Freight Insurance vs Freight Liability: What’s the Difference?

No one ever wants to hear that their freight was damaged during the shipping process. Whenever you are shipping, you want to make sure that your shipment is prepared correctly to avoid possible damages during the shipment. When dealing with damages, it is important to know the coverage you might receive from a freight carrier and the difference between freight liability and freight insurance.

Freight Liability

There are many things you must prove to be compensated for your damaged freight. This can include:

  • The product was undamaged when it left the shippers location.
  • The product was not damaged by the received post-delivery.
  • The product was noted as damaged, shorted (only part of the product made it to the receiver) or the product arrived unreasonably late.

Once the shipper establishes one of these cases, it is the carrier’s job to show:

  • No negligence on their part.
  • The loss/damages were caused by:
  • An act of God
  • An act of the public enemy
  • An act of the shipper
  • An act of the public authority
  • An inherent flaw in the product itself

If the carrier is unable to prove that one of these requirements was not met, the shipper will receive compensation from the carrier up to the amount of liability they offer. In addition, make sure that you know the amount of coverage the carrier you are using is entitled to for each shipment.

Freight Insurance

Freight insurance is almost always set up through a third party. Normally, you send the insurance company your freight information and you will receive a quote back informing you how much they will charge to cover the shipment. There are many different types of freight insurance options, so here are some helpful tips to help you along the process:

  • There is no such thing as total and complete coverage.
  • Make sure to read your policy very carefully. You don’t want to make a mistake and have your policy not cover what you needed it to.
  • Proving carrier negligence is not necessary for receiving compensation for damages or loss.
  • Remember – you will have to show proof of value and proof of loss.
  • Claims that are filed through insurance will usually be paid out within 30 days of submission.

Dealing with freight damages is very frustrating and sometimes unavoidable. Make sure you build a good relationship with the carrier that you choose for your shipment. For information about our claims process, click here.

What Freight Insurance Covers

As the seller, it is your responsibility to secure the freight insurance for the goods you’re about to send out. 

Having freight insurance will guarantee you compensation equal to the market value of the goods you delivered should something go wrong while in transit. You will also be reimbursed for the total transport cost.

Not all insurance premiums are the same. The level of your premium will depend on certain factors such as:

  • The destination of the goods
  • The value of the goods
  • The nature of the goods
  • The selected mode of transportation

Your freight service provider will be the ones to help you determine the market value of your goods as well as the cost of your insurance premiums.

Common Risks In Transportation

No matter how capable and careful the trucking staff may be, they can’t completely avoid mishaps. This is where freight insurance comes to play. Should your goods be lost, damaged, or stolen, you are sure to get proper compensation. 

To better illustrate how freight insurance helps the sender, let’s talk about some of the most common risks in transportation:

  • Damage
  • Delays
  • Lost goods/stolen goods

Damages

Damage includes situations where goods get scratched, broken, dented, or wet during transit. As the sender, you are responsible for ensuring that your goods are well-packaged and secure. This makes for efficient delivery of your products.

Delivery by land: If you are sending your products by land, your carrier will take note of the condition of the items they received before transit. 

So, if there are any signs of damage on your item’s packaging or if your packaging is not up-to-standard, your carrier will record this. Any sign of damage should be immediately reported to the carrier upon receipt. If the damages were not immediately visible, the carrier must be made aware within seven working days.

Delivery by sea: There is an exception for sea and air freight. If you send the goods by air or sea and the goods were received with damages, the carrier is immediately held liable. Additionally, if the damages are not immediately visible, the carrier must be informed within three working days.

Delays and freight insurance

In some cases, late delivery of goods can cause financial losses to clients. It is known as “consequential damages” or “special damages”. Most carriers don’t usually accept liability for damages when it comes to delays. This is because it’s difficult to determine the extent of the losses to the client’s business. At most, you will only be able to get a reimbursement for the freight cost if you can prove that the delays were caused by mistakes or negligence on the carrier’s end.

Lost/stolen goods

This covers a possible case of loss or theft of the client’s goods. Unlike concerns regarding damages where a signed document will be enough to get a reimbursement, theft or loss of goods needs solid evidence and thorough investigation. In addition, the loss needs to be documented and reported upon receiving the goods. A list of the goods received and goods lost should be provided to the carrier. This will serve as proof that the goods were lost during the delivery period. Theft, on the other hand, will require concrete proof of the crime. This includes photos and CCTV footage of the crime being committed. However, as with any case of theft, this has to be reported to the police, and an investigation will be conducted. 

If the client can’t provide enough proof of the theft, then the case will be treated as a loss.

While cases of theft, loss of goods, and damages are relatively rare, knowing the details on your freight insurance will make sure you’re prepared to deal with any mishaps that your carrier is possibly liable to.

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