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Cargo Insurance Cost: 2021 Trucking Coverage Comparison

If your company is responsible for transporting freight, you need insurance for protection in the event of loss or damage to the cargo. If you are in this industry, you can easily take out commercial cargo insurance to protect your company from claims for compensation that you might be liable for.

Truck cargo insurance rates vary depending on many factors, which we’ll discuss later. However, typical premiums for cargo transportation insurance range from $400 to $1800 per year. But of course, you could pay this monthly, with premiums of $35 to $150.

How Much Does Truckers Cargo Insurance Cost?

The average cost of cargo insurance differs from provider to provider. However, the following ballpark figures link your premiums to the pay-out limit in the event of a claim.

  • At the cheapest level, an annual premium of $44 to $700 pays up to $50,000.
  • Next, we have annual premiums of $800 to $1,400. This amount pays up to a maximum of $100,000.
  • Finally, an annual premium of $1,100 to $1,800 pays out compensation of up to $250,000.

How are Cargo Insurance Policies Calculated?

The three most significant factors affecting your cargo insurance policy premiums are:

  • The commodity type. The type of cargo you carry governs the premium you pay. We probably don’t need to say that if your cargo is a shipment of flammable gas, you will have higher premiums than if you’re carrying rigid plastic drainage pipes.
  • Your loss history. If you have a history of making claims, the cargo insurance companies will consider this when assessing your premium. If your history shows you are a terrible risk, they might even refuse insurance cover or charge an extremely high premium.
  • Insurance policy limits. Your cargo insurance providers will set limits on the pay-out from your policy. For example, most cargo insurance policies have limits of up to $100,000. Whereas, if you’re transporting new cars, the limits might be $250,000 to $300,000. But, in the case of, say, a shipment of Lambouginis, you might need limits of $1 million. However, the premium will always reflect the policy limits.

Types of Cargo Insurance Coverage

Most cargo in the US travels by truck or rail. However, sometimes the cargo might go by sea or air for part of its journey. Therefore, it makes sense that you should know a bit about the various types of insurance.

Generally, cargo coverage insurance includes transportation by ship, plane, truck, and train. But your cover for each depends on the type of policy you choose. Sometimes the policy documents can be difficult to understand, so read the small print and ask for professional legal help if you need it. Don’t sign an insurance document unless you know exactly what you’re signing up for.

Generally, the following types of policies are standard throughout the industry. However, each will have slight amendments to customize them for the type of transportation you’re using. For example, a clause about piracy is probably only relevant when dealing with marine travel. And, damage due to depressurization will usually take place in a plane. You might even have to take out specialized insurance coverage for cargo transported by plane for international travel.

You can buy each of the insurance types offering varying levels of cover, and you must decide which is the best for you and your company. Take into account:

  • The risks involved.
  • The severity of the risk.
  • What cargo you’re transporting?
  • Can your company handle a significant loss with a low limit on the claim?

Open Coverage

Open cargo coverage insurance covers your cargo for a specific duration; usually, one year. Typically, you can cover all your transportation under the same policy. Therefore, this is a very efficient way of providing insurance for your cargo and managing the possible risks. Usually, it works out cheaper than insurance for individual trips.

Single Coverage

The alternative to Open Coverage is called Single Coverage and is based on a policy per single shipment. Usually, this type of policy is useful for infrequent shipments or cargo that is somewhat different or more valuable than usual.

Okay, you’ve decided whether to use a single or open coverage policy. So, now you have to decide on the level of coverage that’s appropriate for your cargo. In reality, many types of policies are out of the scope of this guide, and you should get advice from your insurance company or agent on their suitability. However, for this guide, we’ll discuss the most common types of cargo insurance

All-Risk Cover

All-risk cover applies to all types of transportation and offers financial compensation for most circumstances leading to damaged or lost cargo. Furthermore, all-risk insurance is available for most types of cargo. The only requirements are that:

  • You’re transporting new goods.
  • The cargo isn’t likely to break or spoil under normal circumstances.

However, an all-risk policy also has some exclusions, which you must be aware of:

  • Negligence by the importer, exporter, or driver.
  • Delays or rejections occurring at customs checkpoints.
  • Damage or loss due to war, industrial strikes, civil unrest, and riots. Also known as WSRCC (War, Strikes, Riots & Civil Commotion).
  • Damage or loss due to natural disasters or Acts of God, such as earthquakes, hurricanes, or floods.
  • If the customer fails to make payment for the goods. Or, the seller fails to collect payment.

Named Perils Cover

Named Perils Cover is in contrast to All-risk insurance. In this case, the cover is limited to those risks explicitly stated in the policy. Therefore, the insurance cover is not as comprehensive as the All-risk cover. But, its main benefit is that you can specify risks not included in the All-risk insurance policy.

Typical Named Perils could include:

  • Acts of God.
  • Theft.
  • Collisions at sea.
  • Loss of cargo at sea.
  • Non-delivery of the cargo for whatever reason.
  • Bad weather.

Contingent cargo insurance, such as the Named-Perils cover, isn’t the primary insurance cover. Instead, it only comes into play if the general cargo insurance policy doesn’t pay out because of insufficient limits, non-payment because of exclusions, or another situation.

General Average

This insurance policy is a strange one, and you don’t usually encounter it in normal circumstances. But, if you transport by ship, you should cover your cargo with a General Average policy. The General Average Principle, as used in marine transportation, goes as follows.

Suppose some cargo is lost, damaged, destroyed, or jettisoned from the ship due to a problem. In that case, all cargo owners must share the cost of the losses, even if the situation wasn’t your fault and your cargo wasn’t touched.

Therefore, even if your cargo survived the onboard incident, you will be liable for a share in compensating the owners whose cargo was lost. Sometimes, the cost of applying the General Average principle might result in each owner paying hundreds of thousands of dollars through no fault of their own. Furthermore, if you refuse to pay, the shipping company is legally entitled to withhold your cargo until they receive your share of the payment. Moreover, if you decide not to pay, the carrier can take ownership of your cargo instead of payment.

As you’d expect, standard policies don’t include General Average insurance. However, you can purchase an additional policy to cover this situation. Usually, the General Average cover isn’t expensive. So, it’s worthwhile buying, especially when a liability under this can amount to much more than the value of your cargo.

Trucker’s Cargo Coverage: What To Look For

The cost of insurance for transporting cargo also depends on its type and value. You might be tempted to buy some low-cost policies. However, you often find that these policies lack some essential coverages. Remember, you don’t get something for nothing. So, ensure your insurance agent knows the cargo’s contents and understands what policies you’re looking for to cover your risk exposure.

The following list outlines some of the most common clauses in a typical cargo policy.

  • Pollution liability is a clause that covers the cost of cleaning spilled goods such as gasoline, oil, pharmaceuticals, milk, etc., that will pollute the surrounding land or waterways.
  • Theft liability covers losses brought about by burglary or theft of the goods.
  • Debris removal liability covers the costs when removing cargo dropped onto the road or in a waterway: Typical items include fruit, vegetables, coal, sand, etc.
  • Earned freight coverage covers you for any income lost if the cargo becomes damaged and can’t be delivered.
  • Hijackings cover you for losses due to the vehicle or cargo becoming hijacked.
  • Infidelity & Dishonesty Coverage covers you in case your driver decides to take your cargo dishonestly.
  • Sue and labor coverage covers additional loss from damaged cargo after an incident takes place.
  • Reefer Breakdown covers you for losses incurred in the event of a breakdown of the refrigeration unit.
  • Loading & Unloading coverage looks after any damage or losses incurred while loading and unloading the truck’s cargo.
  • Water Damage covers losses from rainwater or damp leaking into the trailer.

You can see that we’ve covered pretty much every eventuality to protect you and your cargo.

What Influences The Cost of Cargo Coverage?

Whether you like it or not, an increase in trade also increases the risks that affect the traded cargo. In turn, the increased risks put up the insurance policy premiums that protect you from financial ruin. The World Trade Organization states that risk is at the center of increased trade and, if not controlled, can potentially adversely affect economic growth.

Insurance companies specializing in cargo policies realize that no two cargos and the circumstances under which they’re carried are the same. Therefore, each trading company and transport company should have a tailor-made policy to suit each load.

Every supply chain contains an element of risk. And, although a cargo insurance premium might be expensive, when things go out of control, you will be glad you took out the policy to protect your business against the inevitable losses.

Minor factors such as limits of liability, business age, the transport route, and destination all affect the cost of cargo insurance. However, three significant factors have the most effect on your insurance premium:

Deductibles

This is when you offer to pay a proportion of the loss, and the insurer makes up the balance. Insurance companies like arrangements like this as it reduces their risk and so will reduce your premiums accordingly.

Most times, when you take out insurance, nothing goes wrong, and you don’t claim. Therefore, you end up paying a reduced premium, the insurance company pays out nothing, and both of you are happy. However, after the one time when something goes wrong, and you have to claim, make sure you have enough resources to pay the deductible.

So, a high-value cargo attracts a lower insurance premium if you agree to deductibles. And, how much deductible you’re prepared to pay governs the size of the premium.

Commodities

The type of cargo you expect to transport and its value affects the insurance. It makes sense that expensive cargo results in high premiums. High-value cargo isn’t only at risk from theft; most foodstuffs and flowers can perish. Likewise, cargo will suffer damage if it’s fragile. Although, unlike theft, these last two aren’t anyone’s fault, you must still have protection.

In the same way, low-risk commodities such as plastics, metal, and other durable cargo are less prone to loss and damage, so that the premiums will be lower.

Additional Coverage

As we said earlier in this section, no two cargos are alike. Usually, most policies will cover most aspects of the risk. But if you’re shipping something out of the ordinary, or more fragile, you need to top up the policy with a few more clauses to make sure the policy is watertight. The additional coverage will customize your policy based on your unique requirements and will inevitably drive up the total cost of your cargo insurance premium. Nevertheless, it’s worth it.

Typical Limits For Cargo Coverage Policies

You probably are aware that insurance companies place limits on the amount that anyone can claim in the event of cargo loss or damage.

Below we show some typical limitations of different types of insurance coverage. However, be aware that limits aren’t set in stone and often depend on the insurance company and the policy premium. Use these figures as a guide when speaking to your insurance agent about your cargo insurance policy.

Insurance Coverage Typical Limit
General Cargo Insurance $100,000 to $350,000
Earned Freight $1,000 to $30,000
Debris Removal $10,000 to $30,000
Catastrophe $1,000,000
Pollution Liability $10,000 minimum

What is Cargo Insurance For Truckers?

A cargo insurance definition is quite simple to understand. It provides insurance coverage against all types of risk of physical damage or loss to cargo while being shipped from one location to another. The transportation can be via land, sea, or air; covering ship, truck, rail, plane, courier, and registered post.

Cargo insurance for truckers differs from other types of insurance, including the cargo owners’ insurance policy. You’re still covering the cargo against risk. But, with the added complication that you don’t own it. Instead, the cargo owner entrusts the load to the trucker for the duration of the transportation. But, it doesn’t stop there. The trucker should provide insurance cover to protect against claims in the event of loss or damage to the load. However, the coverage only applies to the insureds’ legal responsibility for the cargo. And the amount of the liability in the event of loss or damage.

However, cargo insurance is not the same as liability insurance that truckers and other freight carriers provide. Typically, carrier liability is limited to a fraction of the cargo’s actual value, often no more than $2 per kilogram of cargo. Moreover, the coverage also contains many exclusions. But, we’ve discussed these elsewhere in this guide.

The Federal Motor Carrier Safety Administration (FMCSA) provides guidelines and advice on cargo insurance regulations if you want further information.

Compare Cargo Insurance Quotes

Suppose your company has responsibility for the transportation of cargo. In that case, you need to protect yourself and your company from financial problems and the associated lawsuits in the event of damage or loss to the cargo. But, it’s no secret that the small print in insurance policies can be difficult to understand if you don’t deal with the providers regularly or end up with a shady insurance agent.

Complete the form on this page, and we’ll put you in touch with up to four agents that provide cargo coverage insurance. Not only that, but we have already vetted the companies, so we know that they’re reputable. Moreover, we know that each one will provide a competitive quote for you to compare against the others.