Freight Insurance – Do I Really Need It?

Freight insurance can be one of the most important purchases you will make for your business or personal shipment. Knowing that your shipment is protected whether it is lost, damaged, or stolen can give you great peace of mind during its voyage.

Freight insurance is a contract between an insurance company and an individual or business that provides compensation if a loss or damage occurs to a specific item or shipment. Paid in advance of shipment, it is like a traditional insurance policy. If a claim is not made on that policy, you will not be able to get a refund on the cost.

Freight insurance is a “must have” for today’s shipping environment. When you ship your item with any freight carrier, damage and loss claims customarily only pay out a minimal amount; far less than the value of the item being shipped. Although claim rates are less than 5% with most carriers, accidents can and will happen. Freight insurance helps keep the shipment owner’s exposure to monetary loss at a minimum. The policy will cover your commodity when transferred by truck, train, or cargo vessel. Having this protection is highly important if your business depends upon shipping items that need to arrive on time and undamaged. Without insurance, you will have to replace the commodity at your cost. With a policy from an insurance broker, the compensation is paid directly to you, bypassing the carrier, making replacement easier and faster.

Freight insurance is fairly inexpensive compared to the potential loss or damage costs. There are several factors that determine the price of the policy. The first factor is the value of the item being shipped. Higher valued and one-of-a-kind items raise the price due to the high cost of replacement. Another factor is the type of commodity. The type relates to how likely the item is to be damaged in transport. Items that are fragile are more vulnerable to damage, and therefore more likely to require payment from a claim. A third factor is the distance the shipment will travel. A shipment that will be transported further has a greater possibility of being damaged as it is transferred from trailer to terminal to trailer throughout its journey. Other factors that can affect the cost are the carrier or mode of transportation, and how the commodity is packaged.

There are several sources for freight insurance. If you are shipping items for your company, your business insurance may already cover items in transit. If it is a personal shipment, your home owners or renters insurance often covers shipments. Your insurance agent may also be able to add a one time policy, if it is not already covered. As most freight is paid with a credit card, you may be insured through your credit card agreement. You can also seek insurance through an outside broker.

FreightCenter now offers freight insurance. You can purchase coverage up to $2500, based on the documented value of the item, for only $30 per shipment.