Top 6 Ways to Lower Your Cargo Insurance Rates
Cargo damage is one of the biggest threats to any trucking business. When on the road, your shipment is vulnerable to innumerable risks due to fire, vandalism, theft, etc. Most probably you have patched these likely and unlikely dangers in the form of cargo insurance.
However, you can protect the shipment in the supply chain with this policy but keeping up with its premium can give you a tough time.
Why?
The rate of cargo insurance premiums is likely to jump 8% very soon. Whether you are about to purchase this coverage or need to renew it in a couple of months, the experience is going to be pocket-digging.
Well, we are here to give you a sigh of relief. There are some little-known ways to lower your cargo insurance rates and we will introduce you to all of them.
So, without further ado, let us help you save thousands on your next cargo insurance and make its premium slightly more comfortable. Let’s dive in!
Tips to reduce the cargo insurance rates
After getting your own trucking authority, obtaining cargo insurance is essential if you take your business seriously. Due to the increasing importance of this coverage, the cargo insurance market is expected to reach $87.2 billion by the end of 2031.
Truck cargo insurance is a necessity but it doesn’t come cheap. But there are certain things that can be tweaked for saving a decent amount of money on your next cargo trucking insurance.
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Stick to your requirements
As a trucker, you should know the quantity and the value of the shipment you haul frequently. If you haul normal cargo there is no point in taking pricey coverage and paying high premiums. Whereas, if your trucking includes moving highly-valued freight, opting for high coverage that offers good protection makes more sense.
On the basis of value, specialty, and the quantity of the cargo, you can analyze the amount of coverage you actually need. Once you know it, avoid going overboard and stick to your requirement.
Check for the flexibility
Your trucking business is going to scale in the future, and so as your requirements (even basic ones). Also, there will be events when you will require extra insurance coverages which your existing policy doesn’t offer. Your insurance provider should give you the freedom to modify your policy quickly without charging much.
The flexibility to modify your existing cargo insurance prepares your operations against likely risks. This makes sure that you don’t suffer hefty freight losses as you will get covered for all the damages that you have covered in your policy.
Be cautious on the road
Accidents are inevitable but the way you handle them is highly taken into account while calculating insurance premiums. If you want to avoid higher commercial truck insurance rates, consider keeping your track clean as much as possible.
You can minimize the risk of accidents if you follow these practices whenever you are with the shipment on the road.
- Double-check the blind spots.
- Avoid distractions.
- Keep your trucks maintained.
- Avoid taking bad routes or those with ongoing constructions.
- Keep yourself updated about the likely events in your traveled route to avoid crowds and delay.
- Keep a check on your cargo and truck while taking halts.
Increase your deductible
Increasing the amount of deductible is another excellent way to reduce cargo insurance costs. A deductible is money that you agree to pay before your insurance provider pays at the time of claim. If do a little modification in your deductible amount, you can save a lot on your cargo insurance premiums.
If you can pay the maximum amount at the time of the insurance claim, you can increase the deductible and enjoy low policy premiums throughout. However, make sure that you choose a comfortable figure because it shouldn’t be financially burdensome.
Don’t get swayed away
If you think that you have got the best deal on the first shot, don’t get swayed. You need to be double-sure about everything if you are serious about saving money on your insurance premiums. Obtaining quotes from multiple insurance providers might seem a hassle to you but it can save you a lot of bucks.
Considering multiple options not only helps you avoid paying extra but also increases your knowledge about the industry. It is clearly a win-win deal. Once you have the final list of shortlisted insurers, you can select the one that offers the right cargo truck insurance coverage within your budget.
Work on risk reduction
Transportation of cargo involves many risks. If your trucking is exposed to higher risks then expect to pay higher premiums for your cargo insurance. Fortunately, you can lower your cargo insurance premium rates if you work on a risk reduction strategy.
How? Disaster preparation, constant training of the drivers, and taking safety and theft prevention measures all are part of the risk management strategy. These measures help in reducing the chances of a claim. When you manage and reduce the risk in your operations, the cargo insurance rates definitely go down.
Now, these are all the measures that you can take to lower cargo insurance rates. But!
Do you know what factors increase the cargo insurance price? Let us quickly look at the major causes behind this phenomenon.
What factors drive the cargo insurance rates?
There are many aspects that come into play while calculating cargo insurance costs for any trucker. The following are the major driving factors that impact your premiums.
Shipment destination: What is the destination of your cargo?
The destination and the route that you take for the delivery of the cargo highly drive the cargo insurance costs. The shipping routes of your destination are sometimes riskier and insurers highly take this point into account.
Shipping to mountainous, remote, or snowy areas impacts the cargo insurance price. Also, driving through areas that are high on vandalism, theft, politically unstable, or piracy are also considered risky routes where the chances of cargo damage are higher.
Insurers consider such routes risky and hence quote higher rates for the policy and its premium. They evaluate the associated risks on the route and the destination, take a detailed picture of your trucking business, and come to the final cargo insurance rates.
Type and value of shipment: What type of cargo do you haul and how much is the worth?
The worth and the type of shipment play a crucial role in deciding the cargo insurance costs. Hazardous products if leaked during transportation possess a risk to life, so it needs specialty coverage like hazmat insurance.
Goods that are worth high value like jewelry, precious metal, artwork, etc. are vulnerable to burglary and breakage, so the cost is decided after considering the value of the shipment.
Commodities like pharmaceuticals, seafood, etc. are highly perishable and time-sensitive in nature. The complexity of the policy depends on the type and value of the shipment. All these aspects are factored in to estimate your premium.
Level of coverage: What type of coverage you have opted for?
The coverage level of your cargo insurance greatly drives its cost. The more you opt, the higher will be the premiums and vice versa. The following table will give you a fair idea of the annual cargo insurance costs on the basis of the coverage limit.
| Coverage limit | Annual cost |
|---|---|
| 50,000 | $400 to $700 |
| 100,000 | $800 to $1400 |
| 250,000 | $1100 to $1800 |
However, the price should not be the only factor to decide the coverage limit. If the hauled cargo is precious, consider taking a higher coverage limit. Whereas, if the shipment doesn’t come under a specialty class, there is no point in taking bigger coverage. It is simple, the more you transport cargo, the more coverage you would need.
History of loss: How often you have filed the claim in the past?
When you apply for cargo insurance coverage, your loss history and the number of filed claims are factored in to calculate the premiums. If your driving records are date-stamped with involvement in accidents or traffic violations then your insurance rate would jump on the higher side.
Whereas, if your track records are clean and you have not frequently filed insurance claims then your cargo insurance rates will drop. Try to maintain decent driving records and take good care of your truck to minimize the likely cargo damage in the journey.
Deductible ratio: How much are you paying out of your wallet?
Whenever a cargo insurance agreement is signed, the insurer and the insured agree to share the financial risk in a specific ratio. Although you get reimbursed for the cargo loss, you are still liable to pay a part of the entire damage. This ratio is known as the deductible that you choose to pay to the insured.
The higher the deductible amount is, the lower will be the premiums, and vice versa. The amount that you are comfortable paying out of your pocket drives the cargo insurance rates.
Now, these are some factors that impact the average cost of truck cargo insurance. However, do you wonder why cargo insurance rates are peaking off lately? Well, let us introduce you to some economic factors that causing this phenomenon.
Increasing cargo insurance rates: Economic factors
When you are into transportation, you should have a good understanding of all the aspects that increase cargo insurance rates including the economic factors.
Supply chain issues
The supply chain is disrupted to a great extent, especially after the pandemic. And there are no signs of improvement in the next 3 to 5 years. Shortage of supply chain improvement leads to unforeseen delays, disruption in driving schedules, etc. This increases the cost of cargo insurance as the shipment that you hold tends to lose its value after a certain period, especially when the freight is time-sensitive and perishable.
Inflation
Many experts have predicted that the prices of goods are going to drop in the coming future. However, the cost of labor and material is still taking steep. When the cost of resources, materials, and the commodities you haul increases, the price of the cargo insurance premium also does. How? You need to pay 60% of the total value of the shipment. This augments the price of your insurance premiums.
Road conditions
No matter how vigilant you are about your shipment route, you can’t avoid bad or ongoing construction on roads. Underway constructions, holes, ruptures, etc. cause risks to the truck as well as the shipment inside it. The chances of damage to the cargo increase in such routes. This economic aspect led to an increase in cargo insurance rates because the involved risk is high.
Insurance market
Economic factors make it challenging for insurance companies to increase their return on investment (ROI). To make desired revenue, they supplement the price, especially when taking a high level of coverage when risky or highly valuable cargo is involved in the transportation.
The higher the risk, the more the cargo insurance rates. Here is the list of items for which insurance is a bit pricey:
- Large machinery.
- Valuable electronics.
- Perishable goods.
- Corrosive, inflammable, or explosive materials.
- Precious/luxury items.
All these items hold extra hazards for the insured during the entire hauling process. In such cases, they try to strike the balance between their profit and the amount of covering the risk for the insured. Therefore, the cost of cargo insurance for these items will always be on the higher side.
Frequently Asked Questions
There are a variety of factors that affect the total cost of cargo insurance as mentioned in the blog. However, you can expect to pay around 0.5% of the total cargo value. The average cargo insurance rates range between $400 to $800 per year.
All the mentioned tips can help you lower cargo insurance rates. You can get in touch with us to obtain the right coverage at your affordability.
The claim payout greatly depends on the size and complexity of the cargo insurance. The availability of needed documents and terms & conditions of the policy also matters when it comes to the policy claim.
If your trucking operations involve the transportation of different types of freight, carrying cargo insurance is necessary to protect the shipment against various risks.
The driving record, amount of deductible, level of coverage, value of freight, etc. affect the cargo insurance costs for carriers.
Keeping your trucks maintained, shopping around for good insurance deals, and maintaining good driving records can help you save thousands on your cargo insurance.
Parting Thoughts…
When you are in the market for cargo insurance, consider all the aforementioned points to lower the impact of premiums on your financial health.
With these tips, you not only save money on your cargo insurance rates but also get the best deal out there.
Always remember, whenever you shop around for cargo insurance, don’t give ‘the cost’ all the importance. Your cargo policy should best fit your operations and matches your trucking requirements. Get in touch with us to customize your truck cargo insurance within your budget!
