An Introduction to Freight Insurance: Everything You Need to Know About It

A freight insurance policy is a measure put in place by a third-party business that covers all or a portion of the value of your shipment.

An Introduction to Freight Insurance: Everything You Need to Know

One of your main duties as a shipper is to make sure that your products go from point A to point B in a timely, effective, and secure manner. Your business depends on shipping, which is also a major investment and an extension of your brand’s expertise. In that instance, you could be unsure of the significance of a freight insurance policy.

The answer is explained in detail here in our guide to understanding freight insurance coverage, as you will soon find out.

Freight Insurance: What Is It?

A freight insurance policy is a measure put in place by a third-party business that covers all or a portion of the value of your shipment. It is a policy that only applies to the shipper and their particular freight shipment and will only deal with their claims. If you are familiar with normal insurance policies (dental, health, vehicle, etc.), then you should have a basic understanding of how insurance works. This is especially true if you are familiar with the systematic framework of freight insurance.

You buy insurance that covers your cargo, agrees on its terms, and then a premium is paid based on an agreed-upon contract. Freight insurance coverage generally operates on the same idea as other insurances: more comprehensive policies will cost more, while less comprehensive policies will cost less. Typically, the policy will assess the whole worth of your cargo and base its charges on a percentage. Typically, this percentage is lower than the majority of “normal” insurance coverage.

There’s a 30 days limit to submit a claim if you encounter damages, loss, or theft (of course, this varies based on the type of policy implemented). After the claim has been verified, you will receive payment in accordance with the terms set out.

Why Do I Need Freight Insurance?

Here, we’ll discuss whether or not integrating policy is worthwhile for shippers given the expense and hassle of freight insurance. We’ll discuss the legal aspects of cargo in relation to this query. A shipper is not obligated to have insurance, in contrast to the motoring public. Your business is completely lawful to ship products without a policy.

The carrier liability coverage—which is distinct from freight insurance—is a requirement for your freight service provider. The company is responsible for transporting your merchandise by vehicle should, however, be compelled to carry insurance because they bear the majority of the risk. The inclusion of freight insurance policies in contracts or bills of lading is not a requirement for freight dealers, advancers, or third-party logistics providers.

Therefore, it is wise to do your study and fully comprehend freight insurance as even specialists may not always offer it as an alternative. Sadly, this is not consistent with how important it is.

Is It Worth Having It?

Never ask whether or if you should implement a policy; always ask why you should. Without cargo insurance, you must rely on third parties who do not wish to assume responsibility for the protection of your shipment. A shipper aims to maintain ownership of the value of its cargo from point of origin to point of destination without ever having to sacrifice it because of harm or loss. An insurance policy provides protection from that, making it an essential component of your shipment procedure.

You should assess your insurance choices to safeguard yourself from: 

• Issues with supply chain
• Negligence by carrier
• Acts of God

Advantages of Freight Insurance Services

The words “fear not, shipper; it’s between you and me” are found in a cargo insurance plan. It avoids all other stakeholders and, in an oversimplified manner, assumes exclusive responsibility for the shipment. If it’s stolen or damaged, all you have to do is present enough proof for your claim to be validated. The fact that freight insurance is not dependent on the shipping company being “guilty” of any wrongdoing is one of its many advantages. It addresses the cargo in a vacuum where it is placed.

More significantly, freight insurance gives you the power to decide how the agreement will be drafted. You may relax knowing that your policy compensates for any disasters, fully protects the value of your shipment, and covers its classification (theft, damage of all types, spoilage, etc.). It’s all in the language once more, and creating a contract offers you the power you need to ensure that you aren’t dependent on a policy that isn’t specifically tailored to your requirements.

In nutshell, freight insurance services have the following benefits:

• With freight insurance, a third-party entity is given exclusive control over your shipment. It merely requires evidence of losses or damages; it does not rely on carrier negligence. Depending on the policy, it may even cover deliveries that are late.
• You control and determine the agreement’s conditions. You won’t be in the dark about the policy, and you’ll approve one that meets all of your requirements.
• Rapid claims to process 30 days as opposed to nine months for reviewing liability insurance claims.
• In the bigger picture, when it is about end-to-end shipping delivery, freight insurance is very inexpensive. There is an approach that benefits all parties.

How To Choose The Best Freight Insurance Service?

Knowing your freight insurance coverage inside and out means being aware of insurance in general. Generally speaking, you should read the entire agreement from front to back, specifically to ensure there are no hidden clauses that could cause you trouble down the road. Nevertheless, if this is uncharted territory for you, we advise using a trustworthy insurance agent, an advancer, or a freight broker.

Freight/ Transport Broker

A freight broker should be competent in freight insurance, or at the very least partnering up with an agent, in in addition to developing the relationship between you and a shipping provider. It might be time to locate a new broker if your current one does not advise purchasing insurance. A professional freight broker should be able to create an effective policy as well as offer advice on freight insurance.

Insurance Agent

A trustworthy insurance agent who is experienced in the freight industry will be able to assess your business, select an insurance plan that fits your needs, and then carefully reads the plan to make sure there are no hidden fees or clauses. There are many excellent insurance brokers in the area, and they can help you navigate the procedure quickly.

Freight Advancer/ Forwarder

Although it’s not advised, a seasoned freight forwarder in the business should also be familiar with insurance and possess a network of reputable brokers. If you currently use a freight forwarder, get in touch with them and describe your needs; they must be able to suggest freight insurance coverage for you.

Bottom Line

We sincerely hope that this article helped you gain a better understanding of freight insurance and brought you some peacea of mind. Remember that insurance policies are not standardized and that much of it depends on knowledge, experience, and negotiation. The majority of experts will advise that a freight insurance policy be implemented, although the law does not require it. It’s ultimately up to your company to determine whether the juice is worth the squeeze.