What Is Contingent Cargo Insurance For Freight Brokers?

Top Insights

Backup Coverage: Kicks in only if a carrier’s primary cargo policy won’t pay.
Trigger Events: Inactive/canceled policies, claim denials, insufficient limits, uncovered perils, insurer insolvency.
Common Exclusions: War/terrorism, government seizure, intentional damage, spoilage, inherent product defects.
Cost Range: Typically $1,200–$2,500/year, based on cargo value, route risk, coverage type, and history.
How to Secure: Assess your cargo risks, get quotes from specialized insurers, compare terms, and vet carriers.
Additional Protections: Pair with general liability, E&O, BMC-84 surety bond, and contingent auto liability.
Why It Matters: Shields brokers from costly gaps, preserves client trust, and safeguards reputation.

Carriers have cargo insurance, but that doesn’t guarantee every claim will be covered. Policies can have limitations and exclusions. As the freight broker, you could be responsible for any cargo loss or damage when a claim is denied.

That’s why many brokers choose to carry contingent cargo insurance. This article will explain what it is, how it works, and why it’s a smart move for freight brokers looking to reduce risk and protect their reputations.

What Is Contingent Cargo Insurance?

Contingent cargo insurance is a type of coverage designed specifically for freight brokers. It acts as a safety net or “backup” insurance policy that only kicks in when a motor carrier’s primary cargo insurance fails to cover a loss.

For example, if a load is damaged in transit and the carrier’s insurer denies the claim, the shipper might turn to you, the broker, for compensation.

Contingent cargo insurance coverage is not a replacement for the carrier’s insurance but an extra layer of protection.

What contingent cargo insurance covers

Contingent cargo insurance keeps you from being held liable in the following scenarios:

The carrier’s policy was inactive or canceled.
The carrier refuses to take responsibility for lost or damaged cargo.
The carrier’s insurance claim was denied.
The carrier’s coverage limit was too low to cover the full loss.
The loss occurred under circumstances not covered by the carrier’s policy.
The carrier’s insurer went out of business or refused to respond.

What contingent cargo insurance doesn’t cover

Understanding what your insurance doesn’t cover is just as important as knowing what it does. Contingent cargo insurance comes with specific exclusions that brokers need to be aware of in order to manage risks and avoid unexpected legal liability. It does not cover:

Damage caused by war, terrorism, or nuclear accidents.
Seizures by government authorities.
Intentional damage, misconduct, or fraud.
Any loss resulting from deliberate acts by the carrier, shipper, or other parties.
Natural deterioration or spoilage of perishable goods.
Damage caused by a flaw within the cargo itself is not covered.
Normal wear and tear during transit.

How Much Does Contingent Cargo Insurance Cost?

Most freight brokers can expect to pay between $1,200 and $2,500 annually for contingent cargo coverage. However, costs can vary based on factors like:

Cargo type and value: High-value shipments cost more to insure than general freight due to the high risk of damage or accidents.
Mode of transportation: Different modes carry varying levels of risk.
Shipping route: Shipments that go through areas with political instability or are prone to natural disasters have higher premiums.
Type of coverage: Comprehensive all-risk coverage costs more than limited named perils coverage.
Claims history and risk profile: Companies with a history of frequent claims indicate a higher risk to the insurer.
Coverage limits and deductibles: Higher coverage limits and lower deductibles will increase the insurer’s payout, leading to higher premiums.

How To Get Contingent Cargo Insurance For Freight Brokers

Getting contingent cargo insurance is a straightforward process. Here’s how to get started:

Step 1: Assess your coverage needs

Before shopping for coverage, conduct a comprehensive risk assessment. Evaluate the type and value of the cargo you handle and the potential risks involved. You also need to consider the requirements of your contracts with shippers.

Step 2. Work with a transportation-focused insurance provider

Look for insurance companies or brokers that specialize in freight and logistics. They understand the risks freight brokers face and can recommend the right coverage.

Step 3: Request and compare quotes

Contact several providers for quotes. Compare aspects like coverage limits, premium costs, deductibles, exclusions, and claims processes.

Step 4: Review the policy details carefully

Before you sign, make sure you understand the policy’s terms, especially what is and isn’t covered. Ask questions if anything is unclear.

Note: Maintaining healthy carrier vetting practices is key, as some policies may deny claims if you used an unqualified or improperly vetted carrier.

FAQs

1. What other types of insurance should a freight broker carry?

Beyond contingent cargo insurance, freight brokers should consider the following:

General liability insurance: for third-party bodily injury or property damage.
Errors and omissions (E&O) insurance: to protect against mistakes in paperwork or contracts.
Surety bond (BMC-84): required by the FMCSA to obtain broker authority.
Contingent auto liability: optional coverage if a carrier is underinsured for liability.

2. What’s the difference between primary and contingent cargo coverage?

The carrier holds primary cargo insurance and covers losses directly. It’s the first policy to respond to a claim.

On the other hand, contingent cargo insurance is held by the freight broker and only activates if the carrier’s policy fails to pay. It acts as a secondary safety net.

3. What happens if both the carrier and broker have denied claims?

If both the carrier and the broker’s contingent cargo insurance deny the claim, the shipper may be left without compensation. This often leads to disputes or legal action. It’s one reason why freight brokers should carefully review their policy exclusions and ensure their carriers are properly vetted and insured.

Final Thoughts

Contingent cargo insurance might not be required by law, but it’s one of the smartest protections a freight broker can have. When carrier policies fall short, this insurance coverage helps you avoid financial loss and maintain trust with your shippers.

Understanding risk management is just one part of running a successful brokerage. Our 90-Day Freight Broker Course walks you through everything from insurance and operations to sales and dispatching. Get the tools, training, and support you need to launch your brokerage confidently.

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