Know your cargo coverage

The business variables you can’t control can be fickle enough; just look at fuel prices. For costs or potential costs you can control, be in the know and be prepared to cover them. One of thoseis cargo insurance.

“Owner-operators whose cargo insurance is provided by carriers are less likely to know the parameters of their cargo insurance,” says Chris Brady, whose Commercial Motor Vehicle Consulting compiled the Overdrive 2005 Owner-Operator Market Behavior Report.

Most leased operators are covered by their carrier’s policy, “although it is not unheard-of that the carrier requires the owner-operator to pay for it,” particularly at smaller, specialized carriers, says Todd Amen of American Truck Business Services, a Denver-based owner-operator financial services firm.

Carriers typically require owner-operators to meet the cargo deductible, which often is $1,000, say Amen and owner-operator accountant Perry Wiseman of Truckers Accounting Service in Omaha, Neb. Only 40 percent of those surveyed for the Overdrive report said they had enough cash to meet their cargo deductible.

A third weren’t sure what their deductible was. A larger group, 38 percent, did not know what would happen if a claim was filed with a value that exceeded the policy’s coverage limit.

Shippers require carriers to prove they’re carrying sufficient insurance, often $1 million, Amen says. Extra insurance in the form of riders is obtainable for ultra-high-dollar loads, says Amen, a former small fleet owner who recalls buying $3 million in coverage for certain loads. So the problem of a claim exceeding a coverage limit rarely would be an issue for a leased driver. The owner-operator with his own authority and his own insurance, of course, needs to make sure he’s covered for every single load.

There’s also the matter of unattended trailers. Among those surveyed for the Overdrive report whose insurance was provided by carriers, 61 percent were unaware whether unattended trailers were covered; among those who bought their own insurance, 26 percent were unsure on the trailer question.

Know where you and your business stand with all the financial and legal fine print. Be prepared to meet all deductibles. The mere existence of an insurance policy doesn’t mean you’ve removed all financial risk from your operation.