Understanding Contingent Cargo Insurance – Freight 360

Contingent cargo insurance.  You may have heard this talked about, but do you know what it is and what it covers?  If you’d like to know what contingent cargo is and its purpose, this blog is for you.

What is Contingent Cargo Insurance?

So, contingent cargo insurance.  As a freight broker, this isn’t a requirement for you to operate, but it’s a huge recommendation from us.  Keep in mind, we’re not insurance agents or brokers, so we recommend you get with a good insurance broker that can evaluate your specific situation and shop the market to get you the best policy for your company.

Like I said before, you’re not required to have a contingent cargo policy, but you’ll want to get one to give you an added layer of protection from freight claims.  Your customer might even require you to carry a policy.  Let’s take a look at what this policy is and what it covers.

Contingent cargo insurance for freight brokers is a secondary insurance policy to the carrier’s primary insurance.  Like the name suggests, it’s contingent upon the carrier’s insurance being in place.  It is not a primary cargo policy, and your customers should understand that.  The purpose of the contingent policy is to act as a safety net in certain circumstances when a carrier’s primary policy denies a claim.

Suppose you have a claim on a load.  Typically you’ll facilitate the claims process with the carrier’s insurance company.  You’ll help gather some documentation from the carrier and file a claim on your customer’s behalf with the insurance company.  If all goes well and the carrier has a comprehensive policy, the claim is approved and the customer will receive a check for their loss.  But, what happens if the carrier’s policy denies the claim or refuses to pay up?  That’s when a good contingent cargo policy will come into play.

What Does Contingent Cargo Insurance Cover?

Every policy has different levels of coverage and might include some exclusions to certain commodities as well as coverage limits.  The same applies to your contingent cargo policy.  At the end of the day, you get what you pay for.  A good insurance broker that specializes in the transportation industry will help you create a customer policy that covers you in a way that meets the level of risk that you are willing to accept.  Insurance is simply a way for us to offset risk in doing business.  A cheap policy often has many gaps in it, so you need to make sure yours is tight and covers exactly what your customer needs.

When you vet a carrier, their certificate of insurance only tells you their policy limits and coverage dates, but not always the exclusions of the policy.  This creates potential risk for you and your customer.  A typical contingent cargo policy will kick in due to situations such as a carrier’s policy being canceled, insufficient funds or coverage limits, and loss or damaged commodity exclusions.  This puts you in the second position of coverage, hence the term “contingent.”  There are options for carriers to purchase “all-risk” cargo insurance policies which can put your coverage in the first position, but that’s a totally separate product that costs a lot more than contingent coverage.

Your contingent cargo policy won’t cover everything that could ever potentially happen, and that’s not the goal of it.  It’s intended to add that extra layer of protection and offset additional risk for your customer and you.  This is exactly why it’s crucial for you to work with a top-notch insurance broker when analyzing your customers’ needs and your specific situation.

We hope this overview on contingent cargo insurance helped to clarify a few things for you.  Fill out the contact form below to let us know what you think, or if you have a question or a topic that you want us to cover.