Understanding cargo insurance

Cargo insurance can help cover damages on the cargo you carry, but not all cargo insurance covers all incidents. (Photo: Shutterstock)

Cargo insurance can help cover damages on the cargo you carry, but not all cargo insurance covers all incidents. (Photo: Shutterstock)

Insurance is always one of those items that you forget about until you have a need for it. Take the extreme example that some homeowners in Texas and Florida are facing right now. Insurance companies are declining claims for damage to homes from Hurricanes Harvey and Maria because that damage was the result of flooding, and only a small percentage of homeowner’s policies include flood insurance. It’s not something many people think about when getting their policies.

The same thing can happen to trucking companies and owner-operators. They are required by law to have liability insurance - at least $750,000 in liability coverage and up to $5 million depending on the commodities hauled – but many are unaware that liability coverage does not cover damage to cargo. That is a separate insurance policy.

There is no requirement for cargo insurance, but that doesn’t mean you shouldn’t have cargo insurance. As you search for motor truck cargo insurance, you will find various plans at various price points. Like those homeowner’s policies, no two are the same. So how do you know what you should be looking for?

To start with, understand what you are buying. Motor truck cargo insurance is specific insurance coverage that covers the motor truck carrier if it is legally liable for the destruction, damage, or other loss of the customer’s property being shipped, including lost packages, broken contents, or stolen articles to name a few, according to Reliance Partners.

While all insurance providers that work in commercial transportation offer cargo insurance, not all the policies will cover the same thing. Like your health insurance plan, it’s all in the details.

Exclusions, deductibles, retention options, and claims handling are some of the different areas to consider and all will affect your monthly premium.  You can purchase plans that include pollution liability, debris removal, theft, hijackings, labor coverage, earned freight coverage, dishonesty, water damage, loading and unloading coverage and refrigeration unit breakdowns. You can also purchase plans with only a few of these options, or none at all if you prefer a bare-bones policy.

When shopping around, though, it’s best to consider the total cost of the plan – including your costs when filing a claim – rather than just the initial monthly premium cost. That low-cost plan you find might end of costing you more in the long run if you don’t check the details.

Some policies exclude certain types of cargo, for instance. It may cover loads hauled in your own truck, but if you lease a vehicle, you might not be covered. If you are flatbed operator, it might cover lumber but not machinery. Sometimes only certain areas or terminals are covered, and certain events can also disqualify the claim.

Typically, insurance would cover damage of freight caused by collision or striking, and also for damage as a result of water or moisture, stolen cargo or shortages. Coverage of perishable goods or temperature-sensitive items, though, is sometimes an additional policy item that must be purchased.

Depending on the policy, motor truck cargo insurance will include specific exclusions or limitations. These can include limits on theft or damage when a truck is unattended. Insurers may also provide one level of coverage for some goods, but lower amounts for other types.

Deductibles are another area that can cost carriers. You may have a $1,000 deductible, but claims due to theft may come with a $5,000 deductible.

Some policies also include retention options that allow you, as the carrier, to assume some risk for certain claims by not including them under the coverage.  

All of these can affect the cost of the monthly premiums you will pay. In general, the higher the deductibles and the more exclusions, the lower the premiums. The tradeoff, of course, is that if you have a claim, you will pay more out-of-pocket. Depending on the actual costs, a single claim could wipe out an entire year’s worth of premium savings over that more expensive plan you turned down – or worse yet, bankrupt your business.

In the end, the best approach is to read the fine print, ask questions, and be sure that what you are buying now not only covers your current needs, but covers your needs should you file a claim.

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