Transportation Insurance Glossary: Key Terms Explained

Regulatory and Filing Terms

BMC-91: The form used by an insurance company to file proof of a motor carrier's public liability coverage with the FMCSA. The BMC-91 certifies that the carrier maintains at least the federally required minimum liability insurance.

BMC-91X: The version of the BMC-91 filing used when coverage is provided by a surplus lines insurer rather than an admitted insurance carrier. It serves the same purpose as the standard BMC-91.

BMC-84: A surety bond required for freight brokers and freight forwarders in the amount of $75,000. This bond protects carriers and shippers against financial loss resulting from the broker's failure to meet its obligations.

BMC-85: A trust fund agreement that serves as an alternative to the BMC-84 surety bond for freight brokers. The broker deposits $75,000 into a qualifying trust fund rather than purchasing a surety bond.

MCS-90: A mandatory endorsement attached to the liability policy of every for-hire interstate motor carrier. The MCS-90 guarantees that the insurer will pay valid public liability claims up to the minimum required limit, even if a policy exclusion would otherwise apply.

FMCSA: The Federal Motor Carrier Safety Administration, the agency within the U.S. Department of Transportation that regulates the Transportation industry. The FMCSA sets insurance requirements, safety standards, and licensing rules for motor carriers.

USDOT Number: A unique identification number assigned by the FMCSA to every commercial motor carrier operating in interstate commerce. The USDOT number is used to track safety information and compliance status.

MC Number: The Motor Carrier operating authority number issued by the FMCSA to for-hire carriers. An active MC number with proper insurance filings is required before a carrier can legally transport freight for compensation in interstate commerce.

CSA: Compliance, Safety, Accountability, the FMCSA's data-driven safety program. CSA assigns scores in seven Behavioral Analysis and Safety Improvement Categories (BASICs) based on inspection, crash, and violation data. Insurers use CSA scores as an underwriting factor.

SAFER System: Safety and Fitness Electronic Records System, the FMCSA's online database where the public can access motor carrier registration, safety, and insurance information. Brokers and shippers check the SAFER System to verify a carrier's authority and insurance status.

Liability Coverage Terms

Primary Auto Liability: The foundational liability coverage that pays for bodily injury and property damage your commercial vehicle causes to third parties. Required by the FMCSA for all motor carriers at minimum limits ranging from $750,000 to $5,000,000 depending on commodities transported.

General Liability: Coverage for bodily injury and property damage claims arising from your business operations that are not related to the operation of a vehicle. This includes slip-and-fall injuries at your terminal, damage caused by your employees during loading and unloading, and other premises and operations liability.

Umbrella/Excess Liability: A policy that provides additional liability limits above and beyond your primary auto liability and general liability policies. An umbrella policy increases your total available limit for catastrophic claims that exceed your underlying coverage.

Non-Trucking Liability (NTL): Coverage for owner-operators who lease onto a carrier, providing liability protection during personal use of the truck when the driver is not under dispatch. Also called deadhead liability or bobtail insurance, though these terms have technical distinctions.

Bobtail Liability: Coverage for operating a tractor without an attached trailer. Depending on the policy, bobtail coverage may apply during both business and personal use or may be limited to non-business operations similar to NTL.

Hired Auto Liability: Coverage for liability arising from vehicles you rent, borrow, or hire for business use. This extends your liability protection to vehicles you do not own but are temporarily using in your operations.

Trailer Interchange Coverage: Insurance that covers physical damage to trailers you are pulling under a trailer interchange agreement with another party. Standard physical damage policies often exclude non-owned trailers, making this endorsement necessary when you haul trailers owned by others.

Property and Cargo Terms

Physical Damage: Insurance covering damage to your own vehicles. Physical damage policies include two components: collision coverage (damage from striking another object or overturning) and comprehensive coverage (damage from theft, fire, weather, vandalism, and other non-collision events).

Collision Coverage: The component of physical damage insurance that pays to repair or replace your vehicle after it collides with another vehicle, object, or overturns. Coverage applies regardless of fault.

Comprehensive Coverage: The component of physical damage insurance that covers non-collision damage including theft, fire, vandalism, windstorm, hail, flood, falling objects, and animal strikes.

Motor Truck Cargo Insurance: Coverage for loss or damage to freight in your care, custody, and control while you are transporting it. Cargo insurance responds when goods are damaged, destroyed, or stolen during transit, loading, or unloading.

Actual Cash Value (ACV): A valuation method that determines the value of a damaged or total loss vehicle based on its fair market value at the time of the loss, accounting for depreciation. ACV is the standard valuation basis in most physical damage policies.

Agreed Value: A valuation method where you and the insurer pre-agree on the value of the vehicle at policy inception. In a total loss, the insurer pays the agreed amount rather than an ACV assessment. This eliminates depreciation disputes and ensures a predictable settlement.

Stated Amount: A valuation method where you declare the value of the vehicle on the policy. In a total loss, the insurer pays the lesser of the stated amount, the actual cash value, or the cost of repair. Stated amount is not the same as agreed value because the insurer can still apply depreciation.

Deductible: The amount you pay out of pocket before your insurance coverage begins to pay on a claim. Higher deductibles reduce your premium but increase your financial exposure when a loss occurs.

Workers Protection Terms

Workers' Compensation: State-mandated insurance that provides medical benefits, wage replacement, and disability payments to employees injured on the job. Required for Transportation companies with employee drivers in every state except Texas.

Occupational Accident Insurance (OA): Voluntary coverage designed for independent contractors that provides benefits similar to workers' compensation, including accident medical expenses, disability income, and accidental death and dismemberment benefits. The standard injury coverage for owner-operators who are not classified as employees.

Employers Liability: A component of the workers' compensation policy that covers lawsuits brought by employees alleging employer negligence. While the exclusive remedy provision of workers' comp generally bars employee lawsuits, exceptions exist, and employers liability responds in those situations.

Experience Modification Factor (EMR or E-Mod): A multiplier applied to workers' compensation premiums based on a company's historical claim experience compared to the industry average. An EMR below 1.0 indicates better-than-average loss experience and results in lower premiums. An EMR above 1.0 indicates worse-than-average experience and higher premiums.

Underwriting and Policy Terms

Premium: The amount you pay for your insurance coverage, typically expressed as an annual amount and payable in installments. Premiums are determined by underwriting factors including your loss history, driver records, fleet size, commodities hauled, and operating radius.

Loss Run: A report from your current or prior insurance company showing your claims history over a specified period, typically three to five years. Loss runs include claim dates, types, amounts paid, and amounts reserved. Underwriters require loss runs when quoting your renewal or new business.

Loss Ratio: The ratio of claims paid by the insurer to premiums collected, expressed as a percentage. A loss ratio of 60 percent means the insurer paid 60 cents in claims for every dollar of premium collected. High loss ratios lead to premium increases or non-renewal.

MVR (Motor Vehicle Report): A record of a driver's history from the state department of motor vehicles, including violations, accidents, license suspensions, and DUI convictions. Underwriters pull MVRs for every driver on a Transportation policy as a primary risk assessment tool.

PSP (Pre-Employment Screening Program): An FMCSA program that provides motor carriers access to a driver's crash history from the previous five years and roadside inspection history from the previous three years. PSP reports are used in the hiring process to evaluate driver safety records.

Exclusion: A specific risk, situation, or type of loss that your insurance policy does not cover. Understanding exclusions is critical because a claim falling within an exclusion will be denied regardless of how much premium you pay.

Endorsement: A written modification to your insurance policy that adds, removes, or changes coverage terms. Endorsements can broaden or restrict the base policy and are attached as addenda to the policy document.

Certificate of Insurance (COI): A document issued by your insurer that summarizes your coverage types, limits, and effective dates. Brokers, shippers, and other parties frequently require COIs as proof that you maintain adequate insurance.

Premium Finance: An arrangement where a finance company pays your insurance premium to the insurer and you repay the finance company in monthly installments with interest. Premium financing reduces the upfront cash required to bind coverage but increases the total cost.

Subrogation: The process by which your insurer, after paying your claim, seeks reimbursement from the party that caused the loss. If another driver was at fault in your accident, your insurer may pursue subrogation against that driver's insurance to recover the claim payment.

Indemnity: The principle that insurance restores you to the financial position you were in before the loss, no better and no worse. Insurance payments are designed to indemnify you for your actual loss, not to provide a profit.

Additional Insured: A person or organization added to your insurance policy who receives coverage under your policy for claims arising from your operations. Shippers and brokers frequently require motor carriers to add them as additional insureds on their liability policies.