Cargo Insurance

October 3, 2016

Cargo insurance, also known as freight insurance, is an important expense for over-the-road drivers and trucking companies.

While it may seem expensive, this vital insurance can protect your business and make you more competitive. It’s something that we recommend to all trucking companies, and genuinely believe it helps make your business stronger and healthier.

What is Cargo Insurance?

If you work in the transportation and trucking industry, you likely already know the details of cargo insurance. However, it never hurts to review the basics to further understand what it is and how it helps your trucking company.

Cargo insurance is a way of protecting yourself against financial liability if cargo is lost or damaged while under your control or the control of one of your drivers. It guards against significant financial loss if cargo is damaged, stolen, or otherwise ruined while in freight.

With wise risk-management techniques, cargo insurance is an ally in your long-term goals and should be a consistent part of your finances.

As we’ll see when we examine the topic further, cargo insurance varies from driver to driver, company to company and even insurance-provider to insurance-provider. However, one factor remains consistent: cargo insurance is something that all trucking companies should have.

A study conducted by Overdrive found that 5 percent (one in twenty) of all owner-operators had to use their cargo insurance at least once in the last three years.

It not only protects your financial assets, it also gives your customers peace-of-mind knowing that their valuable cargo is protected while under your care. This can be an important point for staying competitive or separating your business from the competition.

What is NOT Covered by Cargo Insurance

Every insurance provider has different policies, so there is likely a cargo insurance plan that can cover just about any freight you haul. You simply need to be aware of the limitations in your plan and make sure everything you haul is protected.

For example, Progressive Insurance offers a plan called Motor Truck Cargo Insurance. This plan, which is advertised to for-hire drivers, can be a valuable asset for over-the-road truckers. However, the plan specifically states that is does not cover items like art, tobacco, alcohol, live animals (such as livestock), and paper. It also does not cover any item that has been stored for more than three days or cargo that is in the custody of another carrier.

The lesson is that while simply having insurance is a good start, truckers and fleet operators need to be aware of the limitations and details involved with their plan.

How Much Should Your Trucking Company Have?

Unfortunately, there is no magic formula for calculating exactly how much insurance you need and what types of coverage you should purchase. However, fleets typically buy about $1 million worth of coverage, which is a typical amount required by many clients. If you or your company commonly haul specialty items, you may want to purchase more.

Reducing the Cost of Cargo Insurance

Despite the potentially high costs of cargo insurance, there are a few steps you can take to make the price more affordable. While there is little you can do to instantly reduce the costs, taking a long-term approach to safety and diligence could reduce costs and free up cash for other investments.

Like all driving-related insurance, the first thing you can do is to have a long record of safety. Make sure your team is following proper traffic laws, maintaining safe practices and taking a proactive approach to safe driving. Registering your team in on-going training could also help reduce your cargo insurance costs.

Emphasize to your team that monitoring cargo and maintaining caution against theft is very important to your company’s strength. Be sure they understand that some items, such as cigarettes, cell phones and clothing, are more likely to be stolen. Have them park in well-lit areas and avoid leaving a fully-loaded trailer whenever possible.

You can also monitor your insurance and review it regularly to make sure the values are current and that none of your insurance overlaps. For example, make sure you aren’t paying for a private policy and a fleet policy that covers the same items. In this case, you’ll be paying for two insurance plans, but it’s doubtful that both providers will provide payment on a claim.