Know What to Expect from Your Cargo Insurance

Insurance Insurance (Photo credit: Christopher S. Penn)

Know What to Expect from Your Cargo Insurance

If you do enough shipping and receiving, you’re bound to have some damaged or lost products at some point. Keeping this in mind, make sure you’re prepared with the proper cargo insurance. In this post, we’ll discuss various types of insurance and the coverage that each type provides. Whatever type of cargo insurance you use to protect your freight, the important thing is that you understand what you’re covered for before you need to make a claim.

Primary Insurance vs Contingent Insurance

Primary Insurance

If your freight is covered under more than one insurance plan (eg your carrier’s insurance and your freight broker’s insurance), then the primary insurance is the insurance plan that the claim will come to first. If the claim falls under the coverage of more than one plan, the claim will be paid by the primary insurance plan.

Contingent Insurance

This is insurance that comes into effect if the primary insurance plan does not cover the damages. A good freight broker will carry contingent insurance in case the carrier’s insurance has expired without the carrier or freight broker realizing it.

However, keep in mind that contingent insurance will only cover your goods if the primary insurance is not accepted. For example, suppose that the primary insurance is the carrier’s insurance which covers the carrier’s liability at $0.50/lb, and your contingent insurance covers the full value of the freight. If your carrier accepts your freight claim, you cannot file a claim with your contingent insurance – even through the coverage is better.

Liability Insurance vs Open Cargo/Shipper’s Interest Insurance

Liability Insurance

If your carrier is covered under liability insurance and your freight is damaged, this means that the carrier’s insurance will cover whatever he is legally responsible for. This is often a price per pound, but is not usually the true value of the damaged goods.

Open Cargo or Shipper’s Interest Insurance

This is another type of insurance that may be held by a carrier, freight broker, or shipper. This type of policy covers you, the shipper, for the actual value of your goods, rather than only the carrier’s legal liability. If you would receive a low payment compared to the actual value of your goods in the event of a claim, you should consider Shipper’s Interest Insurance. If you would be comfortable receiving the liability value or if you don’t mind taking a risk, then Liability Insurance is fine.

Total Loss, Basic Risk, & All Risk

1. Total Loss Coverage

Do not mistake “total loss coverage” for “total coverage”. This type of insurance will only cover you if your entire shipment is a total loss. It will not cover partial losses. The types of events that you are covered for may vary by insurance provider. This type of insurance is usually used for low value cargo.

2. Basic Risk Coverage

This type of insurance will cover you for both partial and total losses of your shipment due to any specific risks listed in your policy.

3. All Risk Cargo Insurance

All Risk cargo insurance is the most comprehensive form of cargo insurance. This type of policy will cover you for any losses or damages from any external source, barring any exceptions listed on the policy.

This is by no means an exhaustive list – there are many types of cargo insurance policies available. Now when your carrier or broker mentions that you’re covered under “contingent shipper’s interest insurance”, you’ll have a better idea of what that means, and if it’s the policy that is best for you.

Disclaimer: The information is for personal reference only. This is not official legal or insurance advice. We accept no responsibility for consequences resulting from the use of this information. For official legal or insurance advice, talk to a certified professional.

Written by Guest Blogger Vanessa Glavac, TranSolutions Inc.

TranSolutions’ mission is to effectively minimize the time, cost, and mental burden of processing freight claims through state of the art technology and supportive customer service. TranSolutions’ blog is dedicated to providing free freight claim filing tips, templates, and resources, available at www.transolutionsinc.com/blog

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Posted by LeanCor Supply Chain Group

LeanCor Supply Chain Group is a trusted supply chain partner that specializes in lean principles to deliver operational improvement. LeanCor’s three integrated divisions – LeanCor Training and Education, LeanCor Consulting, and LeanCor Logistics – help organizations eliminate waste, drive down costs, and build a culture of continuous improvement.

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