What Is Freight Insurance?
Freight insurance provides additional coverage above and beyond the carrier’s default protection policy, which they are legally required to have. Typically, a carrier’s standard policy covers your shipment for a flat rate and doesn’t adjust based on your freight’s value. Depending on the carrier, you could look at a flat amount or a number that adjusts on a dollar-to-pound ratio. This may leave you with a payment smaller than your item’s true value.
Unfortunately, freight damage is a relatively common occurrence. It can happen due to any of the following reasons:
– Subpar packing
– Inadequate ventilation
– Poor distribution of cargo weight
– Wrongly declared cargo
– Heavy containers stored on light ones
– Motor vehicle accidents
– Natural disaster
If your item is worth more than the standard coverage amount, it is worth adding an independent policy to ensure that you’re covered if an accident occurs. At the very least, knowing that your cargo is safe and covered will provide good peace of mind for both you and your boss.
Buying Freight Insurance?
1. What does Freight Insurance Cover?
As we mentioned earlier, every freight shipment comes with limited liability coverage. This is either a flat rate policy or an amount that adjusts based on the weight of the item that you’re shipping. It does not necessarily reflect the actual value of the item that’s being shipped. It is not considered freight insurance coverage.
If your item is damaged during shipping, to file a liability claim, the carrier must be at fault for the damaged or lost item. Suppose your item faces injury as a result of subpar packing, loading errors, or weather-related issues. In that case, the carrier is not at fault, and therefore, the included policy will not cover damages. Additionally, if the damage or loss isn’t reported upon delivery receipt. It becomes very difficult to file a claim later on and prove to the carrier that the damage or loss was due to their miss handling.
These are just a few reasons why it is a good idea to purchase additional insurance, often referred to as cargo insurance, when shipping a valuable item.
That being said, it is also important to note that not all items are insurable. Some independent policies, for example, do not offer coverage for fresh foods, laptop and tablet computers, jewelry and precious stones, cell phones, boats, yachts, or household goods. When searching for your policy, be sure to verify that your item is eligible for coverage.
2. Understanding your Freight Coverage Options
When you purchase your cargo insurance plan, you must decide upon limits and deductibles. The verbiage and definition will vary from policy to policy. Generally, the limit refers to the maximum amount that the insurance provider will pay if your item faces damage.
The deductible refers to the maximum amount that you’ll have to pay out of pocket if your item faces injury and you have to file a claim. Increasing your deductible can help to lower the price of your insurance. However, be mindful of what you’re saving versus how much you’ll have to come out of pocket in the event of a claim. For example, check the premium for $500 versus a $1,000 deductible. If you’re only saving $5 on the premium to go for the $1,000 deductible, it’s not worth the savings. Explore all of your options before making a decision.
3. Check (and Double Check) your Shipment
It is vital to examine each item or pallet that ships thoroughly. Before you accept a shipment or inspect your freight for damage. Take the following steps to ensure your freight is covered by insurance:
– Document damages | Take pictures of each broken freight item (and any damaged packaging). Make notes of any missing items.
– Check all sides of the shipment | The pallet, the outside packaging, the shrink wrapping, the tags, the warning tape, etc…
– Open any package or pallet with visible loss or damage.
– Study the items with the driver, looking for further injury.
– Record detailed descriptions of this inspection.
– Once you have listed every issue on the delivery receipt, get the driver’s initial on the delivery receipt next to any damage/loss notes taken. It is most important that the driver’s copy has these notations on it, but preferably both the driver’s copy and the customer’s copy should have damage/loss notations on them.
4. What to do About Concealed Damage
– Alert the carrier immediately if you find any damaged or missing items after the driver has left and you didn’t notate the delivery receipt.
– Alert your Freight Broker and your freight insurance provider of the problem.
– Carriers must be alerted of any concealed damage or loss within 5 days of delivery. Check your insurance policy for details on the reporting requirements, as each insurance provider may differ.
– Retain all packaging and damaged freight. You do not want to dispose of anything, as the carrier or insurance company may request an inspection.
5. Document the Condition of your Freight
Before your shipment is picked up. Take photos showing the condition of the freight and packaging. Many insurance providers will request photos of the freight before it is picked up. In the event, your freight is lost by the carrier. Having these photos will help assist the carrier in locating your freight.
Ship With FreightCenter
Are you having trouble buying freight shipping insurance or have questions about the entire freight shipping process? Give FreightCenter a call at 800.716.7608. We can help you navigate the freight shipping world and steer you in the right direction for your next shipment. Don’t have time to call? Run a free online freight quote today to see how much you can save.