How Insurance Works in the Car Shipping Industry
Everyone shipping a car for the first time asks us the same question: “How does insurance work?” Car shippers have their own types of insurance policies; here is how it works in our business.
In order to do business legally, a carrier must have a certain amount of liability and cargo insurance, which varies depending on the type of truck, size of truck, and the type of cargo it will carry.
Most commonly, carriers are covered up to $1,000,000 for liabilities such as lawsuits and other third-party insurance claims.
Cargo insurance, on the other hand, will cover risks of loss or damage to the freight on the truck. If the carrier uses small trailers like a 1-4 open car carrier, coverage ranging from $175,000-$250,000 will be fine. When the carrier has larger trucks with 7-10 car open trailers, you should put their insurance under closer scrutiny. We require any carrier we do business with to have at least $500,000 in cargo insurance for larger trucks because, in the event of a major claim, we need to make sure all freight is covered in full. For an open 10 car carrier, that would cover $50,000 per car, which is more than the value of most cars on an open trailer. For enclosed car carriers, which haul collectible cars and exotics, you will need to ensure that the carrier has even more insurance to cover their freight.
Cheap shipping quotes are usually a result of lower quality equipment and lower insurance, leading to lower insurance overheads. If you like to gamble with your assets, then shopping around for the cheapest option might be fun. However, if you value your car and peace of mind, make sure your carrier has sufficient coverage to ship your vehicle. Ask for a certificate of insurance when you get a quote to confirm you are working with a respectable outfit.
What is the deductible?
Most trucking companies are not going to want to file a claim, as it could, and most likely will, affect their insurance premiums in the following year. The transportation industry is known for having low margins as it is, and any increase in expenses could put them out of business very quickly. Most carriers will opt to take a higher deductible in order to get the cheapest premium possible and therefore end up paying out of pocket for most damage claims.
Does your carrier have the means to pay the high deductible?
This is a question that nobody asks. If your carrier damages your car, and they have a very high deductible (between $5,000 and $10,000), they may be unable to pay it, leaving you with a damaged car, or no car at all.
Your carrier won’t just tell you how much they have in their bank account, of course. Here are some ways to tell just how comfortable your proposed car shipper really is:
- Equipment should be well maintained, and reasonably new. Ask for photos of their trucks!
- The company should have a website. Any reputable company that takes pride in what they do will have some type of online presence showcasing their work and equipment.
- Company longevity is a factor. Auto transportation has a very low barrier to entry; anyone with a pickup truck and a Class A driver’s license can open up shop and book jobs on a load board. Those type of shippers are usually moving cars on a paycheck-to-paycheck basis, so they’ll have very little money in the bank. Look for a carrier with some history. If they have stood the test of time, chances are they have the money to cover their deductible.
Shipping a brand new car?
Have you ever heard of diminished value insurance? When I ask this question to a driver/ carrier most of the time I get an awkward silence. Since it is not a requirement to operate a truck, most insurance companies don’t educate their clients about it, and trucking companies are blissfully ignorant to the need until they damage a new car. Cargo Insurance might cover the repairs, but it will not be enough to cover the diminished value of the new car, and the car is considered tainted now that it has been damaged. It’s been used and abused! Its value will be much lower as a result.
Ask the right questions when you are shopping around for a good auto transport company, and remember that the cheapest option is not always going to be your best bet. There is a reason they’re the cheapest, and it’s not that they put the customer’s needs first.