Keys to Shipping Happiness Part 6: How Freight Insurance Works

June 21, 2018 by Mikayla Avila Vila
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Shipping freight can be a little stressful, which is why we’ve put this guide together to make sure you remain a happy shipper. There’s a lot to keep an eye on, but with the right precautions taken before your cargo hits the road (or sky, or sea), you can plan and ship without giving it a second thought.
Finding the right policy takes time and planning. The world of insurance is vast, sometimes confusing, but it doesn’t have to be. In this part of our series we want to break down some insurance terminology, and what goes into the process of filing a claim in the event of damage or loss.

What is Cargo Insurance?

Cargo insurance policies are there to protect your freight against loss and damage. No matter the mode your freight is traveling you can find a policy with suitable coverage for what damages or losses the journey may incur. This insurance will protect your goods from origin to destination, and there are many different types of coverages available to ensure you have the best protection for your freight.

What All Risks Freight Insurance Can Offer

From the moment it’s with the carrier to the instant it’s with the consignee, All Risks freight insurance is there to cover unexpected property damage. However, “all risks” is not to be taken literally. While the coverage all risk provides is extensive, it’s still limited and shippers should familiarize themselves with the limitations and exclusions of their policy before purchase.
This is different from named perils coverage, which, like the name indicates, only covers the specific damages named on the policy.

What Other Coverage is Available?

There are a variety of coverages available for your freight. Familiarize yourself with the variations before making your purchase. Coverage is not catch all—consider what you’re shipping and how it will be traveling. Here are some different classifications:

  • Annual – This policy stays on the records for a year, and involves sharing in-depth information about the company’s shipments, the maximum value of the freight in any one shipment, and annual turnover. This is perfect for frequent shippers, so you know each freight shipment is taken care of in advanced.
  • Named Perils – Named Perils insurance covers damages caused by perils that are specifically listed in the policy.
  • Open Cover – Open cover policies provide coverage to all shipments, no matter the value, from beginning to end, and have no expiration date.
  • Single Shipment – This is a one-time only policy that applies to a single shipment. It covers a shipment from origin to destination, and takes the least amount of time to generate.
  • Total Loss – Total loss means that your goods are protected in the event of catastrophic events or total loss. It does not cover a partial loss.

How Much Cargo Insurance Do I Need To Buy?

It’s typical to have all your bases covered when you purchase insurance. This includes the invoice cost of the freight being shipped, freight costs, and whatever additional expenses are related to the shipping cost (think of it like tipping—10% is okay, 20% is ideal).

Without Additional Insurance, Limited Liability is Truly Limited

Why Insure Your Cargo?

There’s insurance for every occasion, and in the world of freight shipping—with freight moving from forklift to forklift, trailer to trailer—carrier liability simply does not have the scope shippers require to maintain peace of mind.

The Carmack Amendment dictates that carriers legally have a legal financial responsibility to their customers if freight is damaged in transit, but only to a certain amount. Limited Liability coverage promises cents on the pound of the total weight of cargo if the shipper can prove negligence. Built-in coverage appears as a good enough safety net when planning shipments, but many damages accrued between points A and B often fall outside of the carrier’s scope.

For instance, the carrier is not liable for Acts of God (extraordinary weather events, like hurricanes or tornadoes), strikes or riots, shipper/packager error, or if the delivery receipt was signed clean.

While all shipments come with limited liability, carrier liability only covers a certain dollar amount per pound. The threshold changes depending on the mode of transportation. This is never enough to cover the total financial damages done to your shipment.

For domestic carriers, the limit can be 50 cents per pound. For international air, the limit is $20.00 per kilo, or ~2.2 pounds. For international ocean carriers, the limit is $500 per shipping unit (most standard shipping containers are 20 feet long and 8 feet high).

If you choose to ship dependent on carrier liability alone, there are a few things thing to keep in mind when preparing to file a claim:

  • Note any and all visible damage on the delivery receipt, even minor damage like dents, tears, rips, crushed or broken shrink wrap on boxes, pallets, or crates.
  • Make sure that all the freight on the delivery receipt is accounted for. Any missing pieces should be noted.
  • Open and inspect your freight for concealed damage.
  • The timeline for filing is dependent on whether your freight’s damage is concealed or visible. For visible damage, a claim should be filed within 9 months of delivery. However, if the damage is concealed, you’ll have a minimum of 5 days to file the claim, though this is dependent on the carrier.
  • You must provide proof of value and proof of loss (consignor and consignee should take photos of the shipment)
  • You must be able to prove carrier oversight, and that the cargo received was in perfect order at pick up, and was damaged in transit

For more information on the differences, read our blog, Carrier Liability, Freight Insurance, and You.

The Conundrum of Declared Value Explained

Declared value of freight can be a place of disagreement between shippers and providers, even with guidelines in place. The value of a piece, or pieces, of freight is based on sales value.

This means that a shipper purchasing insurance for their freight may declare a piece to be worth $1,000 because that is what they believe it’s worth, but the purchase price of the item is actually $500. Your insurance company will request a purchase receipt, and the claim paid will be according to the price you paid for the item, not its believed worth.

Anatomy of A Freight Insurance Claim

There’s a process to filing damage claims with your insurance providers, especially when you’ve shipped through a third party logistics company like FreightCenter. Accidents happen, but fortunately you have expert freight agents to walk you through the claims filing process. They are there to be your intermediary.

Step One: Filing A Damage Claim With The Carrier

The first step is to file a damage claim with your carrier. You’ll submit a small package of documents necessary to expedite the claims process. These are:

  • Proof of purchase and the freight’s value
  • Photos of the damage
  • Repair estimate with the charge explained
  • Documentation pertaining to the packaging

Our freight agents will use this information to prepare a claim against the carrier. It’s important to note that the damage claim with your carrier and the insurance claim with your provider are handled separately. You will have to contact your insurance provider for that part of the claim.

Step Two: Filing An Insurance Claim

The next step is to file an insurance claim through your provider. This example is specific to FreightCenter’s relationship with Falvey Insurance.

The insured will be required to provide several pieces of documentation, including each of the following.

  • A completed Falvey Shippers Insurance claim form
  • A copy of the Carrier’s tracking report
  • Bill of lading
  • Signed delivery receipt
  • A copy of the invoice and/or sales receipt
  • Photos of damaged goods and packaging
  • An itemized repair estimate if applicable
  • Any other documentation specifically requested by adjusters representing Falvey Shippers Insurance

The more detail, the easier it will be for your insurance provider to help the claims process along.

Filing A Claim For Lost Freight

If your tracking team notes that your freight has been lost or misdirected en route to its delivery point, you will be notified.

When this occurs, immediately file two claims for lost freight, one with the carrier and second with the insurance company. Should luck be on your side and the freight is found and delivered undamaged to its destination, you can go ahead and cancel your claim. Never underestimate the power a pending claim has on relocating freight.

Our Partner, Falvey Insurance

FreightCenter is partnered with Falvey Shippers Insurance, a full-service freight insurance provider. When you book a shipment through us, you have the choice to add Falvey coverage onto your shipment, allowing for you to reap the benefits of our partnership—part of which means no additional paperwork. You just add it to your booking and you’re good to go.

Falvey Shippers Insurance has a variety of other perks as well, such as:

  • No deductibles
  • Full-value reimbursement of lost and damaged shipments
  • Coverage for catastrophic events (floods, hurricanes, tornadoes)
  • Coverage for international shippers (some exclusions apply)
  • Door-to-door coverage
  • And many others

If Falvey Can’t Provide the Coverage You Need

There may be circumstances in which Falvey cannot cover your shipment.  While FreightCenter does not recommend or endorse any insurance provider other than Falvey Insurance, we do advise all our customers that coverage may be available from other insurance companies.

Ship Worry Free

You have enough to worry about when you start shipping freight. Avoid the migraine of potential loss and get your bases covered with freight insurance, and you’ll be a happier shipper in no time.

Ready to go with your next LTL shipment? Get an instant freight quote or call one of our shipping experts at 800.716.7608.

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