Business Insurance for Railroads

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Contributor, Benzinga
September 25, 2020

If your company owns, operates or works on a railroad, your employees are at a significant risk of physical harm. Purchasing a comprehensive business insurance policy can help protect you and your employees in the event of an accident. If you don’t already have railroad insurance, our guide will help you start comparing your options. 

Best Railroad Insurance

There are a wide range of insurance companies that offer policy options for railroad owners and construction professionals. The inclusions on each policy may vary from company to company, which makes it especially important to compare all of your options before you sign up for coverage.

Not sure where to begin? Consider a few of our top options below. 

Types of Railroad Insurance

There are multiple types of railroad insurance, each of which offers its own type of coverage. Let’s take a look at some of the protections your company might need depending on the nature of your business.  

Railroad Protective Liability Insurance

If you’re a contractor who performs work on a railroad, around railroad tracks or on a railroad’s right-of-way, the company hiring you will likely require you to hold a railroad protective liability (RRP) policy. 

An RRP policy is a type of limited contractor liability insurance that compensates the railroad you’re working on if you damage or destroy a portion of the railroad’s tracks, you cause a customer to be injured during your work or your demolition produces an unanticipated delay of service for the railroad’s schedule.

An RRP policy is not the same thing as a comprehensive contractor’s general liability policy. Your RRP policy won’t cover all of your contracting activities — it will only provide select liability coverage for a specific project at a specific location. If you’re working on another railroad and you injure a customer or destroy the railroad’s property, you won’t have coverage under your RRP policy. Even if you purchase an RRP policy, you should complement it with a contractor’s general liability protection to ensure that all of your activities are covered. 

Commercial General Liability Insurance

General liability coverage is a type of umbrella protection that protects you from financial loss if a client or customer decides to sue you for damages you cause while providing a product or service. 

General liability policy inclusions might vary by company, but most include at least the following 3 types of protections:

  • 3rd party bodily injury. If a client or customer injures themselves as a result of your work, they have the option to sue you for the cost of their medical bills. In this instance, your general liability insurance would help you cover the cost of representation in court as well as any court-awarded medical bills.
  • 3rd party property damages. If you or 1 of your associates damages a customer or client’s property, they might sue you for the cost of a repair or replacement. Like your 3rd party bodily injury coverage, your 3rd party property damage coverage will help cover the costs of court representation and awarded damages.
  • Advertising injuries. When you advertise your business, you might unintentionally slander another company or inadvertently use a copyrighted phrase in an unauthorized way. Your general liability insurance will help you fight these claims in court if another business owner decides to sue you.

Your general liability insurance will provide you with a large range of protections — but it won’t help you pursue damages after a loss. For example, your general liability insurance won’t help you cover the cost of your own medical bills after an accident. In the same way, your general liability insurance also won’t help you pursue a defamation or copyright infringement claim against a competitor. 

Commercial Property Insurance

Commercial property insurance is a type of protection that compensates you if someone else damages your property. Your commercial property insurance extends to the physical office space or workshop you operate from, your computers and data storage equipment and your personal property you use to conduct business. Your policy may or may not include coverage for equipment and specialized tools, but you’ll usually be able to add an endorsement to your coverage that extends to heavy machinery.

Commercial property insurance is similar to homeowner’s insurance because it protects you from a set of predefined perils. A peril is a situation under which your policy will compensate you for damage. Some of the most commonly covered perils for commercial insurance policies include:

  • Fire
  • Lightning
  • Theft and vandalism

Your policy will also include excluded perils. If you suffer damage from an excluded peril, you typically won’t be able to claim a payout from your insurance provider unless you’ve added an endorsement to extend your coverage beyond normal limits. 

Flooding and earthquakes are 2 of the most commonly excluded perils. If you work in an area where these natural disasters are common, you’ll want to talk to your insurance provider about purchasing a second policy or extending your coverage. 

Business Owner’s Policy (BOP)

A BOP is a type of all-inclusive policy that combines your general liability insurance and your commercial property insurance into a single policy. Most business owners who operate from a physical location can save money when they purchase a BOP from a singular company because insurance providers often offer discounts on each insurance included in the BOP. 

A BOP might also be more convenient than purchasing an individual commercial property insurance policy and a general liability insurance policy because you typically only need to worry about 1 due date. 

Workers’ Compensation Insurance

If you have at least 1 employee, you might be legally required to purchase workers’ compensation insurance depending on where your business operates. Workers’ compensation insurance is a type of coverage that compensates employees for medical bills if they’re injured in a work-related accident and decide to sue you for damages. 

If an employee loses his or her life in a work-related accident, your workers’ compensation insurance may also offer compensation to the victim’s family to help pay for funeral expenses.

Like your general liability insurance, workers’ compensation insurance doesn’t compensate you as the policyholder — benefits only extend to your employees who are injured at work. If you injure yourself while working, you won’t receive a payout for your own medical bills. 

Though independent contractors and sole proprietors don’t need to carry workers’ compensation, your local laws might require a policy with a certain level of coverage as soon as you hire an employee. 

Cost of Railroad Insurance

The specific price that you’ll pay for railroad insurance will vary depending on where you live and the nature of your business. Railroad business owners generally pay more than business owners who work in a lower-risk industry (for example, at a hair salon or tutoring company) because the railroad industry carries a higher risk of injury and damage.

Some additional factors that might influence how much you’ll pay for railroad insurance may include:

  • Location. If you operate your business from an area where certain natural disasters are more common, you’ll pay more for insurance.
  • The number of employees you have. The more employees you have, the more likely you are to file a workers’ compensation claim. If you have workers’ compensation, your premiums will increase as your payroll increases.
  • The price of your equipment. If your insurance policy includes coverage for your tools and heavy machinery, your premiums will increase as the value of your tools increase. 

The best way to get a specific idea of how much you’ll pay for insurance is to collect quotes from a few competing insurance providers. Enter your ZIP code above to begin exploring your options.  

How Railroad Insurance Works

There is no singular definition of railroad insurance. Some companies consider railroad insurance to be a catch-all term for any type of insurance a railroad company or contractor needs, while others consider railroad protective liability insurance to be the only “true” form of railway insurance. This makes it especially important to review your options between a few competing insurance companies so you fully understand all of your coverage options.

As a general rule, we recommend that railroad companies maintain at least general liability insurance and commercial property insurance. You might be able to save money by combining these 2 coverages into a singular BOP. We also highly recommend that railway contractors review their client’s railroad protective liability requirements before purchasing a policy.

What Coverages Do You Need?

The types of insurance protections you’ll need as a railroad-related contractor or business owner will vary depending on the unique nature of your business. In some cases, companies you’re working with might require that you have at least some level of liability insurance to carry out your contract. 

Before you choose a policy, start by collecting a few quotes from varying insurance providers. It can also be a good idea to speak with a local insurance expert to understand your state and county’s requirements for public railroad projects. 

About Sarah Horvath

Sarah is an expert in the insurance, investing for retirement and cryptocurrency space.