Whether you’re dealing with freight or cargo, unforeseen disruptions or damage can happen, and that’s where freight insurance comes in. It helps safeguard your goods and reduces potential logistical headaches. But with so many options available, how do you choose the right coverage for your needs? Don’t worry, we have got you covered.
In this complete guide to freight shipping insurance, we’ll break down everything you need to know to protect your shipments and keep you on track. Let’s get started!
What is freight insurance?
Freight insurance is a policy designed to protect your goods from loss, damage, or theft during transportation. Think of it as a safeguard for your cargo – if something goes wrong, you’re financially covered.
Many shippers mistakenly believe that carrier liability offers full protection, but that’s not the case. Carrier liability is often limited and may not cover the total value of your goods.
Generally, you can purchase freight shipping insurance from the forwarding agent or a third-party insurer. If an incident arises, the insurer compensates you for the value of your shipment so you can minimize losses and avoid bearing the total cost yourself.
Freight insurance vs. carrier liability
Carrier liability refers to the carrier’s limited responsibility for any damage or loss during shipment. But it typically covers much less than your cargo value.
Here are the main differences between freight shipping insurance and carrier liability:
- Value of goods covered: Carrier liability generally offers much lower compensation than freight ones.
- Incidents covered: Carrier liability only applies under specific conditions outlined in the contract, while freight insurance offers broader protection.
- Claims process: Carrier liability requires proof that the carrier is at fault for damage or loss. Conversely, freight insurance may compensate you even if the carrier does not pay the freight claim.
Freight shipping insurance has different types depending on your specific needs. You can choose coverage based on factors like duration, potential risks, or the level of protection required.
Types of freight shipping insurance
- Cargo insurance: This is the most commonly used type in international trade. It covers physical damage or loss of goods during transport, including options like air cargo insurance. Typically, it can be arranged by the shipper, buyer, or a third party.
- Liability insurance: Protects against claims from third parties for bodily injury or property damage, making it crucial for freight forwarders and logistics companies.
- All-risk coverage: This type of freight insurance covers various potential risks and offers the most extensive protection. However, it is also the most expensive option.
- Named perils coverage: This policy covers losses resulting from specific, listed risks, providing more focused protection tailored to particular concerns.
- Average coverage: Exclusive to maritime shipping, this insurance spreads the cost of losses among all stakeholders if a principal sacrifice is made for the safety of the voyage.
Within cargo insurance, there are three primary levels of cover:
- Basic cover: This provides minimal protection against significant incidents, such as accidents and natural disasters. As the lowest level of coverage, it is not advisable for high-value or sensitive items.
- Broad cover: This option builds on basic coverage by added protection against theft, non-delivery, and other risks. It serves as a solid mid-tier choice for many shippers.
- All-risk cover: Offering the highest level of protection, covering all risks unless specifically excluded. It is particularly recommended for valuable, fragile, or critical shipments.
Moreover, different freight modes present unique risks and insurance requirements. For instance:
Air freight insurance
While air shipping is quick and efficient, it comes with specific risks, such as handling airport delays. Air freight insurance can safeguard against these particular challenges and may also cover the cost of the freight itself along with related charges.
Container shipping insurance
Sea voyages face hazards like rough weather, port congestion, and the loss or damage of containers during transit. A good container shipping insurance will protect you from these marine-specific risks.
What freight insurance coverage?
- Theft, pilferage, and non-delivery of goods
- Physical damage caused by accidents, mishandling, or severe weather
- General average sacrifice in sea freight incidents
- Loss of cargo overboard during sea travel
- Customs rejections or delays
- Normal wear and tear or gradual deterioration
- Inadequate packing or labeling of items
- Employee dishonesty or intentional harm
- Losses related to delays, unless specifically covered
- Risks from war, strikes, or civil unrest, unless explicitly included
Always take the time to thoroughly review your policy documents to know what is included and what is not.
How much does it cost?
On average, freight insurance premiums range from 0.3% to 0.5% of the commercial invoice value of the goods. But the cost can fluctuate depending on:
- The type and value of the shipped goods
- The destination country and shipping route
- The mode of transportation (air, sea, road, or rail)
- The level of coverage selected
To help reduce your freight shipping insurance costs, consider these tips:
- Opt for the right amount of coverage
- Provide accurate declarations and documentation to avoid disputes
- Choose a reputable freight forwarder like Airsupply with a strong safety record
How to file a freight insurance claim？
Immediate notification
As soon as you become aware of any loss or damage, inform your insurance or freight provider immediately. Prompt reporting is crucial for initiating the claims process.
Complete the claim form
Request a claim form from your insurer and fill it out thoroughly. Be specific and accurate in your description of the incident, including details of the damage or loss.
Gather preliminary evidence
Collect key evidence to support your claim, such as photographs of the damaged goods, shipping documents, or an initial damage report. This evidence will help validate your claim and ensure a smooth process.
Keep in mind that claims are typically processed and paid within 30 days, much faster than the months-long process some might expect.
How to choose the right insurance?
Start by evaluating the goods you typically ship and the transport modes. Identify any unique risks related to your cargo or shipping process.
Second, review what your carrier’s insurance covers and where it falls short. It will help you spot any gaps in coverage that need to be filled. Then, choose between basic, broad, or all-risk coverage depending on your cargo’s value, potential risks, and budget.
With the appropriate freight shipping insurance, you can ship confidently, knowing your cargo is well-protected.
At Airsupply, we’re here to simplify the complexities of international shipping and make the process easier. We also offer expert guidance to help you choose the ideal freight shipping insurance.
