Cargo Insurance - Who’s Really Covered?
When you're moving freight, one of the most important — and often overlooked — questions is: who’s actually responsible if something goes wrong? Whether it’s cargo damage, a traffic accident, or a breakdown in communication, shippers need to understand how insurance and liability actually work in the freight industry.
Here’s a breakdown of the key insurance and bonding concepts in freight — and what they do and do not cover.
Carrier Insurance: The Foundation of Protection
When you're working directly with a carrier (a trucking company), there are typically three types of insurance they may carry:
1. Cargo Insurance
What it covers: Loss or damage to the goods being transported.
Why it matters: This is the only type of insurance that directly protects your freight.
Limitations: Often capped at a specific dollar amount per pound or per shipment, and doesn’t cover every type of loss (e.g., Acts of God, poor packaging, certain exclusions).
2. Automobile (Trucking) Liability Insurance
What it covers: Bodily injury or property damage caused by a truck while on the road.
Why it matters: Protects third parties, not the shipper or cargo. It’s required for carriers to operate legally.
3. General Liability Insurance
What it covers: Incidents not directly related to driving — for example, a driver damaging a dock or warehouse.
Why it matters: It’s not cargo-specific, but offers broader protection in some business-related scenarios.
Important: Just because a carrier has auto or general liability insurance does not mean your cargo is protected. Only cargo insurance covers cargo.
Broker Coverage: A Different Ballgame
Freight brokers are intermediaries — they don’t transport freight themselves. Instead, they match shippers with carriers. That’s where things get tricky.
Can brokers carry cargo insurance?
Technically, no — because brokers aren’t in possession of the freight. However, they can (and often should) carry contingent cargo insurance or other specialized policies.
1. Contingent Cargo Insurance
What it covers: Kicks in only if the motor carrier's cargo insurance fails or denies a claim.
Why it matters: It's a backup — not primary insurance — and often includes strict conditions or exclusions.
2. Broker Liability Insurance (a.k.a. “Freight Broker Insurance”)
What it covers: Errors and omissions (E&O), negligent hiring, miscommunication, and certain contractual liabilities.
Why it matters: It protects the broker — not the shipper or the freight. It’s useful for professional risk management but doesn’t pay out on cargo loss.
3. Surety Bond (U.S. only)
What it covers: In the United States, freight brokers must hold a $75,000 USD surety bond (BMC-84) to be federally compliant. This bond ensures that carriers get paid.
Why it matters: It protects the carrier, not the shipper. And it does not cover damaged or lost freight.
In Canada, there is no federal requirement for brokers to carry a surety bond or insurance. Some provinces, like Ontario, have rules around payment practices, but no bonding is required unless the broker operates cross-border into the U.S.
What Does All This Mean for Shippers?
Many shippers assume that if something goes wrong — especially with cargo — insurance will take care of it. Unfortunately, that’s not always the case. Here’s what you should keep in mind:
Only cargo insurance protects your freight from damage or loss.
Working through a broker means you are one more step removed from the insured party — and may have less visibility into who is actually hauling your goods.
Not all brokers carry contingent insurance, and those who do may have limited coverage.
In Canada, brokers can legally operate without any insurance or bond at all.
Final Thoughts
The freight industry has a complex web of insurance requirements — and unfortunately, not all parties carry the coverage you might expect. As a shipper, understanding who is actually holding the risk can help you make smarter decisions, protect your goods, and avoid costly surprises.
At Evotrux, we’re working to simplify this part of the process by verifying only those carriers — including both trucking companies and brokers — who hold valid insurance. Specifically:
Only carriers with valid cargo insurance or, in the case of brokers, valid contingent cargo insurance are allowed to submit quotes on Evotrux.
Shippers can view a carrier’s insurance documents directly by clicking on their profile.
We monitor insurance documentation to help ensure transparency and reduce risk when booking shipments.
While no system can eliminate every variable, Evotrux aims to raise the bar for accountability and visibility — so you can ship with greater confidence.
