Cargo Insurance Overview

The Basics of Cargo Insurance

Smith & Sons Laboratory Moving is a moving company that specializes in moving lab equipment and even entire laboratories to new locations. Just like some moving companies specialize in moving commercial offices, Smith & Sons specialize in moving scientific labs.

One day, while they’re driving an expensive piece of equipment for a customer, they hit an icy patch and end up off the road into a ditch. The driver receives a few minor injuries and treated and released at the scene. Meanwhile, the very large piece of equipment sustains damage in the crash. The equipment is worth $500,000, but not covered under their regular commercial auto/trucking insurance, since it is not part of the vehicle.

Not to worry though. As professional movers, Smith & Sons make sure to carry cargo insurance up to, and even exceeding, the cost of the cargo they’re carrying. The client may not be happy that their machine was smashed, but Smith & Sons are able to replace it at full value.

What is Cargo Insurance?

Cargo is defined as any thing that is transported on a vehicle – regardless of the mode of transportation. This covers ground, sea, or air transport. If it’s on a vehicle, and it gets broken or destroyed as a result of an accident, it’s covered. Without it, vehicle coverage will cover accident damage to the vehicle itself. It will not do a thing for whatever is being carried.

Cargo insurance is not just for delivery trucks. It even applies to tow trucks hauling a car to another location. In those cases, tow truck drivers are required to get an endorsement called “on hook coverage.”

On hook” is another term for cargo insurance, although it refers to that specific application. If you’ve got a semi and you’re hauling TVs, that’s your cargo. If you’re an auto hauler carrying 10 cars, your cargo is your cars. But a tow truck has “on hook” cargo because of the way it’s hauling a particular car.

What Does Cargo Insurance Not Cover?

The only time it becomes difficult to get cargo insurance is if you’re a household goods mover (that is, a moving company). “Household goods” is a very difficult classification, because they’re personal belongings, and people’s perceptions of what things are worth differ from person to person.

If an item is brand new, it’s easy to figure out what it’s worth. But if the item is used, that number can vary. That’s because you’re dealing with things like sentimental value, perceived value, and so forth. You may think that clown painting Aunt Mabel bought when she was in college is worth a fortune. Regardless, an insurance company won’t, because they have art experts who can assess that kind of thing. The same is true for antique furniture, collectibles, guns, electronics and even something as simple as appliances and furniture.

Fine arts can also be a problem, because the amount you paid could be much higher than the actual value of the piece. So it’s always good to have up-to-date assessments of your fine art before transporting it, and insuring it for the appropriate value.

Who Needs Cargo Insurance?

If you’re carrying anything of value with your vehicle, regardless of the type of vehicle you’re using, you need cargo insurance. Whether you drive a semi, a box van, or even a car delivery service, you need cargo insurance. The same is true if you’re carrying freight on a train, a container hauling ship, or a cargo plane transporting supplies in the Alaskan wilderness. Even excavation contractors who are hauling their earth movers from one location to another need cargo insurance.

What Else Does Cargo Insurance Cover?

There’s also a separate policy/rider for livestock, although that’s considered cargo too. It includes transportation and mortality of the animals. So, if you own 100 cows, and they all get stricken with a disease and die while you’re transporting them, you will not lose a lot of money. The cargo insurance and livestock policy covers those losses.

Cargo insurance covers anything transported on any vehicle – including livestock – regardless of the mode of transportation. It has a limit of what it will cover, from $1,000 to $100 million. You’ll change your policy based on the value of what you’re carrying each time. You don’t necessarily need a $50 million policy if you only haul $100,000 items most of the time. However, you don’t want a $100,000 policy if you’re hauling $1 million cargo.

If you need to raise your limit, your insurance company can do it relatively quickly. An exception is if you’re hauling unique cargo. This could take a bit more time. If your cargo limit is$100,000, and you need a $1 million limit, call your insurance agent, and they’ll take care of it for you.

Whenever anyone hires you to move cargo, your coverage must be at least the valuation of that cargo. It’s a good idea to call your agent and make the change before you even load the cargo on your truck. Once covered, you’re ready to load the cargo and make the delivery.

Are There Limitations to the Scope of Cargo Insurance?

Yes, under certain circumstances, like when the cargo is in storage and not transported. Here’s another story to illustrate:

Kevin and his family are moving from New York to Florida, so they use a DIY service where they load their household goods onto a couple small storage containers. The service transports the containers to the final destination so the family can unload them. Kevin and his family then went on vacation. The containers sit in storage, in a warehouse in Florida, until the scheduled delivery date at the end of their vacation.

When the truck transports the containers, everything inside is covered under cargo insurance. Unfortunately, that didn’t help the moving company when they dropped one of the containers inside the warehouse. While the items inside the containers can be called cargo, but that’s only when they’re being transported, which means our moving company has a problem.

Warehouse Liability

Luckily, they had another endorsement called warehouseman’s liability, which protected cargo while not actually in transit, but as it was in the storage facility. Keep in mind there are very specific situations where cargo insurance ends and warehouseman’s liability beings. Is your cargo stored inside a shipping container on a dock or a shipping yard? Did you park your trailer inside a warehouse for a single night? Were you in the middle of unloading the cargo when there was an accident that destroyed a lot it?

For these reasons, and many more, you want to make sure you speak to your insurance professional about your cargo insurance and warehouseman’s liability. You also want to make sure you’re up to date on the amount of your coverage, and any changes or important details about the coverage, because you never know where and when accidents may happen. The more integrated your insurance is, the easier it is to answer difficult questions like these.

The Big Takeaway

Trucking insurance and commercial vehicle insurance may cover most damages during an accident. However, it doesn’t cover everything, especially the cargo you’re hauling. This can oftentimes be more valuable than the vehicle you’re using to haul it.

Cargo insurance can be somewhat tricky, because it’s always temporary and changing, depending on the value of your cargo. Vehicle operators and transportation companies need plenty of coverage. This is not only for their vehicle, but for the products they’re hauling, because almost anything can happen.

So it’s very important that you speak to an insurance professional. They will ensure you’ve got exactly the kind of trucking and cargo insurance you need. The two go hand in hand, so it helps to have the same agency covering both of them for you.


This article is by no means an exhaustive discussion about the kinds of cargo insurance and its endorsements and riders. We want to give you an idea of some of the different options you’ll require, depending on your specific situation.

Rather than trying to figure everything out yourself, you should speak to a professional insurance agent who specializes in helping business owners and transportation professionals protect themselves.

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