Owner-Operator Insurance in Texas: What You Need Leased On vs. Under Your Own Authority

If you are leased on to a motor carrier, the carrier has to carry public liability on your truck while it is working for them. Everything else, like bobtail coverage, physical damage on your tractor and coverage for your own injuries, depends on what your lease states. If you run under your own authority, the primary liability is on you, and it has to be filed before your first load.

Many owner-operators buy a policy before they ever read the insurance section of their lease. Below is what the federal leasing rules require, what the carrier's policy does and does not cover, what owner-operators usually buy on their own, and what changes when you get your own authority.

Are you leased on or running under your own authority?

This is the question that decides everything else.

• Leased on. You lease your truck, and usually yourself as the driver, to a motor carrier. You haul under the carrier's DOT number and operating authority, and the carrier's insurance is the primary liability coverage on your truck while it is in their service.
• Your own authority. You have your own DOT number and, if you haul interstate for hire, your own operating authority. You buy the primary liability policy, your insurer files proof of it, and every coverage decision is yours.

Some owner-operators move back and forth between the two. If that is you, the day you switch is the day a coverage gap is most likely to open up.

What does the motor carrier's insurance cover when you are leased on?

Federal leasing rules in 49 CFR 376.12 set out what a lease between a motor carrier and an equipment owner has to say. Three parts matter most for insurance:

• The carrier takes responsibility for the operation. The lease has to give the carrier exclusive possession, control and use of the equipment for the length of the lease, and the carrier assumes complete responsibility for operating it during that time (376.12(c)(1)).
• The lease has to spell out insurance. It must state the carrier's legal obligation to keep public liability coverage on the equipment, and it must say who is responsible for any other insurance for operating it. The regulation names bobtail coverage as an example. If the carrier charges you back for any of that coverage, the amount has to be stated (376.12(j)(1)).
• Control is not the same as employment. The regulation says those control provisions do not, by themselves, decide whether you are an independent contractor or an employee (376.12(c)(4)).

So the carrier's policy is built to cover your truck while it is working in the carrier's business. What it does not cover, and who is supposed to cover it, is in your lease.

What insurance does a leased owner-operator usually need?

Non-trucking liability

Non-trucking liability covers your truck when it is not being used in the business of the carrier you are leased to. Think driving home on a weekend, or running a personal errand on a day off. The standard ISO version of this coverage is an endorsement called Motor Carriers: Insurance for Non-Trucking Use (CA 23 09). It does not apply while the truck is carrying property in any business, or while it is being used in the business of anyone it is rented to (CA 23 09 summary).

That last part matters. If you take a load for another company outside your lease, non-trucking liability is not built to cover it.

Bobtail vs. non-trucking liability

The two terms get used interchangeably, and sometimes they mean the same policy. Bobtail usually refers to driving the tractor without a trailer. Non-trucking liability usually refers to any use outside of dispatch, with or without a trailer. The bigger difference is in how each insurer words the coverage, especially around trips to the shop, the terminal or the next pickup. Read the exclusions, not the name on the policy.

Physical damage on your truck

The carrier's liability policy pays for damage you cause to other people. It does not fix your tractor. Physical damage coverage does, and if you are financing the truck, your lender will require it. Insure the tractor, and your trailer if you own one, at a value you could actually replace it for.

Occupational accident or workers' comp

Texas treats an owner-operator who provides transportation services under contract for a motor carrier as an independent contractor (Texas Labor Code 406.121). A carrier and an owner-operator can agree in writing for the carrier to provide workers' comp coverage, and the carrier can deduct the premium from what it pays the owner-operator (406.123). Workers' comp is also elective for most private employers in Texas (406.002). We covered that choice from the employer side in our post on workers' comp nonsubscription.

In practice, many carriers require leased owner-operators to carry occupational accident coverage instead. It pays medical bills, disability income and death benefits if you are hurt on the job. It is not the same thing as workers' comp, so read the limits and the benefit periods.

Trailer interchange

If you pull trailers you do not own under an interchange agreement, the agreement usually makes you responsible for damage to that trailer while it is in your care. Trailer interchange coverage is built for that.

What changes when you run under your own authority?

Primary auto liability

You buy it, and the minimums are set by law. For a for-hire carrier hauling nonhazardous freight interstate in a vehicle of 10,001 pounds or more, the federal minimum is $750,000. Oil and most hazardous materials require $1,000,000, and certain hazardous materials require $5,000,000 (49 CFR 387.9).

If you only haul inside Texas, TxDMV requires at least $500,000 for most private and for-hire vehicles over 26,000 pounds (TxDMV).

Those are minimums. Brokers and shippers often require more in their contracts, so check the contracts you plan to sign before you pick a limit.

Filings

Your insurer files proof of your liability coverage with FMCSA for interstate authority, and with TxDMV for a Texas intrastate number (43 Tex. Admin. Code 218.16). If the filing lapses, your authority goes inactive. It is your job to make sure the filing stays in place.

The MCS-90

Interstate carriers carry the MCS-90 endorsement. It protects the public, not you. If your insurer has to pay a claim the policy would otherwise exclude, the MCS-90 gives it the right to come back to you for reimbursement. We covered this in our guide to starting a trucking company in Texas.

Cargo, general liability and umbrella

Federal rules do not require cargo insurance for general freight, but most broker and shipper contracts will. Cargo forms vary a lot on theft, unattended vehicles and refrigeration breakdown, which we went through in our post on cargo theft. General liability covers claims that do not involve driving the truck, and an umbrella sits on top of both.

What should you look for in your lease before you buy a policy?

1. Who provides insurance beyond the carrier's public liability. This should be stated plainly, including bobtail or non-trucking coverage (376.12(j)(1)).
2. Any insurance chargeback, as an amount. If the carrier deducts insurance from your settlements, the lease has to say how much (376.12(j)(1) and (h)).
3. Your right to the paperwork. If you buy coverage through the carrier, the carrier has to give you a copy of each policy on request and a certificate of insurance showing the insurer, policy number, dates, coverage, cost and deductibles (376.12(j)(2)).
4. Cargo and property damage deductions. The lease has to say when the carrier can deduct for cargo or property damage, and you get a written explanation and itemization before any deduction is made (376.12(j)(3)).
5. When the lease ends. The carrier's coverage on your truck ends with the lease. Know the date, and have your next policy ready before it.

Leased on vs. own authority at a glance

Whichever side you are on, liability is the expensive part of trucking insurance right now. We covered why in Why Is My Commercial Truck Insurance Going Up in Texas? and what it usually costs in How Much Does Commercial Truck Insurance Cost in Texas?

Frequently asked questions

What insurance does a leased owner-operator need?

Usually non-trucking liability or bobtail coverage, physical damage on the truck, and occupational accident coverage. Your lease sets the details, because federal rules require it to say who provides insurance beyond the carrier's public liability coverage.

Does my motor carrier's insurance cover me when I am not under dispatch?

Generally no. The carrier's coverage is built for your truck while it is being used in the carrier's business. Non-trucking liability is built for the time in between.

What is the difference between bobtail and non-trucking liability?

Bobtail usually means driving the tractor without a trailer. Non-trucking liability usually means any use outside of the carrier's business. Insurers word both differently, so read the exclusions on your policy.

How much insurance do I need for my own authority?

At least $750,000 in liability for interstate general freight in a vehicle of 10,001 pounds or more, and more for oil and hazardous materials (49 CFR 387.9). Texas intrastate carriers with vehicles over 26,000 pounds need at least $500,000. Brokers and shippers often require more.

Do owner-operators need workers' comp in Texas?

Usually not. Texas treats an owner-operator as an independent contractor, and comp is elective for most Texas employers. A carrier can agree in writing to provide coverage and deduct the premium, and many carriers require occupational accident coverage instead.

Can my carrier charge me for insurance?

Yes, if the lease states the chargeback as an amount. If you buy coverage through the carrier, you can ask for a copy of the policy and a certificate of insurance.

Does non-trucking liability cover me if I haul a load for another company?

No. Non-trucking liability does not apply while the truck is carrying property in any business. A load outside your lease needs its own coverage.

What happens to my coverage when my lease ends?

The carrier's coverage on your truck ends with the lease. If you are moving to your own authority, your primary liability has to be in place and filed before your first load.

Send us your lease before you buy anything

If you are leased on, or thinking about getting your own authority, our transportation team can read your lease and tell you what it already covers and what you actually need to buy. If you are in Guadalupe, Comal, Bexar or the surrounding counties, call 830-303-8300 or visit our trucking and transportation insurance page.