Understanding How Freight Insurance Works

freight insurance

Businesses need to ensure that they have adequate levels of freight insurance in place. For businesses that transport cargo either domestically or internationally, they are required by law to be adequately covered in the event of an accident. The unfortunate thing is that there can be a difference in the freight insurance costs that you have to pay for your goods. This is so even when you choose a reputable company to cover your goods.


First and foremost, it is necessary to understand what is covered when shipping freight and what is not covered by freight insurance. If you are shipping extremely valuable goods, you will need to have the freight insurance that protects these shipments. In the unfortunate case that your shipment is damaged or lost, it is imperative to know what is covered under freight insurance and what is not covered by freight insurance. Freight insurance simply doesn’t provide coverage against all losses that a commercial motor carrier may be responsible for under the Carmack Amendment or federal law.

A good example of what is not covered is any loss that is sustained due to injuries sustained on a commercial vehicle while it is in transit. Federal law mandates that all freight insurance policies protect passengers, regardless of who was at fault. There are even some types of freight insurance that will compensate third-party businesses or individuals for losses incurred while a shipment is in transit. However, any employee that receives an injury in a workplace will be protected by workers compensation insurance, which is typically not bundled with freight insurance. Employers that allow their employees to use personal vehicles during business travel may also be exposed to liability claims. So it is essential to be aware of what types of loss are covered by your particular policy and what is not covered.


Other types of freight insurance costs that many businesses don’t recognize are the costs associated with emergency medical services if there is an accident involving a transport vehicle. These costs can quickly mount up due to the long term physical damage caused by an accident. Many insurers only offer a limited range of benefits to help offset the financial consequences of an accident. Besides, most insurers only reimburse you for the cost of transporting your goods and never the actual cost of the goods themselves. This can create significant savings for businesses that regularly ship products, but the lower amount of money that you receive in premiums means that you will have to come out of pocket to pay the expense.

freight insurance

Another type of freight costs that most businesses don’t recognize is the costs that are incurred by shippers when they are responsible for hiring their cargo brokers. While most companies prefer to contract with freight forwarders, brokers often represent only one company and provide a limited range of benefits and reimbursement opportunities. When your goods are shipped using freight, the cost of employing a freight broker is dependent upon the volume and frequency of shipments that you need to make. This means that even if you only need a few shipments made per year, you will have to make the payment for your broker. Many brokers charge a per shipment fee that is significantly higher than the cost of having a freight insurance policy in place.

Open Coverage

One type of freight insurance that most businesses don’t realize that they need is known as open coverage. Open coverage protects goods that are not covered under the main body of a policy. Most insurance companies only cover shipments that are shipped in the same container with the goods. However, some carriers allow you to send goods on an empty or “bulk” container, which means that they are protected and shipped without paying the premium on the container. If you want to be sure that your shipments are covered when they are shipped overseas, you should contact your carriers regarding their open coverage policies.

Single Shipment Insurance

A third type of freight insurance that most shippers aren’t aware of is single shipment insurance. It only applies to single shipments that are sent over a certain value. For example, if you’re shipping a one-ounce suit of golf balls overseas, you would probably want to consider the single coverage policy. The premium for this type of insurance is typically much lower than that of a multi-trip policy, and many people can even obtain a good deal on this type of insurance. However, one major downfall to the single coverage policy is that it doesn’t cover you if the package becomes lost or damaged while in transit. For most businesses, this is not a necessary policy, but for those who frequently ship packages internationally, it’s something to consider.

Every shipment requires a different type of insurance coverage, so you must contact many different insurance companies to get quotes and learn more about how their plans work. Many of these agents also have connections with freight brokers and can help you save money by arranging for multi-stop shipments or air freight services. Freight insurance isn’t always as expensive as you think, especially when you look at the different types available. You may be able to take out a policy that gives you extra benefits and discounts. Even if you purchase the minimum required insurance, many shipments can be completed without incident and provide your business with peace of mind.

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