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What Is The Average Cost of Truck Cargo Insurance and Do I Even Need it?

Every trucking company knows how crucial it is to get your cargo from point A to point B in perfect condition.  Some products are extremely sensitive to weather conditions while others are temperature sensitive, some are extremely fragile and some are oversize load.  Every piece of cargo is precious and every one of them needs to be handled in a particular way, but what if something happens to your cargo during transit? What do you do?  

Everyone talks about the required liability insurance that your company needs to carry, but not much is discussed about the insurance piece that covers your product, after all, that’s the reason you got on the road in the first place, right?  It’s important to know that your cargo is covered should something happen to it, but it’s equally as important to know the average cost of truck cargo insurance so that you don’t overpay, or so that you don’t buy a policy that excludes every possible scenario that could arise.

What is the average cost of truck cargo insurance?

Cargo insurance is usually packaged in with your Liability insurance since both go hand-in-hand, but you can buy a stand alone cargo policy as well. When it comes to truck cargo insurance, the average cost of a policy is between $500 and $1,500 per truck per year.

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How much is cargo insurance on a monthly basis?

Most insurance companies, or premium finance companies, will allow you to pay a policy over a 9 or 10 payment schedule.  Using a more aggressive payment plan, your monthly insurance payment would be between $55 and $167 per month. Keep in mind that most of the time you will have the Liability and cargo coupled into one policy so your monthly payment probably will not be broken up by line of insurance coverage.

How does truck cargo insurance work?

Cargo insurance is a key piece of insurance for any trucking-for-hire company.  When cargo is accepted by your company, you are guaranteeing that the product will be delivered to its final destination in the same condition as when you picked it up.  If anything happens to the cargo during transport, your company would be liable for the difference between the original value of the product and the salvage value.

For this reason, Cargo Insurance covers your liability for cargo that is lost or damaged due to causes such as fire, collision, or striking of a load.  If your company transports refrigerated products, for an additional charge, you can purchase refrigeration breakdown coverage which protects you in the event that the trailer's cooling system breaks down or malfunctions during transit causing the food to spoil, melt, or become otherwise useless.

Most freight brokers or shippers will want to see that you carry at least $100,000 of cargo insurance before they release a load to you.  For some types of cargo, auto haulers for example, your shipper may require that you carry more coverage, especially if you carry higher end vehicles or exotic autos.

How much cargo insurance do I need?

This is a very hard question to answer and ultimately it will depend on how much risk you are willing to handle.  Sure, your shippers may require a certain amount from you, but will you feel the need to carry as much insurance for a trailer full of sand and gravel as you would a trailer carrying exotic Ferraris?  Likely not, I hope.

To help you keep as much of your hard earned money as you can, take a look at the previous loads you’ve hauled and their total value.  How much was it? What is your typical load worth? You definitely don’t want to find yourself underinsured if an accident does occur, but you also don’t want to unnecessarily pay insurance premiums either.  The good thing about truck cargo insurance is that it is relatively inexpensive when compared to the Liability coverage. If your monthly payment is between $55 and $167 for $100k of cargo insurance then we think it’s a pretty cheap cost of doing business to be well protected.

Do you need to buy cargo insurance?

Tricky question - yes and no.  Cargo insurance is not required by the FMCSA, nor is it required to get your authority active.  We get some insureds who want to let their authority “season” for a couple years and they’ll just purchase the bare-bone minimum which doesn’t include cargo insurance.  

In reality, if you’re looking to get your company going right away and you don’t carry cargo insurance then the shippers you work with won’t want to give you a load.  This means that if anything happens to the cargo while you’re in possession of it, and you have no way of paying for the damages, your shipper is out of a lot of money!

Ultimately, if you want to take loads, then yes, you’ll need cargo insurance!

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How is cargo insurance calculated?

As mentioned above, the average cargo policy ranges between $500 and $1,500 per year per truck.  Though every insurance carrier has their own set of factors that determine the final price, here are a few factors that nearly all insurance companies share:

1) Commodity

The financial loss for some commodities can be much higher than the financial loss for others.  If during a collision an entire truck full of iPhones were to get damaged and rendered useless, the financial loss would be much greater than a truck full of scrap/junk metal.  The value of the commodity is not the same, therefore, the risk to the insurance company would also not be as great.

2) Limit

As with anything, the more of something you purchase, the more the overall cost will be.  Cargo insurance is no different. The standard limit when it comes to truck cargo insurance is $100k, but as you purchase more limits, the premium per thousand does decrease.

3) Losses

insurance companies care a lot about your track record.  For them, your history is a window into the future, so our advice for trucking companies is to protect your claims history as much as you can.  When it comes to losses, underwriters are looking for both frequency and severity. They can decline you for having too much of one or both, so whenever you can avoid putting another claim on the books, it’s usually a good idea.

Coverages to look for in a cargo policy

Not every insurance policy is created the same, sometimes a policy may look tempting because the price is much lower, but once you dig deeper you realize that the policy has a lot of holes in it.  In the insurance world we like to say, “like swiss cheese”!  

Here are some common coverage items included in a cargo policy:

  • Defense costs and expenses
  • Debris removal
  • Expediting expenses
  • Uncollectible freight charges
  • Moving equipment
  • Pollutant cleanup and removal
  • Contractual penalties

Exclusions you don’t want in a policy

When we talk about the swiss cheese effect, sometimes that’s due to the exclusions that are deliberately placed in a policy more so than what was left out.  You’ll want to work with your agent to review the list of exclusions on your policy and make sure that there won’t be conflicts with the cargo you’re hauling.  Here are a list of some common exclusions you may see on a cargo policy:

  • Art and jewelry
  • Money, paper and collectibles
  • Contraband, pharmaceuticals and tobacco
  • Livestock (unless specifically endorsed)
  • Property while in the custody of any other carrier
  • Property owned by the insured
  • Property not under bill of lading
  • Explosive or radioactive material (unless specifically endorsed)
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