When reviewing transportation contracts, one of the most common questions that comes up is, "What insurance should we require?"
The answer isn't always obvious. Transportation involves several different parties—shippers, brokers, motor carriers, warehouses, and logistics providers—and each has a different role. Because of that, they also carry different types of insurance designed to cover different risks.
Unfortunately, many insurance requirements are copied from old contracts without considering whether the coverage actually applies to the services being provided. In this post, we’ll review the most common insurance policies you'll encounter, what they cover, and, just as importantly, what they do not cover.
Motor carriers physically transport freight. Because they operate commercial vehicles, they carry insurance designed to cover the risks associated with operating trucks and handling cargo. The core insurance policies every motor carrier should have are Auto Liability and Cargo Liability. Depending on the size of the carrier and the nature of its operations, they may also carry General Liability, Umbrella/Excess Liability and other specialized coverages.
Auto Liability
Auto Liability is the carrier's primary insurance policy and is required by federal law for interstate motor carriers. It protects against bodily injury and property damage that the carrier causes to others while operating its commercial vehicles.
Examples include:
But Not All Auto Liability Policies Are Equal: One of the most overlooked items on a Certificate of Insurance is which vehicles are actually insured. Several coverage forms exist, and understanding the difference is important.
It is not uncommon to receive a Certificate of Insurance showing $1,000,000 coverage in Auto Liability that only provides Scheduled Auto Only or Hired and Non-Owned Auto coverage. If the truck hauling your freight does not qualify for coverage under that policy, the policy may provide little or no protection if something happens Policy limits are important, but so are the coverage types.
Cargo Liability
Cargo Liability protects the freight while it is in the carrier's possession. Depending on the policy, it may cover losses resulting from:
But Cargo Insurance Is Not All-Inclusive: Cargo insurance limits vary widely, depending on the commodities transported and the carrier's operations, and frequently contain limitations and exclusions. Common examples include:
Simply verifying the policy limit does not tell you whether your specific shipment is actually covered.
Reefer Breakdown Coverage: For refrigerated shipments, many carriers purchase a Reefer Breakdown endorsement. This endorsement may provide coverage if the refrigeration unit suffers a mechanical failure that results in cargo damage or loss. Without this endorsement, loss due to a refrigeration unit malfunction may not be covered, even if the carrier has Cargo Liability insurance.
General Liability (Commercial General Liability)
Unlike Auto Liability, General Liability is not federally required for motor carriers. Many smaller trucking companies do not carry it, while larger fleets and carriers with terminals, warehouses, maintenance facilities, or other business operations often do.
General Liability protects against claims arising from the carrier's business operations that are not related to operating a commercial vehicle. Examples include:
General Liability generally does not cover:
General Liability is a good complement to a carrier's insurance program, but it should never be viewed as a substitute for Auto or Cargo Liability coverage.
Trailer Interchange Insurance
If a carrier transports someone else's trailer, such as during a power-only move or a customer trailer repositioning, they should typically carry Trailer Interchange Insurance.
This coverage protects the trailer itself while it is in the carrier's care, custody, and control. Examples include:
This coverage protects the trailer, not the freight being transported, which would be covered by the carrier’s cargo insurance.
NOTE: Trailer Interchange vs. Non-Owned Trailer Physical Damage are terms often used interchangeably, but they are not always the same:
Because terminology varies among insurers, it is important to review the policy language rather than relying solely on the coverage title.
Unlike motor carriers, transportation brokers do not own trucks or transport freight. Instead, brokers arrange transportation with licensed motor carriers. Because their responsibilities are different, they carry insurance designed to protect against brokerage-related services and activities rather than the operation of commercial vehicles.
Errors & Omissions (Professional Liability)
Errors & Omissions (E&O) is arguably the most important insurance policy a transportation broker carries. It protects against claims arising from the broker's professional services. Examples include allegations of:
General Liability
General Liability protects the broker against ordinary business risks unrelated to arranging transportation. Examples include:
General Liability is not intended to cover cargo losses or third-party accident claims.
Contingent Cargo
Contingent Cargo is one of the most misunderstood policies in the transportation industry. It is not intended to replace the motor carrier's Cargo Liability insurance. Instead, it serves as limited backup protection under specific circumstances, such as:
Coverage varies significantly from one insurer to another, but it should never be viewed as primary cargo insurance.
Contingent Auto Liability
Contingent Auto Liability provides limited protection if a broker is named in a lawsuit arising from a motor carrier's accident, but only under circumstances covered by the policy. It does not replace the carrier's Auto Liability insurance and does not insure the truck itself.
Rather, it protects the broker against certain liabilities that may arise from arranging transportation.
Excess / Umbrella Liability
Many brokers also purchase Excess or Umbrella Liability insurance. This policy increases available limits over certain underlying policies, which most commonly General Liability and/or Contingent Auto Liability. It is important to understand that an Umbrella policy does not automatically increase the limits of every insurance policy. Whether it applies to Errors & Omissions, Contingent Cargo, or other coverages depends entirely on how the insurance program is structured.
A Certificate of Insurance (COI) is an excellent starting point—but it has important limitations. A COI does not tell you:
Insurance verification should always be combined with broader carrier vetting, including safety performance, operating authority, compliance history, identity verification, and ongoing shipment monitoring.
"The broker's cargo insurance is just another layer of carrier cargo insurance."
Not necessarily. Most Contingent Cargo policies only respond under limited circumstances and are not intended to replace the carrier's primary Cargo Liability insurance.
"If the broker has General Liability, I'm covered."
General Liability typically has nothing to do with cargo or truck accident claims.
"A $1 million Auto Liability policy means every truck is insured."
Only if the policy actually covers the truck being used. Always verify the applicable auto coverage types, not just the dollar amount.
"A higher insurance limit always means better protection."
Not always. The scope of coverage is often more important than the policy limit. A $100,000 Cargo policy that actually covers your commodity may provide significantly better protection than a $250,000 policy with exclusions that eliminate coverage for your shipment.
A strong transportation partner doesn't simply verify that insurance exists. They understand what each policy is designed to protect, recognize where coverage ends, and build additional safeguards around those gaps. However, insurance is only one component of transportation risk management. The right coverage matters, but so does selecting reputable carriers, verifying compliance, understanding policy limitations, and continuously monitoring shipments.
The most successful shippers aren't simply moving freight – they are managing risk. That starts with choosing a transportation management partner whose policies, technology, and carrier oversight are built for today's transportation environment. We have implemented that framework at SimPL from the beginning, If you'd like to see what that looks like in practice, we'd love to show you.