Cargo Insurance

Cargo insurance is a policy that protects the shipper or consignee against financial loss if freight is damaged, lost, or stolen during transportation. It exists because carrier liability – while legally established under frameworks like the Carmack Amendment – rarely covers the full value of the goods. Shippers who rely solely on carrier liability often discover this gap the hard way, after a high-value load is totaled and the carrier's maximum payout falls far short of replacement cost.

Policies typically cover losses from collision, overturning, fire, theft, and natural disasters, though exact terms vary by provider and coverage level. Key variables include the declared value of goods, the deductible, covered perils versus exclusions, and whether coverage applies on a per-shipment or annual blanket basis. For temperature-sensitive freight, it's critical to verify that reefer breakdown or temperature excursion is explicitly covered – many standard policies exclude it unless added as an endorsement.

The decision to purchase cargo insurance comes down to risk tolerance and cargo value. Shippers moving high-value, perishable, or hard-to-replace goods – think frozen food, pharmaceuticals, or specialty ingredients – generally can't afford to self-insure against a total loss. The cost of a cargo policy is typically a fraction of a percent of the goods' value, making it inexpensive relative to the exposure. Conversely, shippers moving low-value, easily replaceable commodities may decide the premium isn't justified.

A common mistake is assuming the carrier's freight charge or released value rate provides adequate protection. Released value pricing – where the shipper accepts a lower liability cap in exchange for a reduced freight rate – can limit carrier exposure to as little as a few cents per pound. Understanding the gap between carrier liability and actual cargo value is the first step toward deciding whether separate insurance is warranted.