The Importance of Freight Insurance


As a business owner, you know nothing is certain. On the other hand, your customers demand certainty from your products and services. Millions of things can go wrong when shipping freight. Supply chain logistics are typical of accidents, spoilage, damage, theft, and more. An easy way to increase certainty in your business and maintain happy customers is to invest in freight insurance.

The main objective of all types of insurance is to protect your most important assets. You purchase insurance for your health, technology, car, and home, so why treat your freight any differently? Freight insurance benefits your business and stakeholders in the long run when issues arise.

Freight Insurance vs. Carrier Liability

Carrier liability and freight insurance are often mistaken for one another since they both protect your cargo. However, it is crucial to understand their key differences to ensure you make the right decision for your business.

Carrier Liability

Carrier liability is the minimum amount of coverage available for your freight. Every shipment you book includes a small coverage, typically included in the total rate. The carrier determines the coverage you will receive based on your load and company policies. Often, carrier liability far underestimates the value of your freight and only covers a small portion of your loss or damage. For example, a carrier may protect up to $0.25 per pound for LTL or a max fixed dollar amount for full truckload shipments.

The process of filing a claim and receiving compensation is difficult and often unsuccessful since you will only be covered under carrier liability if you can prove the incident occurred due to the carrier’s fault. This coverage can be problematic when you are shipping valuable or fragile goods. Investing in insurance is usually a better choice for additional protection on your freight to protect your bottom line.

Freight Insurance

Unlike carrier liability, freight insurance, also known as cargo insurance or goods in transit insurance, will protect your freight under various circumstances at a better rate. You will receive more compensation when accidents occur by investing in freight insurance, no matter how large or small your claim is. Natural disasters, pandemic-related shutdowns, loading and unloading errors, infestation, abandonment, theft, customs rejection, fraud, and more are all covered under freight insurance only. The uncertain repercussions of COVID-19 uncovered even more reasons to invest in freight insurance and shows why it is more important now than ever.

Types of Freight Insurance

Land Cargo Insurance

There are two types of freight insurance based on transportation: land cargo and marine cargo. As the name implies, land cargo insurance provides coverage for your goods moved on the road. However, land cargo insurance is typically only applied to domestic shipping.

Marine Cargo Insurance

If you are moving products internationally, consider investing in marine cargo insurance. Marine cargo insurance protects transported goods via air or water. Marine cargo insurance is crucial since shipping overseas is more complex than moving domestic LTL and FTL shipments. In 2020, there were 229 incidents of maritime piracy, resulting in hundreds of injuries to crew members, damage to cargo, and hijacked ships. If your business ships internationally, take your time researching marine cargo insurance options.

Types of Freight Coverage

Don’t be surprised if a freight insurance broker offers you different rates depending on how frequently you ship freight. As a result, coverage policies can vary to meet your business needs.

All Risk Policy

All risk coverage provides you with the most certainty against external risk. In addition, it will provide compensation for damaged freight due to natural disasters, negligence, poor packaging, customs rejection, abandonment, WSRCC (war, strikes, riots, and civil commotions), loss of use or market, failure to pay or collect, and more.

Named Perils Policy / Free of Particular Average Coverage

Named perils policy, also known as “free of particular average,” protects your freight against damage caused by the ship. This policy includes collision, sinking, derailment, non-delivery, heavy weather, fire, and theft.

Single Policy

Also called voyage policies, a single coverage policy is an excellent option if shipping irregularly via maritime. For example, if you begin introducing your business to the international market and start small, a single coverage policy is your best choice.

Warehouse-to-Warehouse Policy

This coverage policy is standard in a B2B supply chain setting. Warehouse-to-warehouse policies protect your shipment when transported from a cargo ship to a warehouse. This policy typically includes maritime cargo insurance, but it is important to specify this beforehand with your carrier.

Contingency Policy

Contingency cargo is strongly affiliated with freight brokers. For example, sometimes products are damaged in transit, and the carrier may refuse to pay. A freight broker steps in with a contingency policy and can compensate for your claim.

General Average Policy

General average policies are less common but still important to understand. With a general average insurance policy, you share the responsibility for the damaged cargo with all stakeholders. For example, costs incurred from a fire that damaged 15 percent of freight on board will be split amongst all owners and shippers. Therefore, average general insurance can protect you from these costs.

3PL Assistance with Freight Insurance

Now that you understand the importance of freight insurance, it’s time to act. Working with a third-party logistics company ensures another level of protection for your freight. When loss or damage occurs, you do not want to be left alone and without a plan.

PLS Logistics partners with one of the largest global insurance providers with underwriting authority secured 100%. PLS’ shipping insurance covers your shipment’s total value at a very reasonable rate. In addition, we provide all-risk coverage on domestic shipments. Get a free freight quote on your freight today and see why PLS is one of the country’s leading logistics management service providers.

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