What is motor truck cargo insurance?
Motor truck cargo insurance is a commonly used term when talking about commercial truck insurance coverage for your load that you are hauling, but what really is it? We all know that motor carriers need it and that it’s relatively important, but would it break you if you didn’t have it? Absolutely.
Now that we know the importance of motor truck cargo insurance let’s dive into understanding it a bit more. First, I want to talk about the bill of lading. When you enter into an agreement as a motor carrier with a shipper, or freight broker, there is a bill of lading, B/L, or BoL as it is often referred to as. The bill of lading should be used each time you haul a load, no matter what. It proves that you have taken receipt of the load. At this time you become responsible for the cargo that is in your possession until you unload the cargo at the predetermined destination designated on the bill of lading.
While the cargo is in your possession, your cargo policy is activated and covers your load while it is in your care, custody, or control. Once the cargo is unloaded at the destination then your cargo insurance is effectively “turned off”, until you enter into another bill of lading agreement.
What type of insurance policy form is motor truck cargo insurance on?
Typically we just refer to this coverage as motor truck cargo insurance, but that’s not the actual insurance policy form that is being used. The Inland Marine Insurance form is the form that provides motor truck cargo insurance to your load. It can also often be referred to as a “floater” policy, meaning the policy does not need a specific location to be scheduled to, unlike normal business personal property. Inland marine insurance is designed to cover property while in transit. Additionally, inland marine insurance can offer much broader coverage than normal property insurance.
The use of policy forms is common in the industry and can make or break you. There are three distinct policy forms for cargo insurance; basic, broad, and all risk.
- All-Risk – An extremely broad type of coverage that covers everything except that which is excluded on the coverage form. Often all-risk coverage will even cover damage caused by catastrophic events such as hurricanes, tornadoes, and earthquakes – always confirm this with your policy language.
- Broad – Much like all-risk coverage this form offers coverage for everything except for what is excluded. When purchasing a motor truck cargo policy it’s best to choose the broad coverage form as much as possible as it will offer better protection for general freight motor carriers.
Basic – A motor truck cargo policy written on the basic form has the most restrictions. The basic form only offers coverage for everything that is included in the policy and excludes everything else. This form is very restrictive.
How does motor truck cargo insurance work?
Motor truck cargo insurance works when you are legally liable for the cargo you are hauling. If you are involved in an accident and the load you are hauling is damaged, then the motor truck
cargo insurance would be triggered. The truck insurance company would determine if the cargo insurance policy offers coverage based on the coverage form you chose and payout accordingly after the deductible.
Here is an example of a claim scenario as it relates to motor truck cargo insurance:
You purchased $100,000 of cargo insurance on a broad form, including reefer coverage with a $1,000 deductible. You take a load on the spot market out of Denver that needs to go to Salt Lake City, a relatively short haul from what you’re used to. The BoL specifies the type of load, produce, value of the haul and other pertinent information. You decide to hop on the I-80 for the short trip and are starting to enjoy the scenery.
Suddenly a distracted driver veres into your lane, clipping your front right bumper. You react by swerving to the left, downshifting to avoid jackknifing. The crossover is stuck though, it rolls under, hitting your undercarriage and the trailer full of produce. The trailer peels open, as if the crossover was a can opener, destroying the trailer and the produce you’re hauling. Luckily you were finally able to come to a stop at the side of the road and somehow everyone is safe.
Value of your load: $90,000
Cargo insurance limit: $100,000
Motor truck cargo policy form: broad
Reefer (refrigerated coverage): included
At-Fault: other party
Front facing dash cam: active or front facing dash cam caught everything proving you were in the clear. The cargo insurance policy pays the shipper $90,000 per the BoL and invoices you $1,000 per your deductible. Broad form or reefer coverage were not triggered as it was a typical accident. Your truck insurance company will try to subrogate against the insurance company that represented the crossover to try and collect as much of the $90,000 as possible, since it was their fault.
What is the average cost of motor truck cargo insurance?
A common question is how much does commercial truck insurance costs. Always remember, the cost of motor truck cargo insurance is dependent on many different factors and the type of product you haul, the following pricing is for low risk very generic loads. We’ll break down what the average cost is that we see.
|Coverage Limit||Average Cost Range||Rating Basis|
|$50,000||$375-$750||Per unit, per year|
|$100,000||$775-$1,500||Per unit, per year|
|$250,000||$1,025-$1,875||Per unit, per year|
Motor truck cargo insurance is vital to ensuring your trucking company is protected in the time of a claim much like the scenario above. As you can see it’s best to purchase the right type of cargo insurance policy form, limit, and choose the right deductible. By not making the right choices you put your trucking company in jeopardy. Reach out to us for a firm quote on your motor truck cargo insurance as soon as possible.