If you’re starting a small trucking company and you’ve decided that you will transport goods belonging to others for a fee, you will be a “for-hire” carrier. When you go to register for a transportation authority, you’ll see that there are two kinds of for-hire carriers: common and contract. Your trucking company can be both; you’ll need to file separate registration to obtain both licenses, however.
The Federal Motor Carrier Safety Administration (FMCSA) defines a common carrier as a company that provides for-hire truck hauling to the general public. The FMCSA defines a contract carrier as a carrier that provides the transportation of goods to “specific, individual shippers based upon private contracts between the carrier and each shipper… “
The main difference between the two is that common carriers must file proof of cargo insurance, while contract carriers are not required to do so.
As you’re starting a small trucking company, you also need to be aware that a contract carrier has a contract agreement with your customers stating that you, the carrier, does not have to carry cargo insurance. While it’s up to your client to understand this and insure the goods you will be carrying, it’s good business to make sure your clients know and understand this important fact. You also will need to be understanding if the client decides to go with another -- common carrier -- trucking company.
As a common carrier, your common transportation authority requires that you carry a minimum of $5,000 in cargo insurance. Be advised that the industry standard is $100,000 in cargo insurance.
As you’re starting a small trucking company, you also should know that a small percentage of carriers have contract authority; most operate under common authority.
Your Authority Service can be your one-stop shop for applying for one transportation authority or more of the several you’ll need as you’re starting your small trucking company. They can also can guide you and help you select the right insurance -- including cargo insurance -- you WILL need