Freight & Cargo Insurance: Cost, Coverage & Providers

Cargo insurance pays the value of shipments, up to coverage limits, when shipments are lost or damaged. Certain businesses that ship goods need cargo insurance, but those with infrequent shipments can get coverage for single shipments. Small business owners typically insure cargo through the shipper. Some major shipping companies, such as FedEx, UPS, or the United States Postal Service (USPS), include estimated insurance rates of $2 per $100 of the shipment’s insured value.

If your business is making cargo shipments, whether regularly or not, you should make sure those valuable goods are protected in case of unexpected damage or losses. To simplify getting coverage, reach out to CyberPolicy, a reliable insurance broker that’ll shop and compare policies from top carriers to get you proper coverage fast.

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What Is Freight & Cargo Insurance?

Freight insurance covers shipped goods when they’re transported via land, sea, or air. It pays the value of lost or damaged shipments up to coverage limits, minus the deductible. Policies can be purchased by the seller, the buyer, or even the shipping company. Usually, the party with the greatest financial investment gets freight insurance coverage.

Cargo insurance is a type of property coverage also called marine insurance. There are two main types of marine coverage: ocean marine, for shipments by sea, and inland marine insurance, for shipments by land. Some freight insurance coverage includes all modes of transportation. Import/export companies, wholesalers, distributors, and manufacturers most likely need cargo insurance through a carrier.

Truckers who transport food, medicine, and other items on a daily basis need freight and cargo insurance to be protected against unexpected losses or damages incurred during shipping.

How Freight & Cargo Insurance Works

While carriers are liable for damage to your shipment, they usually only have to pay the amount of your loss. With this, courts often subtract the market value of the damaged goods from the market value they would have had if they arrived unscathed. In addition, carriers aren’t responsible for associated costs such as lost income.

To calculate costs for freight and cargo insurance, you need to consider the following:

• General liability
• Freight classification
• Type of cargo
• Loss history

Per federal law, trucking companies are responsible for damaged cargo unless the damage was caused by an act of God―such as lightning strikes or hurricane―government action, burglars, or a flaw in the goods. However, courts award shippers the market value of their cargo as it should have arrived minus the market value in its actual condition.

What Freight & Cargo Insurance Covers

Federal law requires trucking companies to carry some carrier liability insurance, but the minimum requirement may not be enough protection for your shipment. Moreover, other carriers don’t have the same requirement. This is why agents often recommend additional cargo insurance. It typically covers external causes of loss and damage to your shipment.

Common triggers for cargo insurance include:

• Natural disaster
• Vehicle accidents
• Acts of war
• Piracy
• Cargo abandonment
• Customs rejection

When a covered event causes damage to your shipment, cargo insurance pays up to the amount you insured it for, minus your deductible.

It’s best to find an insurance agent or provider that’s experienced in managing cargo insurance, as they’ll be able to address the following:

1. Responsibility for insuring the goods: Whether the buyer or seller will be the one to insure the goods
2. Point of transfer of the title to the goods: At what point the goods will be transferred from the seller to the buyer—may depend on the kind of goods and the length of time it takes to ship them
3. Insuring Terms: The insuring terms as defined in their respective insurance policies
4. Location of Insurance Company: Important if a U.S. importer asks the seller to provide insurance, as the insurer may be located overseas—could make claims processing more complicated

What Freight & Cargo Insurance Doesn’t Cover

Cargo insurance has a few important limitations. For instance, it doesn’t cover carrier liability. As the shipper, you don’t need liability coverage. The carrier has the responsibility of making sure your shipment gets where it’s going. But if you’re the carrier responsible for transporting goods, then you need carrier liability insurance.

Additionally, freight and cargo insurance policies have exclusions. These are policy provisions that eliminate coverage for certain perils.

Individual freight insurance policies typically exclude:

• Damages caused by your inadequate packing: If water seeps in and corrodes your shipment, the responsibility for the damage is on you.
• Damages caused by faulty goods: If the carrier can show your product has a flaw that caused the damage, then they aren’t responsible for it.
• Certain types of freight: Hazardous materials, certain electronics, or other types of cargo may be excluded, depending on your insurer.
• Certain modes of transportation: Some freight insurance may exclude trucking. Other insurance may exclude cargo ships, freight trains, or airplanes.

The insurance industry doesn’t have a standard cargo insurance form, so exclusions and inclusions vary widely. Business owners who do a lot of shipping and who are looking for a stand-alone policy should probably work with an agent or lawyer to make sure their freight insurance meets their needs.

Freight & Cargo Insurance Coverage Types

Depending on your business, you may ship your goods domestically, internationally, or both. You may use trains, trucks, cargo ships, planes, or a combination of all of these. As a result, cargo insurance has a lot of variations, including the following:

Land Cargo Insurance

This is freight insurance coverage for land shipments, most often via trucks and small utility vehicles. This coverage is often limited to vehicle accidents but may also pay for theft and other damage. You want to ask if your policy includes theft coverage if your shipment needs to be stored in a truck overnight.

Land cargo insurance only applies within the boundaries of a given country. The coverage is for domestic transport only. If your shipments cross national borders, you may need additional coverage.

Marine Cargo Insurance

Most marine cargo insurance covers sea and air shipments, but some policies also cover land transport. It usually pays for damage caused by bad weather, loading and unloading, piracy, and other related risks.

Marine cargo insurance isn’t limited to a single nation. This makes it the appropriate coverage for international shippers.

Open Coverage

Business owners who regularly ship goods may want to get open coverage cargo insurance, a type of marine insurance that covers multiple shipments made during the life of the policy. The policyholder periodically reports a group of shipments to the insurer, and these reported shipments are covered.

The policyholder also needs to provide the insurer with details about their business, such as the type of goods being shipped and their destination. Failure to provide this information can void the policy.

Single Coverage

Also called a voyage policy, single coverage is the opposite of open coverage. It’s a marine policy that insures one-time shipments and is best suited for either low-volume or infrequent shippers. This policy makes the most sense for small businesses that ship products periodically.

All-Risk Cargo Insurance

All-risk cargo insurance offers the broadest coverage for shipments. It insures your shipment against external causes of damage except those outlined in the policy. In addition, it pays for damages caused by any event that’s not specifically excluded in the policy.

Some common exclusions in all-risk freight insurance coverage are:

• Improper packing
• Abandonment of cargo
• Rejection of goods by customs
• Employee dishonesty
• Loss due to the nature of the product
• Loss due to delay

With all-risk coverage, your insurer pays unless your loss is the result of one of the perils listed in your policy.

Free from Particular Average Coverage

Free from particular average (FPA) coverage is a clause that frees your insurer from covering losses in most situations. Generally, it covers events that are beyond a person’s control.

For example, free from particular average coverage for marine insurance usually pays for total losses stemming from:

• Stranding
• Burning
• Sinking
• Collision
• Errors in vessel management
• Boiler bursts
• Defects in hull or machinery

This is sometimes called a total loss only policy because you only collect if you suffer a total loss.

General Average Coverage

When you transport goods by sea, you share responsibility for the boat and all its cargo with the shipowner and other cargo owners. Essentially, if the boat or another person’s cargo is damaged to save the ship, you share in that loss with the rest of the people involved.

You may be responsible for a general average if the captain needs to abandon some cargo after the ship runs aground or is caught in a storm. Sometimes the shipowner won’t even release your cargo until you’ve paid your portion. With general average coverage, your portion is paid by the insurer.

Warehouse-to-Warehouse Coverage

Most marine cargo insurance includes a warehouse-to-warehouse clause. It insures your shipment from the moment it leaves the seller’s warehouse until it reaches the destination warehouse. Without it, your cargo is only protected when it’s onboard the cargo ship.

Warehouse-to-warehouse coverage may not be in effect in some situations. For instance, it doesn’t cover cargo if either the shipper or the consignee picks it up. Your coverage may also be impacted by sales terms (for example, if the buyer takes ownership before the cargo reaches the final destination warehouse).

Contingency Cargo Insurance

Contingency cargo is a type of freight broker’s insurance. Brokers and expeditors buy contingent cargo policies because they can cover lawsuits brought by business owners who use their service. It covers common causes of loss, like theft and damage in transit. However, contingency cargo insurance is only triggered if the shipping company refuses to pay a claim.

Here’s how it works: say you use a freight broker to ship items overseas, and the items are damaged during transit. The shipping company refuses your claim, so you turn to your broker for reimbursement. If they have contingent cargo insurance, they may be able to cover your costs.

The experts at CyberPolicy will take all of your insurance requirements into consideration when working with top insurers to get you complete coverage. Inform CyberPolicy’s experts of any specific risks, and they’ll do the legwork to find the right policy for you.

Freight & Cargo Insurance Costs

Cargo insurance costs are usually a percentage of the value of the shipment or the value of the shipment plus shipping charges. Most freight brokers sell coverage for 60% of the shipment value. For every $100 worth of cargo, there’s a corresponding insurance value of up to $2.

Freight & Cargo Insurance Coverage Single Shipment Costs

Many providers have minimum premium requirements on stand-alone cargo insurance. That’s the amount you have to pay, no matter what, and it’s one reason small business owners who either rarely ship items or who ship small quantities get cargo insurance through the freight carrier, broker, or forwarder.

The chart shows the insurance rates for a single shipment going from Los Angeles to New York. Each shipment contains 20 boxes of computers weighing 100 pounds each and has a commercial value of $10,000. As you can see, the shipping costs have a minor impact on the premium. However, other factors can come into play.

Other factors that impact freight insurance costs include:

Items Being Shipped

The type of goods you ship can have a major impact on your cargo insurance costs. Shipping products that are inherently risky, valuable, perishable, or easy to steal usually increase cargo insurance costs.

Here are a few examples:

• Inherently risky: Materials that are flammable, corrosive, or explosive
• Valuable: products such as large machinery or major electronics
• Perishable: items such as food or certain pharmaceuticals
• Stolen easily: Small or attractive items like smartphones, auto parts, or luxury items

Your Loss History

Insurance applications almost always include questions about prior losses. Insurers use that information to determine how risky your business is to insure. They compare your losses to similar businesses and increase your premium to cover the cost of potential claims.

Most cargo insurance providers only consider freight-related losses, but some may look at other claims to determine your risk. This makes good risk management (like proper packaging) important because it can reduce the likelihood of claims.

Shipping Route

Underwriters consider some routes riskier than others. Sometimes this is due to geography. Routes through areas that are mountainous, icy, remote, or otherwise treacherous can increase your rates. Your rates may also increase if your shipment has to go through areas known for piracy or theft. Political instability in either the country of origin or the final destination can also increase risk and your premium.

Where to Get Freight & Cargo Insurance

CyberPolicy

CyberPolicy simplifies the process of shopping for insurance online. They’re a reliable broker that shops and compares quotes from top carriers, including Progressive, Chubb, Liberty Mutual, Nationwide, and over 40 others. This ensures that you’ll get the right coverage for your business at an affordable price.

No matter the type of business you own and the frequency of cargo shipments your business makes, CyberPolicy will help make sure your goods are protected. CyberPolicy strives to deliver fast and accurate rates from top insurers and simplify the process of getting freight and cargo insurance you can rely on.

CoverWallet

As a broker, CoverWallet works with a large number of national carriers so you can be sure your goods are covered on their journey from beginning to end. It connects small business owners with insurance experts who help determine what kind of coverage is needed and why.

Unlike many providers, rates are viewed easily on the CoverWallet website. It also offers an online service where you can request a free, no-obligation quote and explore options. If you get stuck, you can always call to speak with a helpful representative for assistance.

Travelers

Travelers is a well-known insurance company that offers industry-specific underwriting, risk management, and claims services for small businesses. Business owners work directly with agents to quote, bind, and service their policies.

Travelers’ ocean marine policy, called Cargo Elite, is designed for importers, exporters, manufacturers, and freight forwarders to ship goods by sea. It’s an all-risk policy, meaning it covers any peril except for those specifically outlined in the policy.

Travelers also has a marine cargo policy called Cargo Elite Express that’s offered to businesses with up to $20 million worth of annual international shipments. Similar to Cargo Elite, Cargo Elite Express offers all risk coverages and flat annual premiums.

Roanoke Trade

Roanoke Trade specializes in insuring businesses that import, export, and transport goods. They’ve been focused on the transportation and logistics industry since 1935, offering innovative insurance policies, bonds, and carnets as a subsidiary of top insurer Munich Re.

Because Roanoke Trade has deep industry experience, they can write cargo insurance policies for sea, land, air, truck, and rail transport. Plus, they can customize them for many unique situations, including high-value cargo, warehousing, and international shipping.

Roanoke Trade policyowners can process their marine cargo claims immediately through CoverageDock.

Chubb

Chubb is a large, publicly traded insurance provider with operations in 54 countries and relationships with affiliates in over 190 countries. That worldwide reach gives Chubb a leg up on writing cargo insurance coverage for international shipments.

Chubb offers coverages and services for small businesses that are planning to expand to the global market. Among the coverages that business owners can get through Chubb are the following:

• Ocean/air transit insurance
• Controlled master program with locally written underlying policies that are required and permitted by law
• Multiline coverages
• Shippers interest cargo
• Bailee liabilities

Chubb offers a minimum premium of $1,500, and its limits can go up to $60 million.

CargoCover

CargoCover is an industry-leading cargo insurance broker. The company offers cargo insurance policies underwritten by quality insurers, including CNA and Liberty Mutual. In addition to freight insurance coverage, small business owners can quote commercial property, crime, and motor truck cargo liability policies.

What makes CargoCover unique is its online experience. It starts with a simple online application that generates quotes. Policies can be booked and managed online. Plus, they offer downloadable insurance certificates that business owners can print or email securely.

CargoCover also offers transportation insurance for freight forwarders (NVOCC), third-party logistics providers (3PLs), common carriers (ocean and truck), and load brokers.

Bottom Line

Business owners who ship only occasionally or who ship low quantities of products can usually get the best deal on cargo insurance by working with their freight broker. However, manufacturers, wholesalers, importers, and exporters may need their own cargo insurance to be protected fully.

The more your business ships, the more likely you need cargo insurance. Talk to an expert at CyberPolicy about your specific risks, and they’ll shop and compare your exact needs to find you the right coverage at an affordable price.

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