What is Hot Shot Trucking?
Hot shot trucking is “For-Hire” trucking using a tractor (truck) that’s also (somewhat) commonly used for vehicles that are also passenger vehicles, at least sorta kinda.
What we’re talking about when it comes to hot-shot trucking is the “super duty” trucks, often with “dualies trucks,” which are trucks with four wheels on the back axle to handle the road and load better than having only two wheels on the back. These trucks are also always (albeit they don’t have to be) diesel powered for mileage and towing power capacity and while they look a LOT like passenger utility trucks, they have a lot more going on under the hood.
Truck models that often are used for hot shot for-hire trucking include Dodge Ram 3500, Ford Super Duty F250, F-350, and F-450 models, along with Chevy’s power lineup including the Chevy Silverado 3500HD. GMC offers at the time of writing, a GMC Sierra 3500 Denali Duramax Diesel with 4450 horsepower and 910 lb-ft of torque, allowing a much greater towing capacity than a standard pickup truck in your neighbor’s garage.
The above example using a GMC truck doesn’t have dual rear axles, albeit it’s common to see that feature depending on the load hauled by the trucker. In the video below, you’ll see a comparable Ford with dual rear wheels.
The following video is made by a cool couple that is actually in the hotshot trucking industry and their experience. If you’re considering entering, you’ll be doing yourself a big favor by watching and learning from those that are already making a living. The video was selected simply because I think they do a great job of breaking down the costs and discussing some of their (recent) experiences, including truck replacement.
Hot Shot truckers will still get an authority from the Federal Motor Carrier Safety Administration (FMCSA), assuming the hot shot truck is crossing state lines, and if not, a state authority usually, or get “leased on” with another who has their authority.
Often Hot shot truckers will be contract carriers and only haul for one entity and then the rules for an authority are generally different.
One nice advantage of being a hot shot trucker is (generally speaking) a CDL isn’t required. This allows for a much wider pool of driver applicants to enter the industry and get valuable experience at a much lower cost than going with a full semi tractor – trailer 18 wheel setup.
Common hot shot trucking operations include car haulers, and camper toters from my experience with people calling me for hot shot trucking insurance.
It’s important to note, that the cost for commercial auto for-hire trucking insurance isn’t that much different between hot-shot and full semi truck operators. Because many of the power unit tractors can easily top out over $80,000 in physical damage value, I even have hot shot truckers paying MORE of their insurance than some semi truck authorities with a (relatively) cheaper $40,000 tractor power unit.
As I mentioned, “camper toters,” those that take campers from Indiana and deliver them to camper dealers all over the United States and Canada, are often what many would consider “hot shot” truck drivers. In fact, either all or most of my camper toters are driving a “pickup” truck and not using a semi-truck (I can’t think of any clients I have that are full semi-truck operators and only hauling campers at this time), even though I do once in a while see campers hauled on a 53 foot trailer from time to time.
Speaking of 53 foot trailers that are typically witnessed behind a big semi tractor, hot shot truckers always (at least in terms of my clients) have a much shorter trailer, limiting the amount of cargo they can haul.
If you’re looking to enter the industry, or want a more competitive insurance policy, here’s some things to keep in mind.
- Your location matters. Wisconsin happens to be one of the cheapest states to have as your “garage” location. A “garage location” doesn’t mean the vehicle is physically in a garage, it means that’s where the trucker calls “home.” For those that can easily make a choice in location because they’re not rooted to one location and/or don’t mind moving, picking the right location to call home can mean the difference of thousands of dollars in your pocket from insurance savings. You’ll of course want to balance that with tax and fuel considerations too, albeit if you have flexibility, knowing what your options are is key.
- Your driving record is SOOOO important to your insurance cost. This does include your personal vehicle driving. For example, if you get a ticket for not wearing a seatbelt in ANY vehicle, including your personal car on your way to dinner, it WILL (or at least it’s likely) to impact your commercial auto rates. This includes “Bob-tail” (also called non-trucking liability) as well as for-hire trucking commercial auto insurance. The reason why a seatbelt ticket may cause you problems is it’s considered a “safety violation” by some (maybe all, I don’t know) of the commercial auto insurance companies. What may seem like a “no biggie” $10 seat belt ticket could me thousands, yes thousands, of dollars in increased insurance premiums. In short, no tickets = insurance savings.
- Radius of operation. Often hot shot truckers will remain in a certain radius, for example 500 miles. If that’s the case, usually (not always though), the rate will be less than if you have unlimited radius. Again, it depends on where your “garage” is located.
- Age of driver. You may not be able to do much about it, unless you’re hiring drivers, albeit the age of the driver can make a huge difference in the cost of insurance premiums. Generally speaking, the older the lower the cost of your insurance. This is especially true when comparing really young drivers (think under 25 years old).
- Type of goods as your cargo. Probably no surprise to anyone, albeit the cost of your cargo coverage is greatly impacted by exactly what you’re hauling. Many insurance carriers will not even allow hazardous cargo, even if the driver and vehicle are setup for it.
- Pay in full or make payments. Progressive trucking insurance is one of the carriers my clients have, and Progressive in particular offers a pretty sizable pre-pay discount. Generally, it’s about 15%, albeit I don’t have many (less than 10%, and off the top of my head, I bet less than 5%) truckers that pay in full. With the high cost of insurance, it’s not a surprise to me that most truckers make payments. I often suggest taking a loan from the bank to pre-pay if the trucker can secure a loan at a rate under 10% because gaining a 5% discount is not only better than nothing, it’s also usually enough to make it worth the trouble of setting up a loan.
- Have an agent who knows what the heck they’re doing. This is much bigger than most realize. I should, and could easily justify placing this on the top of the list, albeit it would feel too “self serving” and many may question my motivation between providing information and simply trying to sell myself. As an agent writing commercial auto insurance when insurance has been non-renewed or canceled, I talk to a LOT of people in that (awful) situation on a regular basis (think just about every day). In nearly 100% of the cases, the owner and/or driver/operator had an agent who didn’t give advice as to how fast to grow, what to do and not do, and generally how to operate in a manner that provides the best chance for making it in the trucking industry. Usually, it appears to me, the previous agent was more interested in making a sale than truly being a risk counselor, which is WHAT IS REALLY REQUIRED for almost all start-up Hot Shot truckers.
- Continuing with who is an appropriate insurance agent, let me add the single biggest warning flag your agent, or the agent you’re talking to isn’t likely an appropriate person to help you grow your business….. That’s an agent that primarily sells home and auto insurance, and doesn’t focus on commercial insurance, much less transportation / trucking coverage. If your insurance primarily sells home and auto, I’m nervous for you in ways you don’t even know about because it’s happened to too many of my clients that the agent didn’t know much more about trucking than being able to fill out forms with common information. I’m not suggesting you have to change your insurance agent and use me, albeit with my fist pounding on the table, I am saying if your agent you’re either considering or currently using doesn’t know more than you do about trucking, you’re not only missing out on what you must have, it may make the difference between staying in business because you have low-cost insurance and going out of business because you’ve been canceled / non-renewed for reasons you should have known (if your agent was providing the advice you need). Ok, in short, if you’re going to be a hot shot trucking operator, interview a few agents before deciding who has your best interest at heart.
I think that covers the primary things about hotshot trucking. Feel free to leave a comment or suggestions below.
Robert Weinstein is a husband, dad, stock market junkie, real estate broker, and of course…Insurance agent. Interests include my family, economics, marketing, technology, real estate, finance/investing, history, and Asia.
Robert’s insurance expertise includes having the designation of Certified in Long-Term Care (CLTC) and assist in asset protection for families with members entering retirement.
Robert is also an accomplished syndicated writer whose work can be found in TheStreet, MainStreet, CNBC, Forbes, Yahoo Finance, Seeking Alpha, MSN Money, The Money Show, Stock Saints, Motley Fool, Fidelity, Minyanville, RealMoney Pro, and many national and international newspapers.