During a time when spot rates are low, many carriers are looking for new ways to make money in trucking. Enter power only — a strategy some truck companies are using to increase and diversify their monthly income. Before we examine why there are so many owners opting for power-only loads, let’s define what it is.
What is power only in trucking?
It’s just what it sounds like. A carrier provides just the truck (the “power” unit) and a driver, but not the trailer. The trailer is typically supplied by the shipper, another carrier, or a third-party logistics provider. This type of arrangement has become more popular because of its flexibility and efficiency.
Why are carriers choosing power-only loads?
There are several reasons. Here are just a few:
Fleet Efficiency: Carriers can focus on maintaining fewer trailers or even none at all. This lowers the cost of trailer maintenance, repairs, and capital expenses for purchasing trailers.
Flexibility: It allows carriers to scale operations based on demand without worrying about having the correct trailer type for each load.
Market Responsiveness: Carriers can respond more quickly to shifting freight opportunities because they are only providing power units and drivers.
Partnership with Shippers/Logistics Providers: Some shippers or logistics companies prefer to manage their own trailers, allowing them to control specific features such as refrigeration, tankers, or flatbeds.
What kind of coverage do you need for power-only loads?
While there are operational and cost benefits to the power-only model, before you even arrange to pick up the first power-only load, you must make sure you have the right insurance. Let’s break down what is necessary to get started.
Liability Coverage
You still need to maintain primary liability coverage for the tractor and driver, regardless of whether you own the trailer.
There is also a type of coverage called non-owned trailer liability. In power-only situations, you have to make sure your liability policies cover any trailers you pull that you don’t own, as damage or accidents caused while hauling third-party trailers still fall under your responsibility.
Physical Damage Insurance
You may not need physical damage coverage for trailers if you don’t own them, but you will probably still need non-owned trailer physical damage coverage in case you are responsible for any damage to the trailer while it’s in your possession.
Another type of physical damage insurance needed is gap in trailer coverage. Carriers may find themselves exposed if the broker or shipper doesn’t have sufficient coverage or if the agreement is unclear about who is responsible for damages.
Cargo Insurance
Owner operators and fleet owners still need cargo insurance for the goods being transported, but the trailer owner might carry some of the risk for trailer-specific issues, such as refrigeration breakdowns.
Trailer Interchange Agreements
Many power-only arrangements involve trailer interchange agreements. Basically, you take on the responsibility for the trailer while it is in your possession. These agreements often require you to hold trailer interchange insurance, covering physical damage to the trailer while you have it.
Additional Coverage Considerations
While you don’t own the trailer you’d be picking up for a power-only load, there are still adjustments that may need to be made or steps to take to make certain the current coverage works for each power-only agreement.
Risk Management
Always make sure your insurance provider understands the power-only arrangement and customizes your coverage accordingly. There may be unique risks depending on the types of trailers you’re hauling (e.g., hazardous materials, specialized equipment).
Cost Impact
Overall insurance premiums may be lower in a power-only model since you’re not responsible for insuring trailers you don’t own. But, if you’re handling high-value or specialized trailers, this could still bring up your insurance costs due to the additional risks involved with those trailers.
While power-only arrangements can reduce your direct operational costs, you want to make sure you aren’t overlooking a gap in your coverage related to non-owned trailers and cargo liabilities. Work closely with your insurance broker or provider to ensure your policies are aligned with the specific risks you face in these agreements.