Cargo Insurance
Coverage protecting the goods being transported by a motor carrier against loss or damage during transit.
What It Is
Cargo insurance, also known as motor truck cargo insurance, protects for-hire carriers against liability for loss or damage to the goods they are transporting on behalf of others. This is a separate coverage from the Truckers or Business Auto form and addresses the carrier's legal responsibility as a bailee of the shipper's property.
Cargo insurance typically covers perils such as collision, overturning, fire, theft, and loading/unloading damage. Common exclusions include inherent vice (natural deterioration), improper packaging by the shipper, and losses caused by delay. Some cargo policies are written on an all-risk basis, while others are named-peril.
FMCSA requires for-hire carriers of household goods to maintain minimum cargo coverage of $5,000 per vehicle and $10,000 per occurrence, though contractual requirements from shippers typically demand much higher limits—often $100,000 to $250,000 per occurrence for general freight.
Why It Matters for Brokers
Brokers placing motor carrier accounts must coordinate cargo insurance with the auto liability policy. Cargo claims are among the most frequent losses in trucking, and inadequate limits or improper coverage form selection leads to denied claims and angry shippers. Many broker-shipper-carrier disputes arise from cargo insurance gaps that could have been prevented with proper placement.
Real-World Example
A refrigerated carrier hauling $180,000 worth of pharmaceutical products has cargo coverage with a $100,000 per-occurrence limit. The reefer unit fails overnight, and the entire load is destroyed due to temperature excursion. The cargo policy pays $100,000, but the carrier is liable to the shipper for the full $180,000, leaving an $80,000 gap. The broker should have matched the cargo limit to the maximum load value, which required reviewing the carrier's shipping contracts.
Common Mistakes
- 1Setting cargo limits based on average load value instead of maximum load value, creating an uninsured gap on high-value shipments.
- 2Assuming the auto liability policy covers cargo damage—it covers third-party liability for bodily injury and property damage to others, not the cargo being hauled.
- 3Not reviewing commodity exclusions on the cargo policy to verify that the specific types of goods the carrier hauls are actually covered.
How brokerageaudit.com Handles This
brokerageaudit.com's Submission Intake captures commodity types, average and maximum load values, and shipper contractual requirements during the motor carrier application. The Policy Checker verifies that cargo limits meet both FMCSA minimums and the highest contractual requirement on file, flagging any shortfall for broker review.