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.

Coverage Types

Coverage	Who Buys	When it Pays	Baseline Exclusions	Notes
Motor carrier cargo legal liability	Carrier	Primarily, when the carrier is liable	Carrier’s policy exclusions, such as unattended vehicle theft or certain territories.	Annual policy written for carriers. Truckstop
Contingent cargo – following form	Broker	Only after the carrier’s policy does not respond	Usually mirrors the carrier’s exclusions	Narrow if the carrier’s policy is narrow
Contingent cargo – non‑following form	Broker	Only after the carrier’s policy does not respond	Set by the contingent policy itself	Can be broader or narrower than following‑form.
Shipper’s interest (first‑dollar), per load	Typically arranged by broker or shipper	Pays the shipper directly without waiting on a carrier denial	Marine cargo “all‑risk” terms apply to the shipment	Per‑shipment primary coverage for the cargo owner.

Contingent Cargo vs Shipper’s Interest

Contingent cargo is the safety net when the carrier’s coverage fails, while the shipper’s interest is primary, per-shipment coverage that pays the shipper directly, without having to wait on a potential carrier denial. We recommend shipper’s interest when the load value is high relative to the carrier’s limit, when theft-prone commodities are involved, or when swift cash recovery is critical.

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.

Commodities that require special terms

Some cargo types are treated as higher risk due to varying factors such as spoilage, high resale value, and theft potential. These cargo types often require special terms such as sub-limits or added security conditions.

Commodity	Market Treatment
Electronics, pharmaceuticals. alcohol, tobacco, jewelry, or fresh seafood.	Usually excluded or sub-limited unless you secure special wording or endorsements from the insurer.

Following-form vs Non-following-form Insurance

Understanding the difference between following-form and non-following-form coverage helps brokers estimate the flexibility or limitation that they might have when the carrier’s insurance fails.

Following-form: This type mirrors the carrier’s exclusions and conditions. If a carrier’s policy excludes a loss, the contingent policy may also exclude it.
Non-following form: Sets its own terms and is usually broader in some cases, but still only responds after the carrier’s policy fails.

Defense and Legal Expenses

It’s important to remember that most contingent cargo legal liability forms include the cost to:

Defend you against a cargo claim, legal fees, and witness fees.
Settling a cargo claim, as well as including the amount of any associated fees
Pursue recovery from parties responsible for cargo loss or damage

Contingent cargo insurance serves as a crucial layer of protection, providing legal defense against any financial responsibilities that a court may issue against them under the circumstance that the carrier’s insurance doesn’t respond.

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.

Common Contingent Cargo Structure Quotes

Item	Common Figures	Notes
Per‑occurrence limit	$100,000 standard with option to increase to $500,000	Select programs offer higher limits
Deductible	$1,000 to $2,500	Higher deductibles can lower the premium
Options	Reefer breakdown policy	Covers the spoilage of refrigerated goods due to mechanical failure of the reefer unit

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.

Underwriting Checklist to Speed Up the Quoting Process

Having the right documents prepared before requesting a quote can save you days of back-and-forth with insurers. This checklist highlights what most carriers need to issue an accurate and timely quote.

Category	What to prepare	Why it helps
Agreements	Current broker-carrier agreement and any shipper contracts with special language	Drives endorsements and clarifies assumed obligations
Carrier vetting	Authority, COIs, and annual file updates	Shows controls and ongoing oversight
Carrier list	Excel list with carrier names and DOT numbers	Lets underwriters sample‑check partners
Loss history	Five years valued	Supports pricing and credibility
Operations	Commodities mix, reefer share, international legs	Highlights risk segments and needed endorsements

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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