You may assume that all auto insurance is the same in that no matter what kind of vehicle you have or what you are transporting from one place to another, the insurance that you purchase will cover any and all disasters or accidents that occur. In fact, this is not the case — especially when it comes to the hauling of large quantities of products and the movement of freight.
Business experts should know that when you are transporting cargo at any time, secondary contingent cargo insurance or freight insurance need to be purchased. Almost all auto transport brokers who manage the shipping and transportation of vehicles and products have contingent cargo insurance.
It's important to
speak with an agent that is versed with cargo insurance.
What Is Contingent Cargo Insurance?
Auto insurance is something that every vehicle must have, so it makes sense that auto transport brokers do always have a primary auto insurance policy. What a contingent cargo insurance plan or a contingent motor cargo insurance plan does is cover all of the unexpected costs and expenses that may occur when accidents arise that are not covered by primary auto insurance. You don’t have to have contingent cargo insurance as a broker or shipper, but you should. Remember that contingent cargo insurance is a type of secondary insurance, so it goes above and beyond standard auto insurance.
Whenever businesses and companies are transporting cargo or freight by car, truck, train, or other large vehicle, it is imperative that they purchase contingent cargo insurance to keep the products and supplies that they are shipping safe. You can go without it, but it’s a big risk that almost no one in the business of transport will take. Losses from damages not covered by a standard insurance plan are too big to ignore. Also remember that contingent cargo insurance is also known as contingent motor cargo insurance, and you may also hear of it as freight insurance.
As stated, some of the biggest buyers of contingent cargo insurance are freight brokers. But suppliers and other businessmen have the need to purchase this type of insurance as well. Much of the insurance that is purchased for cargo transport is purchased for freight and commodities that are hauled by for-hire
truckers. When you are not the actual person doing the driving of the vehicle, you want to make sure that that person doing the driving or operating the vehicle is going to make good decisions. Naturally, without doing it yourself, you can’t be sure of this, and that’s why having adequate insurance for these situations is important. If you have a large sprawling business, contingent cargo insurance becomes even more necessary.
Who Needs Cargo Insurance?
Let’s go over who exactly needs cargo insurance once more.
Anyone who is shipping a large quantity of items or who products should purchase cargo insurance. There are many accidents that could happen on the way from one point to another. If you have adequate cargo insurance, however, your products will be covered, and any losses incurred because of accidental causes will be covered so that you don’t suffer any losses and your clients and customers don’t suffer any losses either. It is important to protect yourself as a business owner. One accident involving a truck or train car can result in hundreds of thousands of dollars of losses and in some cases, legal ramifications.
What to Look for in a Contingent Cargo Insurance Plan
Contingent cargo policies began in the mid-1980s, and throughout the last few decades, they’ve been used steadily and with great success for brokers, shippers, and sometimes carriers. One important thing to remember, however, is that there were never any regulations set for contingent cargo insurance in the 1980s when they were first being sold. And still today, there are no official regulations concerning this form of insurance, nor are there any standard forms or policies that must be followed. Contingent cargo policies or freight insurance policies are known as “unregulated lines.”
For this reason and naturally because it’s a product that you are investing in, it’s important to look closely at the contingent cargo policy that you’re considering purchasing. You must pay adequate attention to the stipulations of such policies whether you are a shipper, broker, or carrier because you will inevitably be affected by such a policy.
What Shippers Should Know About Cargo Insurance
Cargo losses can be devastating for shippers, so there are certain things that you should take into consideration to make sure that you are adequately protected.
First, make sure that you always have a copy of the Accord form from the motor carrier that you are working with. This will have an outline of the cargo coverage that the motor carrier has. It can be difficult, however, to know what the reference numbers mean on this accord. You should know whether you will be made whole or not in the event of a cargo loss.
In some situations, you will not be made whole. For example, you may not be made whole in these situations:
- If the policy is canceled without your notification
- If there is an extremely high deductible
- If the insurance agency becomes insolvent
- If the carrier and insurer do not cooperate with each other
- If the motor carrier refuses responsibility for the cargo loss
- If the motor carrier goes out of business completely
- If there are radical stipulations, such as the tractor having to be locked or the trailer having to be parked in a specific way overnight
- If the occurrence that caused the cargo loss was simply not covered by the insurance plan
All of these reasons and many others means that most shippers have no idea what they are getting with their motor carrier insurance. And this, in turn, means that as a shipper, you may not be protected. It is highly likely that only the motor carrier will be protected in the event of a cargo loss.
The Advantages of a Contingent Cargo Policy
Shipping businesses can benefit greatly from working with a solid freight broker. Naturally, the job of a freight broker has many aspects. First, for the shipper, they will vet the carrier to make sure that the shipping business will be working with a quality carrier. But there are more benefits where this came from.
Working with a good freight broker who has experience and a good reputation means that you will also be able to take advantage of the contingent cargo policy that your freight broker will have. The advantages of a plan like this are numerous.
The insured individual in the case of a cargo loss is generally the freight broker, but in an event like this, both the freight broker and the motor carrier are liable in legal terms.
If you want to fully understand a contingent cargo policy, it’s important to know why the word “contingent” is in the title.
In terms of a contingent cargo policy, the word contingent means that this policy will come into effect if the insurance policy of the motor carrier does not pay off. As we stated above, you can see that there are many ways in which the motor carrier will be held responsible because their insurance policy does not cover a cargo loss or because certain stipulations were not met. But we also know that the shipping business can be at fault even if the motor carrier is also at fault.
And this is where a contingent cargo insurance policy comes in. Contingent upon the insurance policy of the motor carrier not paying the damages, a
contingent cargo policy can kick in. Always keep in mind, however, that a contingent cargo policy is not primary coverage.
Why and How Will Contingent Cargo Insurance Kick In?
Because contingent cargo insurance is not a form of primary insurance, and is instead a form of secondary insurance, it is important to note that this form of insurance will not be the first line of defense in the event of a cargo loss. Instead, cargo contingent cargo insurance coverage will be triggered in the event that the motor carrier and the motor carrier’s insurance does not cover the cargo loss. There are three main reasons why the contingent cargo insurance will kick in because the motor carrier’s insurance policy may not end up covering the cargo loss.
These reasons are as follows:
- There were policy limits on the insurance policy of the motor carrier, and the limits were insufficient for the damages that occurred.
- According to the terms of the insurance policy owned by the motor carrier, the damages and cargo loss are excluded.
- The insurance policy owned by the motor carrier was for some reason not renewed or was canceled.
Naturally, in all situations having to do with cargo loss, the motor carrier’s insurance policy should ideally cover as much as possible. And certainly, this is the way it was meant to work. The problem is that it doesn’t always work this way. As you can see above, there are certain situations in which the motor carrier’s coverage simply won’t cover what it needs to.
Because of this high risk to you as a shipper, it is exceptionally advantageous to work with a high-quality broker. That’s because it will be their job to vet all of the motor carriers that you will work with as a shipping business. The broker will ensure that the carriers have the necessary authority, insurance, safety programs and regulations, and other precautions in place to minimize the chances of cargo loss in the first place and maximize the likelihood that their insurance plan will cover any damages that do occur.
As a shipping business, you should feel confident working with a broker in these situations. Hopefully, the motor carrier will be vetted well and have a solid insurance coverage plan in place. But where necessary, there will also be that second protective layer of contingent cargo insurance that will
benefit you, the broker, and even the motor carrier.
What Exactly Will a Contingent Cargo Policy Cover? What Won’t It Cover?
Again, it’s important to note here that contingent cargo policies or freight insurance policies are not regulated. This is why you must be diligent when you shop around for contingent cargo policies and find one that you can feel confident with. There are no guarantees that will ensure you know exactly what is covered on these types of policies.
Shopping for a Contingent Cargo Insurance Policy as a Freight Broker
Any business may be interested in purchasing a contingent cargo insurance policy or a freight insurance policy. Again, these policies help anyone that is transporting freight or cargo in a car, train, truck, or other large vehicle. With that being said, freight brokers tend to be the biggest buyers of these policies. They need them so that they can protect themselves, their shipping clients, and the motor carriers that they work with.
If you are a freight broker who is looking to buy a new contingent cargo insurance plan, you may want to pay attention to the following considerations as you look for a policy.
- Understand what the commodities are that your contingent cargo coverage plan will protect. What is included, and what is excluded in your potential cargo plan?
- Check out the requirements for you specifically as a freight broker. You’ll need to know about best practices and answer questions such as: Do policies and operations keep me as the broker away from carriers who are under-performing?
- Look into what type of plan the motor carrier that you are working with has. If you are working with multiple motor carriers, you’ll need to have a good idea of each of their insurance plans. See what is covered and what is excluded in their plans. You’ll need to know this because many contingent cargo insurance policies will not go above and beyond the plan that your motor carrier has.
- Understand the qualifications of the insurance agency that you’re dealing with
- Check to see if there is a 72-hour limitation.
- Make sure you know whether or not a shipper’s claim on damages and cargo loss is enough for a payout. If not, you may need to involve yourself in a full-blown law suit in order to have a payout. Check your legal liability in these situations.
- Check specifically on refrigeration stipulations in your contingent cargo policy. Make sure that goods and products will be protected in the event of a refrigeration breakdown that ruins medical supplies, food stuff, and other sensitive goods.
- Also check specifically on dampness exclusions. You’ll want to know that you have coverage in the event of excessive dampness that causes problems in flatbed operations.
- Finally, check to see if certain commodities will be covered in the event of damages, but at a limited amount.
Purchasing Contingent Cargo Insurance
Talk to a contingent cargo insurance agent today to learn more about your insurance plan options. A knowledgeable agent will be able to discuss your options with you and help you find a plan that works for you and your business. Don’t go another day without contingent cargo insurance to protect yourself from possible financial loss. Call a reputable commercial insurance agent in your area today.