Cargo Insurance

Example

“The electronics manufacturer purchased cargo insurance for their $500,000 shipment of smartphones being transported from China to California.”

Memory Tip

Think 'CARGO = Coverage Assures Reliable Goods Onboard' - it protects your stuff while it's moving.

Why It Matters

Cargo insurance is crucial because carriers like trucking companies and shipping lines have limited liability for lost or damaged goods, often far below the actual value. Without cargo insurance, businesses could lose hundreds of thousands of dollars if a shipment is destroyed, stolen, or damaged in transit.

Common Misconception

Many shippers believe the carrier's insurance automatically covers their goods at full value, but carrier liability is typically limited to very low amounts per pound or package. They also think their business property insurance covers goods in transit, but standard policies usually exclude coverage once goods leave their premises.

In Practice

A furniture retailer ships $100,000 worth of sofas via truck from North Carolina to Texas. The truck crashes and burns, destroying the entire load. The trucking company's liability is limited to $0.60 per pound, paying only $18,000 for the 30,000-pound shipment. However, the retailer's cargo insurance policy with a $500 deductible pays the remaining $81,500, allowing them to fulfill customer orders and maintain their business relationships.

Etymology

From Spanish 'cargo' meaning load or burden, combined with 'insurance' from Latin 'securus' meaning secure, reflecting the need to secure valuable transported goods.

Common Misspellings

Related Terms

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Other insurance terms you should know

See Also