Understanding Freight Insurance: What Shippers Need to Know

Freight Insurance vs Carrier Liability

Many shippers confuse carrier liability with cargo insurance. Understanding the difference can save you thousands when something goes wrong.

Carrier Liability

Carriers are legally liable for damage to goods in their possession, but their liability is limited:

Important: Carriers often limit liability to $0.10–$0.25 per pound in their rate confirmations. A 40,000 lb shipment at $0.10/lb = only $4,000 coverage for potentially $500,000+ worth of goods.

Cargo Insurance

Cargo insurance provides all-risk coverage for the full value of your goods. Types include:

• Single shipment policy: One-time coverage for a specific load
• Annual policy: Blanket coverage for all shipments in a year
• Open cargo policy: Continuous coverage with monthly reporting

What Cargo Insurance Covers

• Physical damage from any external cause
• Theft and pilferage
• Water damage
• Temperature variation (with reefer endorsement)
• General average contributions (ocean)
• Customs seizure (with endorsement)

What It Doesn't Cover

• Inherent vice (spoilage of perishables due to nature)
• Improper packaging by shipper
• War and terrorism (without endorsement)
• Nuclear incidents
• Delay-related losses

Cost of Cargo Insurance

Example: A $100,000 electronics shipment at 0.5% = $500 insurance premium.

Filing a Freight Claim

1. Document damage immediately with photos and notes
2. Note damage on the delivery receipt/BOL before signing
3. File the claim within 9 months (truck) or as required by mode
4. Provide documentation: Invoice, BOL, photos, repair estimates
5. Follow up regularly until resolved

Best Practices

• Always declare the full value of your cargo
• Read carrier rate confirmations for liability limitations
• Consider an annual cargo insurance policy for regular shippers
• Work with a broker who manages claims professionally

Contact Indray Inc to discuss cargo protection options for your shipments.