What is cargo insurance?
Cargo insurance is a very broad category. Some people may call it transportation insurance, because it is designed to cover goods that are being transported from one place to another. Cargo insurance can be used to cover goods being moved by truck, train, boat, plane, or just about any other form of transportation. (There may even be insurance carriers out there willing to write cargo insurance for shipments by dog sled or camel caravan!)
This discussion focuses on ground transportation by for-hire truckers insurance. Insurance for cargo being moved by truck is actually a form of liability insurance. When other modes of transportation are used, the cargo insurance is typically a form of inland marine insurance or maritime coverage.
Do I really need cargo insurance for my California based trucking company?
If you are moving goods that belong to someone else, you probably need cargo insurance. Without cargo insurance, you are liable for any losses that occur to those goods while they are in your custody.
One of the most common types of cargo insurance policies is coverage for moving companies that transport the contents of a house, apartment, condo, office building, or other structure from Point A to Point B when the owner relocates, so let’s use that as an example. Think in terms of the possible extent of loss that can occur, as well as when and where it can occur. You could have a partial loss of some of the cargo or total loss of all of the cargo. And the damage could occur while the truck is being loaded at Point A, or when it is being unloaded at the destination, Point B, or at any point in between. If the cargo will spend any time in a warehouse, it could be damaged during loading or unloading or while in storage.
Most people can understand that unfortunate stuff sometimes happens, but they may not be as understanding if they have to fight to get paid when their property is damaged or destroyed as a result. Ultimately, cargo insurance not only protects you against having to compensate the cargo’s owner for losses incurred while the goods were in your custody. It also protects your trucking company’s good name and reputation.
What cargo insurance coverage is available for shipments by trucking California?
One major distinction is between All Risks coverage, which covers partial loss of a cargo, and Total Loss coverage, which does not. All Risks coverage gets its name from the fact that it pays for damage from all causes not specifically excluded by the policy, including breakage from mishandling, storm damage, theft, or vandalism. An All Risks Policy, of course, provides the greatest peace of mind for the for-hire trucker.
With either All Risks or Total Loss coverage, you may want to consider additional protection, such as:
- Removal Expenses coverage, which would pay for the removal and cleanup if, for example, a moving van overturns and spills its cargo onto the roadway.
- Sue and Labor coverage, which would pay the moving company’s costs to defend itself in court or to settle any claims
- Earned Freight Coverage, which would compensate the moving company for the revenues lost as a result of not delivering the cargo that was lost
(Costs arising from damage to the overturned truck itself, and from any bodily injuries, would fall under the company’s commercial auto policy.)
If you decide to opt for Total Loss coverage instead of All Risks, understand that only the loss of the entire shipment would be covered. A partial loss, or damage to only some of the cargo, would not be covered and the for-hire trucker would be held liable.
How much cargo insurance do I need to operate as a for-hire trucker in California?
As with any business liability insurance, you want to make sure that you will not end up being responsible for paying out more than you can afford in the event of cargo damage or loss. The state of California requires moving companies with a household goods carrier permit to maintain a minimum of $20,000 in cargo insurance per shipment. Different rules govern companies that only handle office moves. Visit the California Public Utilities Commission website for more information about cargo insurance requirements and guidelines: http://www.cpuc.ca.gov/PUC/Transportation/faqs/