Commercial Auto Insurance Required for Tow Trucks: Complete Guide 2025

Introduction to Tow Truck Insurance

Operating a tow truck isn’t just about transporting vehicles—it’s a responsibility that comes with significant financial and legal risks. Whether you run a single tow truck or manage a fleet, having the right commercial auto insurance required for tow trucks is not optional—it’s the law. Without it, a single accident could sink your entire business.

In this guide, we’ll break down why tow trucks need specialized insurance, the types of coverage available, average costs, and tips to save money while staying compliant with regulations.

Why Tow Trucks Require Specialized Commercial Auto Insurance

Tow trucks face risks far beyond those of a standard delivery van or passenger vehicle. They not only operate on busy highways but also handle customers’ vehicles worth thousands of dollars. This dual exposure creates a high liability risk.

Risks Unique to Tow Truck Operations

• Accidents while transporting vehicles.

• Damage to a customer’s car while hooking, towing, or storing it.

• Liability claims from injuries during roadside assistance.

• Property damage while recovering vehicles from accident scenes.

Legal Requirements for Tow Truck Insurance

Most states mandate minimum liability insurance for tow trucks, but many also require on-hook coverage or garage keepers liability. These protect your business if customer vehicles are damaged in your care. Federal regulations also apply if your tow trucks operate across state lines.

Types of Commercial Auto Insurance Coverage for Tow Trucks

Insurance policies for tow trucks are more complex than typical auto coverage. Here are the essential types you’ll need:

Primary Liability Insurance

Covers bodily injury and property damage if your tow truck causes an accident. This is the foundation of all commercial auto insurance.

On-Hook Towing Coverage

Protects customers’ vehicles while they’re being towed. Without this, you’d pay out of pocket if a car was damaged during transport.

Garage Keepers Legal Liability

Covers damage to vehicles stored at your facility due to theft, fire, or vandalism.

Physical Damage Coverage

Covers your own tow truck for collisions, theft, or weather-related damage.

Medical Payments and Uninsured Motorist Coverage

Pays for medical bills for drivers and passengers, even if the other driver is uninsured.

State and Federal Regulations for Tow Truck Insurance

DOT and FMCSA Requirements

Tow trucks that cross state lines may fall under Federal Motor Carrier Safety Administration (FMCSA) rules, requiring higher liability limits.

Minimum Liability Limits by State

Each state sets its own liability minimums. For example, some states require $750,000 liability coverage, while others may require $1 million depending on the type of towing business.

Factors That Affect Tow Truck Insurance Premiums

Driver’s Record and Experience

Clean driving records and trained drivers reduce premiums. A history of accidents or violations increases costs.

Type of Tow Truck and Equipment

Flatbeds, wheel-lifts, and heavy-duty wreckers all carry different risks, impacting rates.

Coverage Limits and Deductibles

Higher coverage limits mean better protection, but they also raise premiums. Choosing higher deductibles can lower costs.

Business Location and Service Radius

Urban tow trucks in high-traffic areas usually pay more than rural operators due to increased accident risks.

Average Cost of Commercial Auto Insurance for Tow Trucks

Price Ranges by Coverage Type

• Primary liability: $4,000 – $10,000 per truck annually.

• On-hook coverage: $800 – $2,500 annually.

• Garage Keepers liability: $1,200 – $3,000 annually.

Cost Differences Between Small and Large Operations

• Single-truck operators may spend $6,000 – $12,000 per year.

• Fleet owners could pay $25,000+ annually but may qualify for group discounts.

How to Choose the Right Tow Truck Insurance Policy

Comparing Insurance Providers

Always compare quotes from multiple insurers. Some specialize in tow truck coverage, offering more tailored options.

Understanding Policy Exclusions

Read the fine print. Some policies exclude repossession services or towing from accident scenes unless specifically added.

Bundling Policies for Savings

Many businesses save money by bundling tow truck insurance with general liability, workers’ comp, or business property coverage.

Tips to Reduce Tow Truck Insurance Costs

Implementing Safety Programs

Training drivers and adopting defensive driving courses can reduce accident claims.

Regular Vehicle Maintenance

Well-maintained trucks have fewer breakdowns and lower insurance risk.

Hiring Experienced and Trained Drivers

Insurance providers reward businesses that hire drivers with clean records.

Consequences of Not Having Proper Tow Truck Insurance

Legal Penalties and Fines

Operating without proper insurance can lead to business license suspension, fines, or even criminal charges.

Financial Loss from Accidents

Without insurance, you could be personally liable for medical bills, vehicle damage, and lawsuits worth hundreds of thousands of dollars.

Companies available for Tow Truck Operators in 2025

Top National Providers and Specialized Regional Insurers

Smaller, local insurers tend to provide customized policies at competitive rates for tow truck businesses.

Frequently Asked Questions (FAQs)

1. Is commercial auto insurance required for all tow trucks? Yes. Every tow truck used for business operations must carry commercial auto insurance to operate legally.

2. What’s the difference between on-hook and garage keepers’ coverage? On-hook protects vehicles during transport, while garage keepers protect vehicles stored at your facility.

3. How much liability coverage do I need for a tow truck? Most states require at least $750,000, but $1 million is recommended for full protection.

4. Can I get insurance if I have new drivers? Yes, but it may cost more. Some insurers require minimum driving experience.

5. Does tow truck insurance cover roadside assistance services? Yes, if included in your policy. Always check coverage details.

6. How can I lower my tow truck insurance premium? By maintaining clean driver records, choosing higher deductibles, and bundling policies.

Conclusion

Tow trucks play a vital role in roadside assistance and vehicle recovery, but they also carry significant liability risks. That’s why having the right commercial auto insurance required for tow trucks isn’t just about compliance—it’s about protecting your livelihood. From liability and on-hook coverage to garage keepers and medical protection, choosing the right policy ensures your business stays safe, legal, and financially secure.

👉 If you’re starting or expanding your tow truck business, we shop multiple carriers for you and help you understand the coverage requirements in your state.