What Type of Insurance Do I Need for Shipping Cargo?

From established logistics companies to emergent trucking startups, any business involved in shipping freight needs to maintain commercial cargo coverage. Cargo insurance is required by law for some businesses, and it may be a good investment even when it’s not required since it can protect your company from costly repair bills or legal fees in the event of a sudden loss of cargo.

Read on to learn more about commercial insurance for shipping companies, including what a cargo insurance policy typically covers and how much it usually costs.

On This Page

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  What Is Cargo Insurance?

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  How Does Cargo Insurance Work?

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  What Types of Cargo Insurance Are There?

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  What Does Cargo Insurance Cover?

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  How Much Does Cargo Insurance Cost?

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  What Are the Benefits of Having Cargo Insurance?

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  How To Choose the Right Cargo Insurance

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  FAQs

What Is Cargo Insurance?

Cargo insurance, also known as freight insurance, is a type of commercial insurance coverage that protects transportation and logistics companies as they haul or orchestrate the delivery of goods. Motor carriers and freight forwarders that work with household goods are required by federal law to purchase cargo insurance with coverage limits of $5,000 per vehicle and $10,000 per occurrence.^[1]

How Does Cargo Insurance Work?

Depending on the details of your policy, cargo insurance may provide multifaceted coverage for both property damage and carrier liability concerns. For example, in addition to covering the replacement or repair of lost or damaged goods, your freight coverage may help take care of cleanup costs and, if a cargo liability insurance claim escalates into a lawsuit from the cargo owners, legal expenses.

What Types of Cargo Insurance Are There?

There are different types of cargo insurance that are distinguished by the phase of the transportation process during which they provide coverage. For example, motor truck cargo insurance is a subset of inland marine insurance that covers freight while it is being transported by land in a truck or utility vehicle.^[2]

Conversely, marine cargo insurance is a type of cargo coverage that is particularly beneficial for international shipments because it covers merchandise that is shipped by sea. In some cases, marine cargo insurance policies provide broader coverage that also applies to goods that are shipped by air.^[2]

What Does Cargo Insurance Cover?

The perils covered by your cargo insurance may depend on the type of policy you select. A free of particular average (FPA) cargo insurance policy covers partial losses from perils specifically named in the policy, while an all-risks policy provides coverage for any loss that is not explicitly excluded from coverage.^[3]

Examples of perils that are commonly covered by FPA and/or all-risks cargo insurance include the following:^[3]

What Isn’t Covered?

If you purchase an FPA cargo insurance policy, your insurance company will not cover damage from any source that isn’t directly mentioned in the policy. Meanwhile, all-risks policies often exclude coverage for the following causes of damage:^[3]

• Intentional misconduct
• Delay or loss of market
• Ordinary wear and tear, leakage or loss in weight or volume
• Inherent exposure to deterioration, such as the inevitable spoilage of perishable foods
• War, terrorism and nuclear hazards

How Much Does Cargo Insurance Cost?

Cargo insurance prices typically range from $400 to $1,200 per year for a semi-truck owner-operator. Some of the factors that will impact your company’s insurance rates include where you are based and how far you travel, what type of cargo you haul, your business’ financial standing and your employees’ experience and driving records.^[4]

What Are the Benefits of Having Cargo Insurance?

Commercial cargo insurance is crucial to protect your business from a massive financial loss in the event that an unexpected peril causes you to lose a significant shipment, especially if you operate on a relatively small scale. While a megacorporation may be able to recover from losing a shipment worth hundreds of thousands of dollars, a smaller business could potentially be bankrupted by a loss of that magnitude without ample insurance coverage.

How To Choose the Right Cargo Insurance

Since different commercial insurance providers have different formulas for assessing risk and calculating insurance premiums, it’s best to compare quotes from around three to five insurance carriers before settling on a cargo insurance policy. However, it could undoubtedly be tedious to individually contact several insurers and go through their quote request processes.

Fortunately, you can streamline the process by shopping for cargo insurance coverage through SmartFinancial. Simply fill out a single questionnaire and then your coverage needs will be shared with a qualified agent who can help you find the best policy for your circumstances. Get started on comparing business insurance quotes for free today.