Cargo Insurance Coverage Explained

What Is Cargo Insurance?

Cargo insurance protects motor carriers against financial loss when freight in their possession is damaged, destroyed, or stolen during transit. Unlike primary liability insurance, which covers injuries and damage to third parties, cargo insurance covers the goods the carrier is hired to transport.

Under the Carmack Amendment (49 USC 14706), motor carriers are generally liable for loss or damage to cargo while it is in their custody. Cargo insurance provides the financial backing to meet this legal obligation.

Who Needs Cargo Insurance?

Federal law requires cargo insurance only for household goods carriers (moving companies), which must maintain a minimum of $5,000 per vehicle and $10,000 per occurrence under 49 CFR 387.303(b). However, virtually all for-hire carriers carry cargo insurance because:

• Broker and shipper contracts almost universally require it, typically at $100,000 to $250,000 per load
• Load boards require proof of cargo coverage to access available freight
• Carmack liability means the carrier is financially responsible for cargo regardless of fault in most cases

What Cargo Insurance Covers

A standard motor truck cargo policy covers loss or damage to freight caused by:

• Collision, overturn, or jackknife accidents
• Fire, lightning, and explosion
• Theft of the entire vehicle and its cargo
• Loading and unloading accidents
• Weather-related damage (varies by policy)

Common Exclusions

Cargo policies typically exclude certain types of losses or commodities:

• Mechanical breakdown of refrigeration units (reefer breakdown coverage can be added as an endorsement)
• Unexplained shortage or mysterious disappearance (only missing cargo with no evidence of theft)
• Contraband or illegal goods
• Commodities not listed on the policy (many policies restrict covered commodity types)
• Acts of war, nuclear events, or government seizure

Coverage Limits and Deductibles

Cargo policies are written with a per-occurrence limit (the maximum the insurer will pay for a single loss event) and sometimes a per-vehicle limit. Common coverage levels are:

1. $100,000 per occurrence: Standard for many general freight carriers
2. $250,000 per occurrence: Often required by larger shippers and brokers
3. $500,000+ per occurrence: Needed for high-value commodities like electronics, pharmaceuticals, or metals

Deductibles on cargo policies typically range from $1,000 to $5,000 per claim, though higher deductibles can reduce premium costs for carriers with good claims history.

Specialized Cargo Endorsements

Carriers hauling specific commodities often need endorsements beyond the base cargo policy:

• Reefer breakdown: Covers spoilage when a refrigeration unit fails mechanically
• Earned freight: Reimburses the carrier for lost revenue on a load that cannot be delivered
• Debris removal: Covers the cost of cleaning up a spilled load after an accident
• Pollution cleanup: Covers environmental remediation when hazardous cargo spills

Filing Cargo Insurance with FMCSA

When cargo insurance is required by federal law (household goods carriers), the insurer files Form BMC-34 with FMCSA. This filing is publicly searchable and can be verified through the carrier's authority profile.

For carriers not required to file cargo insurance federally, proof of coverage is typically provided directly to shippers and brokers through a certificate of insurance (COI). You can review a carrier's insurance information through our insurer search.