Trailer interchange and why you need the insurance

  (Photo: Shutterstock)

(Photo: Shutterstock)

A trailer interchange agreement is a contract that organizes the transfer of a goods being transported between parties to ensure it arrives at the specified destination. It is common in the trucking industry for truckers to use trailers belonging to others in their business. A trailer interchange agreement is required if a trailer of goods is being hauled by different truckers and trucking companies along its path towards end delivery. Trailer interchange is the most common with the UIIA (Uniform Intermodal Interchange and Facilities Access Agreement).

Trailer interchange extends to liabilities an insured may incur for damages to a trailer while it is in his possession, and does not require that the trailer be attached at the time of loss. It also includes “containers” under the definition of trailers, so it is used most often for intermodal operations where the equipment includes both a trailer chassis and container. Trailer interchange does require a “written trailer or equipment interchange agreement” be in place at the time of loss, so it may not extend to all situations when a trucker has a non-owned trailer in his possession.

In most cases, companies do not own all the transportation equipment involved in shipping goods to their final customer. It doesn't make sense for a company to own and manage fleets of ships, trains and trucks when other companies provide these services as their core business. Instead, companies contract transport out to third parties that handle shipping. These transport companies, in turn, operate in set networks. If a good starts in one logistical network, but ends in another, the transport companies will use a trailer interchange agreement to complete delivery.

Truckers often have to switch trailers while traveling around the country in order to meet overall scheduling across the transport network. For example, a trucker may regularly drive a route from Los Angeles to Dallas. If goods from Los Angeles are bound for Chicago, however, the trucking company can arrange for transfer via a trailer interchange agreement in Dallas so that the trailer reaches its final destination. The same trucker may be picking up another trailer for his return trip to Los Angeles that is part of another agreement ending in Los Angeles or further on. A trailer can switch between several companies and many drivers on its way across the country. In this way, trailer interchange agreements make it simpler to move goods by not requiring a single trucker to drive the entire distance.

A trailer interchange agreement makes the motor carrier – the trucker hauling the trailer – responsible for any physical damage caused to the trailer. Businesses involved in a trailer interchange agreement may require those hauling the trailer to have trailer interchange insurance. This type of insurance covers physical damage that may be caused to the trailer while it is being hauled by a party that does not own that trailer. The insurance coverage covers the trucker who is in possession of the trailer, and covers damage caused by fire, theft, vandalism, or collision. The policy has a deductible, and has limits to the amount of damage that will be covered. Alternatively, a company can purchase non-owned trailer physical damage which applies to non-owned assets even if there is no written trailer interchange agreement for the transport. This type of policy also has maximums as to the amount of damage that will be covered.

Depending on the limit and deductible you choose, your trailer interchange coverage should add between $100 and $1500 a year to your overall insurance cost. Factors that influence how much you pay include your loss history, location, equipment value, and driving record.

The average limit for trailer interchange coverage is between $20,000 and $30,000, with a deductible of $1,000. To select the right limit, you’ll need to know the trailer’s actual cash value. The insurance company will only pay out the value of the trailer in the event of a total loss, not the policy maximum. So over-insuring a trailer will only waste money. On the other hand, under-insuring can lead to high out-of-pocket expenses if the trailer is damaged beyond the policy limits.

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