Motor Truck Cargo Coverages
Motor truck cargo coverages protect your clients’ freight or commodities while in transit. Cargo insurance is increasingly required by shippers and risk managers.
Like other types of insurance, it typically requires coinsurance and may exclude certain types of property or impose special restrictions for hazardous or high value cargo. It also usually includes a deductible for claims that are covered by the policy.
Legal Liability
Motor truck cargo liability coverage is a type of inland marine insurance that protects for-hire truckers against liability for the loss or damage to the goods they haul. It can be purchased as a standalone policy or included as an endorsement on an owner-operators policy. The policy is designed to cover local and long-haul shipping vehicles like box trucks, flatbeds, car haulers and tractor-trailers. Most policies will have a specified value for each shipment covered by the policy, and a minimum level of coverage that must be achieved, known as coinsurance, in order to make claims payable. Coverages include legal liability, fire and collision, theft, water damage, equipment breakdown and refrigeration failure. Some carriers may also include debris removal and pollutant cleanup/removal as part of their coverage.
Most motor carrier freight transporters will carry basic commercial auto liability insurance to meet regulatory requirements, but this provides very limited protection for the cargo they are carrying. A cargo liability policy will provide more comprehensive protection, and is commonly required by shippers and brokers. Some cargo insurers offer a variety of limits and deductibles from which to choose, and these will have an impact on the cost of the coverage.
It is important for trucking companies to consider this coverage because if the goods they are transporting become lost or damaged, they could be held responsible for a significant sum. Many clients require them to carry cargo insurance as part of their contracts, and a loss on the road could damage their reputation and relationship with their client.
This insurance can also help them meet the required coverage under the House Bill of Lading or House Airway Bill when operating as an NVOCC, Indirect Air Carrier or Domestic Freight Forwarder. The legal liability part of this coverage will pay to defend the company against a claim and pay settlements according to the policy terms if sued as a result of losing or damaging the goods under their care, custody and control. The cargo policy can be written in an all-risks or named perils format, which will have an impact on the premium.
Physical Damage
Cargo transportation exposes freight to a number of risks that can damage or destroy it. These include vehicle collisions, fires, weather issues and theft. For this reason, most truckers who transport cargo need motor truck cargo insurance in case anything goes wrong during transit. This coverage will protect a trucker’s cargo and allow him or her to continue to transport freight to clients.
Motor truck cargo liability coverage is usually an optional add-on to the primary commercial auto liability policies of truckers (common carriers and contract carriers). It may also be purchased by freight brokers who arrange for truck transport on behalf of their shippers. The policy covers the trucker’s legal liability if cargo is lost or damaged, whether a loss is caused by the negligence of the for-hire carrier or the trucker himself or herself.
Typically, the insurance company offers two different options for physical damage: a Named Perils form and a Comprehensive form. A trucker can choose from these based on the kind of cargo being hauled and what the insurer considers an acceptable level of risk. The trucker must also choose a limit and a deductible for the insurance. A higher deductible can mean a lower premium.
In general, a physical damage policy provides a limit up to the value of the insured’s cargo. It will pay to repair or replace the freight if it is lost or destroyed. The trucker will have to pay a deductible in order for the policy to begin paying, which is generally a percentage of the insured’s declared value of the cargo.
Some specialized coverage is available for cargo such as refrigerated trucks, pharmaceuticals, cash and jewelry. The coverages offered vary from policy to policy. Some trucking companies require their drivers to have this kind of coverage in place, so it is important to know the exact terms and conditions for your specific business. It is also wise to consult an agent who can provide additional information and help you select the right policies for your needs. The agent can also give you a quote and assist you with purchasing the coverage.
Theft
Theft coverage isn’t included by default in most trucking insurance policies, but it is generally available as an optional coverage. It is important for truckers to understand that cargo theft is a real and very expensive threat to the profitability of their businesses. Organized crime rings record truck routes, watch fleets leave trailer loads unsecured and then pounce when the opportunity arises. The good news is that the right trucking insurance coverage can help offset some of these losses.
Trucking insurance coverages vary wildly in terms of the types of property covered and the monetary limits that are offered. It is important to talk to a specialized agent if your business hauls more valuable cargo or if you have concerns that specific perils are not addressed by your policy.
Most trucking policies have a deductible and/or sublimit for claims involving theft. In many cases these are lower than for other perils. This is because most carriers consider theft to be preventable by the carrier, and thus less of a risk than fire, collision or water damage.
Another important consideration is whether your policy offers full protection for your cargo when it is not on a truck. Typically this cover is limited to the period of time that your truck is being loaded and unloaded. Some policies exclude cover for trucks that are parked and unattended, except in fully enclosed compounds that are always locked or under constant supervision. To extend this cover you will usually need an endorsement.
Some cargo policies also exclude cover for trucks that are parked and empty, except when they are in a loading bay. To extend this cover you will usually need a separate warehouse legal liability policy. These are often written on a released value basis and are generally only valid for domestic shipments. If your shipment will be transported abroad, a specific voyage cargo policy should be considered.
Unattended Vehicle Exclusion
While the majority of truckers are trusted with transporting valuable freight from one place to another, they also assume some risk. This is why it is common for companies that ship goods to require that for-hire truckers carry motor truck cargo coverage. This policy protects their freight in the event of a theft or loss. It may also pay for the cost of preparing loss data such as taking inventory and making appraisals. The cost of this insurance can vary from insurer to insurer, but a basic policy typically costs less than a single load.
Many of these policies can be purchased on an all-risks or named perils basis. All-risks policies are more comprehensive and are generally more expensive, while named perils policies only cover losses caused by the perils listed in the policy. It is important to understand how a policy works before purchasing. If a company changes the drivers or vehicles that they use to transport cargo, it is essential to make this change in the policy. Otherwise, the coverage might not apply to any future events.
The types of property that a policy covers also varies. Some insurers exclude coverage for certain property that they consider to be at a higher risk of being stolen or would be especially costly to replace. Others limit the amount of coverage available for certain causes of loss, such as a limited number of limits on electronics or other high-valued items. Carriers that ship particularly dangerous or expensive cargo should consider purchasing specialty coverages.
Most policies will include a limit on the amount of money that the insurance company will be responsible for paying toward a claim. This is known as the limit on liability. If a policyholder is found responsible for a claim in excess of this limit, the company may choose to not pay any part of the claim. Some policies will also have a deductible on the policy that must be paid before any claims are made.
Motor truck cargo coverages are a vital part of any transportation company’s fleet. These coverages can help to keep clients happy by minimizing their financial risks. If you are in need of a cargo insurance policy, contact an independent agent or trucking insurance specialist today.