Over the past number of years I have offered advice on how Owner Operators can make themselves more profitable and hopefully some of you have listened and derived benefit from my writings. What I want to explain in this article is how to protect the small business that you have worked so hard to build. As with most small businesses, the owner is also the company’s only employee and if something should happen to that person the entire company is at risk, along with any personal assets that might be owned or co-owned by them, why would personnel assets be on the line? This is an easy question to answer but could end up being a hard pill to swallow if you ever find yourself in this situation after an accident. If you have a bank loan on your truck, chances are the financial institution you used, asked for (or demanded) a personal guarantee as a prerequisite for the loan. By signing that document you gave the bank the authority to force you to sell any personal assets that you might own to satisfy the balance of the loan should you default for any reason.
Have an accident with inadequate insurance? Doesn’t matter, make the payments – pay the loan. Got sick? Had a Heart Attack? Doesn’t matter, make the payments – pay the loan. You can see where I’m going with this. I know these scenarios are not pleasant topics, but I felt the need to get them on paper – because I have seen it happen (too many times). One of my favourite Owner Operators when I was running a carrier had a minor heart attack but was still going to be out of commission for at least 6 months, this guy was a great operator, clean equipment, worked hard, everyone liked him and then bang he had a heart attack. I remember going up to the hospital and seeing him, which is where I learned that he had no insurance for such an event and no nest egg at all. He and his wife had a house with a mortgage and a small amount of money in RRSP’s, that’s it!
Of course you can find a driver and put them in your truck while you’re convalescing but I gotta tell you that this is a risky path to take, you better be sure the person knows their stuff and doesn’t cause more problems than they solve. The other thing to consider is that you might be able to make your truck payment, but of course any income that you might have used to satisfy your needs at home will now go directly to the driver, so what now? The correct thing to do, as usual, is to do your homework and make sure that you have all (or most) of these scenarios covered with insurance. I have been working with the good folks over at NAL Insurance Inc. for the past number of years, and have seen how things should work when the proper insurance is purchased and problems happen.
One of NAL’s primary products is WSIB/WCB Alternative Insurance; this product is a no-brainer for Carriers that contract with Owner Operators. This type of coverage provides long-term protection for on and Off the Job Injuries (unlike WSIB, which only covers On the Job situations), and is usually packaged with comprehensive Out of Province Medical Insurance (to cover Emergency Medical Expenses when travelling across the border). This Insurance should be a mandatory requirement at Carriers. Further, NAL makes sure each Owner Operator is aware of the scenarios listed above, as well as other possibilities, for instance, the negative effect on cashflow in the event of an accident (Deductible Buydown Coverage), the impact of a Cancer Diagnosis (Critical Illness and Sickness Coverage), or the getting stuck on some lonely highway in the middle of the night (Truckside Emergency Road Service). I hate to sound like a commercial, but I wouldn’t write it if I didn’t believe in it. Proper insurance protection is a necessary component of any sound business; unfortunately too many Owner Operators lack proper coverage and only find that out after it’s too late.
To reinforce my point, here are a couple real world scenarios that NAL has passed on to me, one with a good outcome, and one with a not-so-good outcome. The first one deals with a 47-year-old driver from the Windsor area. During a driver meeting, this gentleman was vehement that he didn’t need WSIB Alternative Coverage or Critical Illness Protection. His comment was “all insurance companies are jokes, they will gladly take your money, but when it comes time to claim they throw up as many road blocks as possible”. Luckily, the fleet he drove for made the coverage mandatory. Further, after the NAL rep got a chance to meet him one on one, he decided to increase his Critical Illness protection to $50,000. It decision turned out to be very timely, because 13 months later he was diagnosed with colon cancer. Luckily, they caught the cancer in time; he has since recovered fully, but did admit that if it wasn’t for the $50,000 Critical Illness settlement he may have lost everything.
This brings me to the not-so-good story. After a two-hour sit down with a NAL rep, an Owner Operator from rural Ontario made the unfortunate decision to “pass” on valuable Disability coverage. His premise was “I own my truck out right, no loan. If something happens, I’ll just sell my truck and live on the proceeds until I recover”. Unfortunately, too many drivers have similar opinions. The reality is that equity in a depreciable asset is certainly not the foundation of a solid financial plan, especially in a distressed situation. Unfortunately, within 12 months, this driver was tarping down his load fell from the deck and broke his arm and collarbone. The results, Due to the nature of the injury, he required two surgeries and was off for an entire year. The truck was long gone (sold for less than half what he thought it was worth), and a house in foreclosure proceedings. This could have all been avoided with a little per-planning, food for thought (and motivation to get you financial house in order).
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