Tow Truck Business Insurance

Every tow truck business needs insurance. Knowing which type of insurance you need and the best place to get it is the next step.

This article will cover the main types of business insurance and help you find the best tow truck business insurance.

Recommended: Next Insurance is dedicated to matching small businesses with the right policy at the best price.

Best Insurance for a Tow Truck Business

The most common and comprehensive type of tow truck business insurance is general liability insurance. We recommend general liability insurance as your first line of defense against a variety of the most general and commonly occurring claims.

Some of the risks general liability insurance covers are:

  • Bodily injury
  • Property damage
  • Medical payments
  • Legal defense and judgment
  • Personal and advertising injury

While a tow truck business isn’t legally required to carry general liability insurance, operating without it is extremely risky. If your tow truck business is sued, you could face fees totaling hundreds of thousands of dollars (or more).

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Cost of General Liability Insurance

The average tow truck company in America spends between $450-$1,500 per year for $1 million in general liability coverage.

Compare the average cost of general liability insurance for a tow truck business to other professional industries using the graph below:

Graph showing average price of general liability insurance prices per industry

Several factors will determine the price of your policy. These include your:

  • Location
  • Deductible
  • Number of employees
  • Per-occurrence limit
  • General aggregate limit

You may be able to acquire general liability insurance at a discounted rate by purchasing it as part of a business owner’s policy (BOP) rather than as a standalone policy. A BOP is a more comprehensive solution that includes multiple forms of coverage, such as business interruption and property insurance.

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Common Situations That General Liability Insurance May Cover for a Tow Truck Business

Example 1: A customer who is stressed about their car being undrivable gets too close during loading and has their hand pinched between the car and the equipment. General Liability Insurance would cover the resulting medical payments for the injury.

Example 2: During a routine pick-up, one of your employees forgets to secure a strap that would properly secure the vehicle being towed. This results in the car detaching from the truck which causes major damage to the car. General Liability Insurance would cover the damage done to the customer’s vehicle.

Example 3: While dropping off a vehicle at an auto shop, you accidentally back the customer’s vehicle into the garage bay door. General Liability Insurance would cover the damage to the customer’s vehicle and the auto shop’s garage door.

Check out our review of the Best Small Business Insurance Companies.

Other Types of Coverage Tow Truck Businesses Need

While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of. Below are some other types of insurance all tow truck companies should obtain:

Commercial Auto Insurance

Since you will be driving your truck on public roadways, you are mandated by the state to carry a commercial auto policy. Auto insurance protects not only your vehicle but any liability you may have in an accident. Your personal car insurance will not cover you if you are driving the tow truck, even if you are off duty.

Commercial Property Insurance

If you own your location instead of renting, you need commercial property insurance to protect the building. If your business is based out of your home, your homeowners' insurance will not cover the home when it is being used for commercial purposes. Property insurance also covers items owned by your business.

Towing companies invest heavily in the tools that are used to complete their work. Be sure that you have enough coverage to replace all of your tools in the case of a loss.

This coverage is generally offered in a Business Owner Policy (BOP).

In addition to the policies outlined above, there are a few other types of coverage your towing company may require depending on certain aspects of your operations. Some of these might not apply to you, so be sure to ask your agent which policies are right for your business.

Workers' Compensation Insurance

If your towing company has any employees (full-time or part-time), you are legally required to carry workers’ compensation insurance. This type of coverage will help compensate your employees in the case that they get injured on the job.

Read more about workers’ compensation insurance.

Business Interruption Insurance

In the event of a fire, flood, or other catastrophes, there is a good chance your business operations will be halted for some time. Business interruption coverage is designed to help you recoup a portion of the revenue your business would lose due to the inability to operate.

This type of insurance is typically included in a business owner’s policy.

Commercial Umbrella Insurance

Umbrella coverage allows you to extend above and beyond the standard limits of your other business insurance policies. If you are faced with a large lawsuit or other claim situation, there’s a possibility that the coverage limits of your standard policies will be insufficient. In this case, your umbrella policy will allow you to surpass these limits.

Additional Steps To Protect Your Business

Although it’s easy (and essential) to invest in business insurance, it shouldn’t be your only defense.

Here are several things you can do to better protect your tow truck business:

  • Use legally robust contracts and other business documents. (We offer free templates for some of the most common legal forms.)
  • Set up an LLC or corporation to protect your personal assets. (Visit our step-by-step guides to learn how to form an LLC or corporation in your state.)
  • Stay up to date with business licensing.
  • Maintain your corporate veil.

Business Insurance Is the Best Way to Protect Your Business

If you're starting a new business, then you need business insurance. It's as simple as that. The protection offered by an LLC will protect your personal assets, but your business's assets are still open to liability in the case of a lawsuit or other loss.

Be sure that everything you've built is safe by getting business insurance.

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Tow Truck Business Insurance FAQ

Can I buy business insurance online for my tow truck business?

Yes, absolutely. You will need to first get a quote from an online business insurance provider like Next Insurance. Next allows you to then purchase a policy immediately and your coverage will be active within 48 hours.

What is included in a business owner’s policy?

A typical business owner’s policy includes general liability, business interruption, and commercial property insurance. However, BOPs are often customizable, so your agent may recommend adding professional liability, commercial auto, or other types of coverage to your package depending on your company’s needs.

What is the difference between business insurance and general liability insurance?

"Business insurance" is a generic term used to describe many different types of coverage a business may need. General liability insurance, on the other hand, is a specific type of coverage that business owners need to protect their assets.

Do I need insurance before I start a tow truck business?

You should invest in business insurance coverage for your business before your first interaction with a customer. Although the cost of insurance may seem high for a brand new business, it’s best to be proactive when it comes to protecting your assets. After all, you can’t buy insurance to cover a loss that has already occurred.

Will insurance protect my tow truck business from everything?

Not necessarily. Certain exceptions may be written directly into your tow truck business insurance policy, and some perils may be entirely uninsurable.

Is general liability the same as business owners?

A general liability insurance policy covers only liability losses. A business owner's policy covers both liability and property losses.

How do I choose the best general liability insurance?

The best general liability coverage for your business really depends on the amount of coverage you’re comfortable with and how often you expect to file a claim. A relatively safe business with a very low risk of accident or legal liability could opt for lower premiums with higher deductibles. 

However, if you are in an accident or injury-prone industry or are making advertising claims about the effectiveness of your service or product, you may wish to consider more extensive coverage. We recommend using a digital insurance provider like Next Insurance.

Do I need business insurance if I already have an LLC?

Yes, an LLC is meant to create a legal barrier between your business and your personal assets and credit. If you haven’t formed an LLC yet, use our Form an LLC guide to get started.

An LLC doesn’t protect your business assets from lawsuits and liability– that’s where business insurance comes in. Business insurance helps protect your business from liability and risk.

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