Utility trailers and the insurance laws provide murky waters for vehicle owners. These insurance issues become more complex when commercial endeavors involve the trailer in question. The bottom line is that if you run a commercial business involving automotive vehicles or towable trailers, you need commercial auto insurance.
The quick answer is yes. If you drive a commercial vehicle towing a commercial utility trailer, then you need commercial utility trailer insurance. If you drive a personal vehicle and tow a trailer, the liability policy you carry on the auto provides liability insurance for the trailer. That policy — liability — is the only coverage type that extends to the trailer. Your comprehensive and collision insurance do not extend to the trailer.
You can quickly see the problem. Your personal policy only provides any coverage so long as you drive your vehicle for personal reasons. As soon as you enter the vehicle to drive to a commercial undertaking with your trailer attached to do work for your company, you render your personal auto policy invalid. You need a commercial policy to cover you, the vehicle and the utility trailer.
You could consider this a trick question. No state requires separate trailer insurance for personal use. Below are the overall requirements under each state, the caveats, next steps to stay protected and additional coverage you may need.
In all states, the liability component of the auto policy covers the trailer. Let’s consider what that means though. That means, if you cause an accident and your trailer swings, sways, and smacks another vehicle, damaging it and hurting the occupants of the other vehicle, your liability insurance for your auto covers the damage to the other person’s vehicle and their bodily injuries.
The trailer attached to your vehicle also incurs damage, but your liability does not cover it. It also does not cover the equipment you tow on the trailer. You might have tens of thousands of dollars of equipment on that trailer, but not one cent of it gets covered on your auto insurance.
If you purchased a separate trailer insurance policy with comprehensive and collision, then you can count on your personal auto insurance to cover the trailer’s damage and whatever you towed on it. Check your policy, though. You might only have coverage while the trailer is hitched to the auto. Once unhitched, you lose coverage.
But, if you towed commercial equipment such as the lawnmowers for your lawn maintenance business, neither your personal auto nor your personal trailer coverage applies.
You would have to purchase a separate commercial auto policy and a separate commercial trailer policy. The same is true if you run a business from home that requires you to hold meetings in the home. You would need a commercial insurance policy. Only a commercial comprehensive and collision policy would cover the damage to your trailer and the equipment you towed.
So, while no state mandates its purchase, you should institute commercial trailer insurance requirements for your business. The alternative simply costs too much.
Imagine replacing $10,000 worth of equipment because you did not want to spend $50 to $80 a month. You will find that commercial trailer insurance cost per year will cumulatively cost less than replacing or repairing everything in an accident.
The same consideration from personal trailer coverage applies to commercial trailer coverage. You might only have coverage while the trailer remains hitched to the truck. This varies by policy, so read the policy carefully with your agent before you sign it and pay the premium.
You may also need inland marine insurance. That would cover items you tow for other people on your trailer. It is a common purchase of dry cleaners, shipping companies, independent short- and long-haul drivers, and trucking companies.
If you transport other people’s items or store them temporarily, like a dry cleaning business, inland marine insurance protects their items. You would still carry commercial trailer insurance to protect your trailer.
Some insurance companies offer discounts for their commercial insurance policies, including commercial utility trailer insurance. Ask your insurance agent about any discounts the company offers. Your agent can explain the potential discounts and how your company would qualify for them. Not every agency offers all discounts, but you may find that your agency offers a discount when your company does one or more of the following:
Also, ask your insurance agency if they provide discounts for bundling your personal insurance policies with a commercial utility trailer policy. Some companies discount your policy if you purchase your personal auto insurance policy from them.
You will find a vast difference in the insurance rates between companies, so it pays you to shop around. These differences in the cost of commercial utility trailer insurance depend on a number of factors. These include the following:
You can find a pretty steep difference in commercial insurance between the costs of different companies. Obtaining quotes from at least five companies can help you save hundreds of dollars if your personal auto policy agency does not offer discounts for bundling.
Role of the DMV: Most states require you to register and license a commercial utility trailer. To obtain the license plate and registration, the utility trailer owner must provide proof of insurance. This means that you need to take your insurance card with you to the DMV (Department of Motor Vehicles). The DMV checks its validity electronically. Some states also require a safety inspection pre-registration.
Know the difference: Now you see the difference between asking "Do trailers need insurance?" and "Do commercial utility trailers need to have insurance?" You could conceivably get away with not separately insuring your utility trailer when you only use it for personal reasons. When you own a commercial business, though, and you use a utility trailer in its operation, you need a separate commercial trailer policy to cover the trailer and anything you haul on it.
Remember inland marine: If you haul items for other people, you need to carry inland marine insurance to protect their property. That’s because the insurance industry uses specific coverage limitations for each policy type with little to no carryover or leeway.
Overnight stay in your truck: Consider one other item if you travel overnight in your truck. You will need to add a special endorsement to your policy if you sleep in or live in the trailer. Some truckers do exactly that, sleeping in their truck trailer on long hauls and using showers in a truck stop for bathing and dining out for every meal. They may only stay in a hotel when on vacation since they eschew homeownership overpaying for their truck and trailer. The special endorsement covers them in ways similar to what home insurance would for a house or what RV insurance does for those who live in an RV.
Schedule a call with CoverWallet by calling (646) 844-9933, or book an appointment online using our contact form. Let our insurance experts help you find the answer to "Do trailers need insurance?" that can help you protect your business.
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