Cargo insurance pays the value of shipments, up to coverage limits, when shipments are lost or damaged. 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. This usually costs $.60 per $100 of the shipment’s insured value.
The Hartford has a customizable cargo insurance policy. The coverage is available for cargo in transit and in storage, and has a number of endorsement options. You can apply for cargo and freight insurance coverage by speaking to a Hartford agent.
Where to Get Freight & Cargo Insurance
|The Hartford||Manufacturers, import/exporters, and wholesalers looking for tailored cargo liability insurance|
|Insurance 321||Small business owners who want to insure regular shipments|
|Travelers||Importer/exporters, freight forwarders, and manufacturers who want affordable, all-risk cargo insurance for international shipping|
|Roanoke Trade||Small business owners who want to work with an insurer who specializes in cargo-related policies|
|Chubb||Small business owners who are just beginning to ship internationally|
|CargoCover||Small business owners who want to apply online and to download secure insurance certificates|
The Hartford has been writing commercial lines for over 200 years, and small business insurance makes up almost half of their entire commercial premium. They offer two cargo insurance policies: one for inland transport and one for ocean.
The Hartford’s Ocean Cargo Choice is an ocean and inland marine policy designed for wholesalers, manufacturers, and import/export businesses. These owners can extend the already broad coverage to include goods in warehouses, damages not visible upon delivery, and international shipments.
Insurance 321 connects small business owners with agents and carriers that can place their risk. Representative work to evaluate the business’ risk and match it to the appropriate carriers or independent agent.
Essentially, Insurance 321 does most of the heavy lifting of getting insured. Instead of filling out multiple applications and sifting through proposals, business owners are connected to the people who can help them immediately.
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, including an ocean marine policy.
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.
Roanoke Trade specializes in insuring businesses that import, export, and transport goods. In fact, 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 it for a number of unique situations, including high-value cargo, warehousing, and international shipping.
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 can tailor their cargo insurance for small businesses that are new to international shipping. They provide fast and flexible underwriting, can issue certificates online 24/7, and have an easy-to-read policy with a simplified rate schedule. Moreover, their minimum premium is only $1,500.
CargoCover is an industry-leading cargo insurance broker. The company offers cargo insurance policies underwritten 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.
What Freight & Cargo Insurance Is
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 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.
What Freight & Cargo Insurance Covers
Federal law requires trucking company carriers 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
- 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.
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 are not 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. Others may exclude cargo ship, freight trains, or airplanes.
The insurance industry does not 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 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 partial loads, this ends up costing between $50 and $100.
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 why 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 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 you cargo insurance costs. Shipping products that are inherently risky, valuable, perishable, or easy to steal usually increase cargo insurance costs.
Here are few examples:
- Inherently risky, such as materials that are flammable, corrosive, or explosive.
- Valuable, such as large machinery or major electronics.
- Perishable, such as food or certain pharmaceuticals.
- Easily stolen, such as small or attractive items, like smartphones, auto parts, or luxury items.
Your Loss History
Insurance applications almost always include a 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.
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.
Freight & Cargo Insurance Coverage Types
Depending on your business, you may ship your good domestically, internationally, or both. You may use trains, trucks, cargo ships, planes, or a combination of all of these. That’s a lot of variations to cover. As a result, cargo insurance has a lot of variations, too.
These are a few coverage types you may need to know when looking for cargo insurance.
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 is not limited to a single nation. This makes it the appropriate coverage for international shippers.
Business owners who regularly ship goods may want to get open coverage cargo insurance. It’s 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.
Also called a voyage or specific cargo policy, single coverage is the opposite of open coverage. It’s a marine policy that insures one-time shipments. 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.
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 a marine insurance usually pays for total losses stemming from:
- 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.
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, like if the buyer takes ownership before the cargo reaches the final destination warehouse.
Contingency Cargo Insurance
Contingency cargo is actually a type of freight brokers insurance. Brokers and expeditors buy contingent cargo policies because it 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 they’re 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 Hartford offers ocean marine insurance with multiple coverage enhancements so you can tailor the policy to your situation. Plus, it automatically includes coverage for non-delivery, shipment delays, and fraudulent documentation.
Tips on Getting Freight & Cargo Insurance Coverage
Whether you’re the shipper or the consignee, you may need freight insurance coverage for the products you ship. These tips can help you find the appropriate cargo insurance.
Don’t Rely on Your Carrier’s Liability Insurance
Trucking companies are required to carry liability insurance. However, director of operations for FreightPros Christie McNeil says the coverage may be insufficient for your shipment.
“Carrier liability insurance policies often only cover a few dollars or a few cents per pound, depending on the type of product being shipped. If you choose not to purchase additional insurance coverage, you could ship something worth $10,000 and end up with a $100 claim payout and no way to dispute.”
Work with an Insurance Agent with Freight & Cargo Insurance Experience
As with any insurance policy, it helps to work with insurers and brokers who have experience. Providers with experience in multiple transportation modes, customs brokerage, and international shipment have better insight into your risks.
Avoid Coverage Gaps by Asking Questions
George Butler, second vice president for business development with Travelers, says:
“To help avoid potential coverage gaps, we highly recommend that those unfamiliar with cargo insurance work with an experienced insurance agent to assist with determining answers to the following questions:
- Who is responsible for insuring the goods—the buyer or the seller?
- When does the title to the goods transfer from seller to buyer?
- What are the insuring terms?
- Where is the insurance company located? If a U.S. importer asks the seller to provide insurance, the insurer will likely be located overseas. This could make the claim process more complicated.”
Asking questions makes it more likely that you can get sufficient freight insurance coverage.
Get Covered from the Moment You Take Possession
You want to make sure your cargo and freight insurance policy covers your goods from the moment you take ownership. Review the terms of sale between you and your suppliers so you know at what point the shipment is yours—and so you can get the appropriate cargo insurance.
Pick Open Coverage for Regular Shipments
Businesses that regularly ship products or materials want to consider open coverage. This is a type of policy that covers all cargo shipped while the policy is active. You report shipments to your insurer, and they are automatically covered as long as they occur on or after the policy inception date and before its termination.
Consider Getting Insurance Through Your Freight Broker
The easiest and most common solution for occasional and low-volume shippers is to get cargo insurance coverage through the freight expeditor or broker. Not only can they usually get the best deals for small shippers, they have experience in working the freight and cargo insurers.
Freight & Cargo Insurance Coverage Frequently Asked Questions (FAQ)
Getting the appropriate cargo and freight insurance for your shipment is an important part of protecting your business. Hopefully, we’ve answered your questions, but you can post additional ones in the comment section below or in our forum. This sections offers a few answers to some of the most frequently asked questions about cargo insurance.
Who Is Liable for Damaged Cargo?
According to federal law, trucking companies are responsible for damaged cargo unless the damage was caused by an act of God, 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.
Why Do I Need Cargo Insurance?
Carriers are liable for damage to your shipment, but they usually only have to pay the amount of your loss. This means courts often subtract the market value of the damaged goods from the market value they would have had if they arrived unscathed. Additionally, carriers are not responsible for associated costs, like lost income.
What Is All-Risk Cargo Insurance?
All-risk cargo insurance pays for damages caused by any event that’s not specifically excluded in the policy. Some common exclusions in all-risk cargo coverage are improper packing, customs rejections, failure to notify carrier of loss in a timely fashion, and abandonment of cargo.
What Is a Voyage Policy?
A voyage policy is another name for a single coverage or specific coverage cargo insurance. It’s a policy designed for low-volume or infrequent shippers, providing them coverage for a single shipment. This is in comparison to an open coverage policy, which insures all shipments made during the policy term.
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 fully protected.
The more your business ships, the more likely you need cargo insurance. Talk to a small business expert at The Hartford about their Ocean Cargo Choice product. They can tailor the policy to your unique business risks.