesses with cash transactions are at risk of robberies because businesses with cash are a target for thefts. Internal theft is another hazard. Employees may steal money through embezzlement, shortchanging transactions, or fraud.

What Types of Insurance Policies Should a Towing Business Consider? 

Towing businesses experience a variety of hazards that threaten their financial wellbeing. However, with well-rounded insurance policies, towing businesses can protect themselves from many financial losses. Some of the key policies that a towing business should consider include the following:

• Commercial auto insurance
• Workers’ compensation insurance
• Inland marine insurance
• General liability insurance
• Crime insurance

Commercial Auto Insurance

A commercial automobile insurance policy provides towing businesses with two important lines of coverage. The primary coverage is liability insurance, which protects the business from at-fault accidents that cause third-party bodily injury and property damage claims. The second coverage on an automobile insurance policy is physical damage insurance for business-owned vehicles.

Liability insurance is the core coverage of automobile insurance because it protects the business from lawsuits caused by at-fault accidents or injuries to passengers while riding in the tow truck. At-fault accidents can be caused by tow truck operators and other employees of the business and may result in expensive lawsuits; however, liability insurance includes coverage for claim expenses such as

• Medical payments
• Property damage repairs
• Legal defense costs
• Settlements

Physical damage coverage protects the business’s fleet of vehicles from physical damage or damage from the transportation or storage of the vehicle owner’s property. This line of insurance includes coverage for collision and non-collision damage (otherwise known as comprehensive coverage). Comprehensive coverage covers hazards such as

• Falling objects
• Wind or hail
• Vandalism
• Theft
• Malicious mischief
• Glass breakage
• Fire

Garagekeeper’s liability is another type of car insurance that a towing business may consider. This garagekeeper’s liability insurance covers claims while operating or caring for a customer’s vehicle. For example, if the towing business stores or cares for customer vehicles and causes an accident while driving one of the customer’s vehicles, the business is responsible for the damages. However, a garage keeper’s liability policy would cover the claim.

Advanced driver licensing can also help reduce the risk of car accidents and greatly complements an automobile insurance policy. For example, tow truck drivers may need a CDL (commercial driver’s license) if the tow truck or towed vehicle weighs above a determined threshold.

Workers’ Compensation Insurance

A workers’ compensation insurance policy protects the towing business from employee injury claims. For example, following an injury, the workers’ compensation insurance would cover the following expenses:

• Medical bills
• Lost income
• Ongoing rehabilitation care
• Disability income
• Funeral expenses

After an accident, employees may accumulate bills and be unable to work, thereby losing additional income. These expenses put a financial strain on the employee and expose the business to lawsuits. Therefore, towing businesses with employees benefit from a workers’ compensation insurance policy because it protects both the employees and the company.

Inland Marine Insurance

An inland marine tow truck insurance policy offers coverage for the towing business’s equipment that moves over land. An equipment floater is an inland marine insurance policy that insures mobile equipment wherever it goes and is not limited to a permanent location. Towing businesses that travel between many areas benefit from this policy as it protects valuable and specialized equipment from losses such as damage and theft.

General Liability Insurance

General liability coverage for premises and operations insures claims of bodily injury or property damage that occur on-site or due to the actions of the business. For example, if customers slip and injure themselves in the towing business’s reception area, they may bring a lawsuit against the business. However, a general liability policy covers these types of claims and includes coverage for claim-related expenses such as

• Third-party medical bills
• Third-party property damage repairs
• Legal defense costs
• Settlements

Crime Insurance

A crime insurance policy offers coverage for the towing business’s cash. A crime insurance policy will benefit towing companies that have many or regular cash transactions. Not only will it cover the replacement of money lost to theft or robbery, but it also covers cash stolen internally. For example, this policy insures cash against the following perils:

• Theft
• Embezzlement
• Fraud
• Forgery

However, a crime insurance policy does not cover theft caused by 

• Owners
• Partners
• Executives