I have found that there is a fair amount of confusion about insuring cargo and utility trailers. Some people have heard that coverage is automatic for trailers, while others have been told that they have to add insurance on the trailer for it to be covered. Which of these is true? Well, both actually!
There’s really two different types of coverage you may need or want for your trailer, and they work different ways under auto policies.
The first and most important coverage you need for your utility or cargo trailer is liability protection. Not only is this required by state law, but you also want it for your own peace of mind. If you swing too wide and hit something or someone or if your trailer becomes detached while driving down the road and causes damage or injury, you want to know that your insurance will cover your legal obligation to make things right financially.
The good news is that your Personal Auto policy* likely extends Liability coverage to whatever trailer you are pulling, either on a primary or secondary basis, in most cases. (A “secondary” basis would mean that if you are borrowing the trailer from someone else, the owner’s Auto insurance may be first in line to pay before your insurance.) So, if you have a valid Personal Auto policy* providing Liability coverage on at least one vehicle, this should cover you while towing a trailer in most circumstances.
There are some restrictions to this automatic Liability coverage for trailers. Generally speaking, the trailer needs to be small enough to be easily pulled by your personal vehicle. Your policy probably doesn’t provide coverage for a trailer owned by someone else but furnished or available for your regular use. (However, the owner’s policy might provide this coverage, if he or she is insured.) Your policy might exclude coverage for both your auto and your trailer while making deliveries or certain other business activities. (Other exclusions may apply; so you should read your policy carefully.)
To summarize, we’ve established that in most cases, you’ll have liability protection for your cargo or utility trailer without needing to specifically list it on your policy. For this reason, the state of Minnesota does not require you to show proof of insurance for a personal-use trailer.
But Liability coverage may not be the only insurance you desire. You may also want physical damage protection for your cargo or utility trailer. Meaning that if you swing too wide or make an error backing up, not only do you want to cover whatever else you damaged, you also want the damage to the trailer itself to be insured. In addition, you’d might also also want to make sure that your trailer is covered while parked - if a tree falls on it, if another vehicle backs into it or if the garage it is stored in burns down.
Unlike with Liability, your trailer is not automatically covered for physical damage under your Auto policy. Your Auto policy only provides Comprehensive and Collision coverage for owned vehicles that are actually listed on the policy. However, believe it or not, your Homeowners policy may provide a small amount of physical damage coverage for trailers, but this is usually limited to a small payout (often $1500 or so) and is also subject to your Homeowners deductible; so relying on Homeowners coverage is not a good solution either for a cargo or utility trailer worth several thousand dollars.
The bottom line is that if your cargo or utility trailer has some value that you would like to protect, your best option is usually to add it to your Personal Auto policy as an additional vehicle. Unlike insuring your cars, you will typically only pay for physical damage coverage, since Liability coverage extends to your owned trailer without additional premium. Covering cargo and utility trailers this way is relatively inexpensive; you will likely find cost to be between $5 and $10 a month in many cases.
Once you add Comprehensive and Collision coverage for your cargo or utility trailer, you can feel confident that its value will be protected against covered mishap, both while you are pulling it down the road and while it is parked in your yard, driveway or garage.
I hope this information has been helpful to you in understanding what coverage you already have, along with what additional coverage you may optionally desire to add for your cargo or utility trailer.
This post summarizes auto coverage under common Minnesota Personal Auto Policies only and only for non-commercial, personal use trailers. Coverage may vary in other situations. You should read your policy carefully for a full understanding of its terms and conditions. *Coverage for trailers you are pulling under a Minnesota Personal Auto policy assumes that you are a Named Insured or the resident relative of the Named Insured on the policy.
Ken Cobb is owner of Pine Country Insurance and has been active in the insurance industry for over 15 years. Meet Ken.
Coverage descriptions found in this blog are summaries provided for general educational purposes and cannot fully detail the terms, conditions, limitations or exclusions of a specific insurance policy. Please read your policy carefully.