Tow Truck Insurance Cost: What Business Owners Need to Know

Tow truck insurance is a type of commercial auto insurance policy that protects tow truck operators from financial losses due to accidental damage to the trucks or to the vehicles they tow. It also protects against lawsuits resulting from injuries and property damage.^[1]

The cost of tow truck coverage depends on the insurer and other factors, such as the type of business, operating risks, location, vehicle weight, and driving histories of the tow truck drivers listed on your policy.

Learn more about tow truck insurance costs, types of coverage, and cost-saving strategies to keep rates affordable.

How much tow truck insurance costs

The average tow truck insurance premium for a single truck ranges from $450 to $620 per month, or $5,400 to $7,440 annually. Every insurance company has its own way of evaluating insurance-rating factors to calculate premiums, but the factors themselves are fairly standard. 

Here are some common factors that affect tow truck insurance costs:^[2]

• Tow truck operator driving records: Drivers with clean motor vehicle records are less likely to cause a mishap, so they’re generally less expensive to insure.

• Vehicle type: Each type of tow truck has unique characteristics, such as weight, size, towing capacity, safety features, safety rating, and uses. These characteristics can drive your insurance rates up or down.

• Business type and unique operating risks: Insurers consider the types of services offered and associated risks, the purpose of towing, and hours of operation. Tow trucks used for vehicle repossessions, for example, might warrant a different rate than tow trucks used to remove illegally parked or broken-down vehicles. 

• Business location: Operating a tow truck in an area with high rates of theft, vandalism, and accidents often makes insurance more expensive.

• Coverage options: Tow truck insurance offers liability and other standard coverages, plus optional insurance add-ons that influence your rate. 

• Policy limits: Policy limits determine the maximum payout you can receive for claims. The higher the limit, the higher your premium is likely to be.

What tow truck insurance covers

Tow truck insurance typically provides liability protection in the event of a covered accident or peril, like fire, theft, or vandalism. It generally also covers your truck and the vehicle it’s towing. 

The exact coverage you need depends on your state’s laws. Vehicles that operate across state lines are also subject to federal insurance requirements.^[3] 

Here’s a closer look at some common types of tow truck coverage:

• Liability coverage: Liability insurance provides financial protection if your truck is involved in an accident that causes bodily injury or property damage. State laws typically require at least $300,000 worth of liability insurance. Tow trucks that operate across state lines generally need to carry at least $750,000.

• On-hook coverage: On-hook insurance covers the vehicle the truck is towing while it’s being towed. Check your state and federal laws to find out what’s required.

• Garagekeepers legal liability coverage: This is a liability policy that protects customers’ vehicles while they’re stored in your garage or on your lot. Depending on the type of business you have, your state might require you to carry this insurance.

• Physical damage coverage: Physical damage insurance offers collision protection and comprehensive coverage for damage to your truck from non-collision causes, such as falling trees, as well as fire, vandalism, and theft. It’s typically optional.

• Medical payments coverage: Medical payments coverage pays your and your passengers’ medical expenses if they’re injured in an accident.

• Underinsured/uninsured motorist coverage: Uninsured/underinsured motorist coverage pays expenses if an uninsured or underinsured driver hits your truck. This insurance type is optional.

What tow truck insurance doesn’t cover

Tow truck insurance is for accidents and other unexpected mishaps. It excludes damage from situations that occur over time or under circumstances that are neither accidental nor unexpected.

For instance, tow truck insurance likely covers repairs resulting from a collision with another vehicle. But it doesn’t cover routine maintenance and general wear and tear on the vehicle. Tow truck insurance may not cover tow trucks used for personal use or agricultural purposes.

While specific exclusions for tow truck insurance vary by insurer and policy, these are some common exclusions:

• Intentional damage

• Damage caused by negligence

• Unapproved business operations, such as towing hazardous cargo

• Unqualified drivers

• Illegal activity

• Terrorist acts and acts of war

Do you need tow truck insurance?

You need a minimum amount of tow truck insurance since all U.S. states require commercial vehicles to carry liability coverage. Coverage requirements vary, so it’s important to understand your state’s insurance minimum requirements. You may also need to meet federal insurance requirements if your truck travels out of state.

Without the right amount of tow truck insurance, your business could face serious legal issues and be on the hook for thousands of dollars. Full-coverage tow truck insurance provides added financial and legal protections. And if you lease or finance your tow truck, your lender will likely require it.

Consider insuring your tow truck if you or your business fall into these categories:

• Independent, for-hire tow truck operator

• Local for-hire towing company

• Interstate for-hire towing company

• Roadside assistance service provider (or for-hire contractor for roadside assistance company)

• Auto body shop, mechanical repair shop, or auto dealer

• Rotational towing program participant

How to save money on tow truck insurance

At an average cost of $450 to more than $600 per month to insure a single truck, tow truck insurance is often a significant business expense. But tow truck owners and operators have several ways to save on a policy:

• Shop around for coverage. Request insurance quotes from several different insurers to find the best price for the coverage you need.

• Insist on clean employee driving records. Hiring drivers with no moving violations and/or at-fault accidents, and maintaining a clean driving record and claims history yourself, helps you qualify for the most favorable rates. Implement safe driving policies to help prevent future accidents and infractions.

• Pay for your policy up front. Some insurers offer discounts on insurance policies to customers who pay in full. Consider switching from monthly premium payments to save.

• Bundle insurance policies. Buying your tow truck and business auto insurance from the same company you use for your personal vehicles or home can earn you discounts. You may also be able to purchase other types of business insurance, like general liability insurance or industry-specific coverage such as auto repair shop insurance.

• Park the truck in a secure location. Secure storage for your tow truck protects it from theft and vandalism, which can reduce rates. Consider garaging the vehicle or storing it in a fenced-in lot overnight.

• Choose higher deductibles. Paying more of your claims out of pocket reduces the insurer’s risk, so it can offer you lower rates.

Tow truck insurance cost FAQs