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