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Motor carriers and freight brokers must follow all requirements, rules, and regulations set by the Federal Motor Carrier Safety Administration (FMCSA). Among those requirements, they must have the proper level of insurance coverage.
Take a look at what is required by this government agency for both motor carriers and freight brokers.
Required Coverage for Motor Carriers
The FMCSA requires motor carriers to have liability and cargo insurance.
Commercial Auto Liability Insurance
Liability insurance is one of the most important types of coverage required by the federal government. It provides coverage for accidents where the truck driver or motor carrier is at fault and pays for the accident victim’s injuries and property damage.
Motor carrier liability insurance will vary depending on the type of goods hauled. An interstate general freight carrier is required to carry a minimum of $750,000 in this coverage. Those carrying hazardous materials are required to meet the minimum coverage of $5 million.
Cargo Insurance
Cargo insurance is also required by the FMCSA for commercial trucks. Any motor carrier that hauls household goods must have at least $5,000 per vehicle and $10,000 per occurrence. Cargo insurance is not required for carriers that transport other goods, but it is recommended. If you’re a motor carrier, you may find that shippers and brokers shy away from a company that doesn’t carry this coverage.
Freight Broker Insurance Requirements
Freight brokers are also required to have certain types of insurance coverage.
Vicarious Auto Liability
Also known as contingent auto liability, this coverage protects freight brokers if the motor carrier gets into an accident doing a job the broker has set up. The broker could be held liable for property damage or personal injuries from a trucking accident.
Freight brokers need to conduct due diligence when choosing a motor carrier for a job because liability could be extended to the broker.
Vicarious Cargo Insurance
Vicarious cargo insurance, or contingent cargo insurance, protects freight brokers from cargo loss or damage when the motor carrier’s liability insurance doesn’t provide enough coverage. It can also provide coverage when the motor carrier doesn’t have full coverage for damaged cargo.
Just like vicarious liability insurance protects a broker from being sued for personal injury and property damage, vicarious cargo coverage protects against cargo loss or damage. Determining the replacement value of the cargo will vary based on the motor carrier’s liability coverage. Since there is usually a gap between the value of the cargo and the calculated value, the coverage closes that gap and protects the freight broker.
How to Get the Right Insurance Coverage
Insurance can often be confusing, and in the trucking industry, it is imperative to ensure you’ve got the right protection. Whether you are a motor carrier or a freight broker, you should check to see if you have coverage that meets the mandated requirements.
You may also find that optional additional coverages are helpful in protecting your business. They come at an added expense, but they can be priceless when you need extra protection.
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