Navigating the Rules: The Federal Cargo Insurance Regulations

It can be exhilarating when your company becomes large enough that you are beginning to engage in large shipments of cargo by road freight, rail, plane, or ship. There is no more important time than to make sure you are covering all of your bases when it comes to cargo insurance. There are many different factors to consider when investigating cargo insurance quotes, particularly the actual legal requirements for cargo insurance. The federal government has some regulations in place, and it makes sense to familiarize yourself with these requirements, whatever shipment method you plan to use.

Because the vast majority of cargo is transported by motor carrier (truck or van), it makes sense to look at those regulations first. Remember – just because the federally mandated cargo insurance regulations have low minimums does NOT mean that you should only purchase the least amount of cargo insurance allowed.

Listed below are the regulations set forth by the Department of Transportation (DOT).

First, the form BMC-91X and the form BMC-34 must be filed with the DOT by all contract carriers of cargo. The minimum liability required is $750,000 in coverage for non-hazardous goods, $1,000,000 for hazardous materials (check for definitions of hazardous goods) and $5,000,000 for the most hazardous materials. (again, you can check the federal regulations for what good fall into what hazardous classification) Few trucking companies carry the $5,000,000 liability coverage. The vast majority prefer to only transport goods that fall into the first two categories. Additionally, the Carmack Amendment to the DOT regulations also makes the trucker liable for the market value of the goods if they are lost or stolen. The insurance requirements, however, are relatively low, only $5,000.

If you are a cargo shipper, your goods are likely to be valued higher than the federal cargo insurance regulations minimum requirements will cover. In order to avoid the substantial loss of goods when shipping, it is imperative to purchase additional cargo insurance unless you intend to restrict your cargo shipments to less than the value of the shipping companies liability minimums. It is also very important to carefully review the cargo insurance policies – whether those offered by the shipping company or by you to protect your materials – for any coverage loopholes. Exclusions can leave you short-changed when it comes to filing a claim for goods, particularly those that are stolen.

When you are getting your cargo insurance quotes, it is important to know the federal cargo regulations because you do not want to ship your cargo with less insurance coverage than the cargo is worth. Take the time to select both your shipping company and your cargo insurance coverage with care!