Cargo Insurance Explained: Protecting Freight & Your Business

Cargo insurance is one of the most critical coverages for trucking companies and owner-operators. It protects the freight you're hauling from loss or damage caused by theft, accidents, environmental factors, and other covered perils. Beyond the financial protection it provides, cargo insurance is often a requirement for doing business with reputable brokers and shippers.

What Is Cargo Insurance?

Motor truck cargo insurance covers the value of goods you're transporting on behalf of customers. If the cargo is damaged, lost, or stolen while in your care, custody, and control, cargo insurance reimburses the shipper for the value of the freight up to your policy limits.

Why Cargo Insurance Is Essential

1. Broker and Shipper Requirements

Most load boards, freight brokers, and shippers require proof of cargo insurance before booking loads. Typical requirements range from $100,000 to $250,000 in coverage, though high-value cargo may require higher limits.

2. Protects Your Business from Major Losses

Without cargo insurance, you're personally liable for the full value of damaged or lost freight. A single claim could cost tens or hundreds of thousands of dollars—enough to put many small carriers out of business.

3. Builds Trust with Customers

Having adequate cargo coverage demonstrates professionalism and financial stability. Shippers and brokers prefer working with carriers who take risk management seriously.

What Does Cargo Insurance Cover?

Cargo insurance typically covers losses from:

• Theft: Cargo stolen from your truck or trailer
• Accidents: Damage to freight during a collision or rollover
• Fire: Cargo destroyed or damaged by fire
• Environmental Damage: Exposure to rain, wind, extreme temperatures, or other weather events
• Reefer Breakdown: Spoiled perishable goods due to refrigeration failure (if you have reefer breakdown coverage)

Common Exclusions

Standard cargo policies have exclusions you should be aware of:

• Loss due to improper packaging by the shipper
• Inherent vice (cargo that spoils or deteriorates naturally)
• Acts of war or terrorism
• Intentional acts or fraud
• Certain high-risk cargo types (e.g., fine art, jewelry, cash) unless specifically covered

How Much Cargo Insurance Do You Need?

The amount of coverage you need depends on:

• Cargo Value: The typical value of freight you haul
• Shipper/Broker Requirements: Contract requirements often dictate minimum coverage
• Your Risk Tolerance: Higher limits provide more protection but cost more in premiums

Most carriers carry between $100,000 and $250,000 in cargo coverage. If you haul high-value goods like electronics, pharmaceuticals, or specialty products, you may need higher limits.

Reefer Breakdown Coverage

If you haul refrigerated or temperature-sensitive cargo, reefer breakdown coverage is essential. This add-on covers spoiled goods if your refrigeration unit fails. Without it, you could be liable for tens of thousands of dollars in spoiled meat, produce, or pharmaceuticals.

How to Reduce Cargo Insurance Costs

• Maintain a clean claims history: Fewer claims mean lower premiums
• Use cargo security best practices: Install GPS tracking, use secure parking, and implement load securement protocols
• Increase your deductible: Higher deductibles lower premiums but increase out-of-pocket costs per claim
• Bundle with other coverages: Many insurers offer discounts when you bundle cargo with liability and physical damage

Final Thoughts

Cargo insurance is a non-negotiable part of running a professional trucking operation. It protects your business from catastrophic financial losses, meets customer requirements, and gives you peace of mind knowing you're covered for the freight you haul. Work with an experienced insurance broker to ensure you have the right coverage limits and add-ons for your operation.