Protect your shipments with freight insurance

Linkway Freight can provide you a freight insurance. It will cover your goods from damage and breakage.Freight insurance protects the value of your shipment against loss or unseen damage during transit. Learn when to add cargo insurance to your shipment.

Do freight forwarders insure automatically their clients’ goods?

First of all, you must know that it isn’t mandatory for a freight forwarder to insure the shipment of a client.

Also, depending on the incoterms used for the transfer, the insurance may be included or not in the freight service. Most of the time it isn’t, so the customer has the responsibility to verify if its shipment is covered. Then he can ask for an insurance where appropriate. Also, there isn’t unique insurance policies protecting your goods from A to Z.

Freight insurance – What you need to know

We negotiated with the best certified insurers to select the most attractive package for our clients, both in terms of cost and safety. Our insurance is limiting considerably the risks for your enterprise. A supply loss can be terrible for your business.

What is the freight insurance?

Legally, it is a contract established between an insurance company and an insurance holder. All carriers have to bear a minimum insurance rate, known as “Carrier liability”.

However, the carriers’ responsibility brings a tiny coverage. It is called the “Hull insurance”, which covers the body of the ship, its equipment and sometimes its crew from natural disasters, vehicles accidents or war acts. As you understand the shipments are not covered in this situation, so we cannot say it’s a reliable coverage.

Linkway Info: Consequently, shippers can ask for a cargo-insurance to protect their goods against losses, damages or theft. Usually, the goods are covered during their warehousing and their transport, until they reach their destination.

The Link Between Insurance and Incoterms

Unless you are completely new to international trade, you will already have come across the intricacies of incoterms. Nevertheless, the way in which they link with your liability and insurance is a crucial point to grasp.

If you would like to understand incoterms in detail, you might like to look at a more comprehensive guide recently published in our Knowledge Series. It explains Incoterms and the recent changes arising from the International Chamber of Commerce’s 2020 revision.

The most important point about Incoterms to note here is that they will determine which of the two business partners is responsible for the risk— and therefore for insurance—of the goods, and when the risk passes from one party to the other.

For now, let’s just look at three of the incoterms most commonly applied to international sales agreements, and how the responsibility for insurance fits into them:

  • EXW (Ex Works): Under this incoterm, the buyer bears the risk and insurance costs from the export customs clearance stage through to receipt of goods
  • FOB (Free On Board): Here the seller is responsible for risk and cost until the goods are loaded onto the cargo vessel or aircraft. At that point, the risk and cost transfer to the buyer.
  • CIF (Cost, Insurance, and Freight): In a sale transacted under the CIF incoterm, the seller accepts risk up to the point the goods are loaded onto the cargo vessel or aircraft. The seller also pays the cost of insurance until the goods reach the port of discharge. The buyer shares the cost at the port of discharge and has sole responsibility for cost and risk from then onwards.

It’s vital that any international sales agreement clearly states one of the Incoterms® to ensure that both buyer and seller know where responsibility for cargo insurance lies.

How is Cargo Insurance Calculated?

The insurer will base the insurance premium they charge on a percentage of the value of the cargo, as well as the following criteria:

  • The nature of the freight—is it hazardous for example?
  • The size, weight, and dimensions of the freight
  • Where the cargo is being shipped from and to
  • Which route the carrier is taking from the port of origin to the port of arrival

How Does Cargo Insurance Work?

The precise terms of your cargo insurance will be detailed in the policy provided by your insurer. As with all insurance documents, you should take care to read the policy thoroughly. You can usually claim for lost or damaged cargo regardless of who or what has caused the loss or damage—as long as you aren’t responsible for the loss or damage yourself. The claim procedure will be laid out in the insurance documentation.

When is a Cargo Insurance Claim Triggered?

Under the terms of most cargo insurance policies, a claim is payable when the covered goods are lost or damaged and following an assessment by the insurer. It is the carrier’s responsibility to report the loss or damage to the customer. The precise nature of the perils covered will be detailed in the insurance policy document. Cargo insurance claims must be made within certain time frames for the claim to be valid. For example:

  • For damaged goods shipped by sea: claims for visible damage must be made upon receipt of the damaged goods. Claims for hidden damage must be made within three days of the goods being discharged.
  • For damaged goods shipped by air: claims should be made no later than 14 days after receiving the damaged goods.
  • For loss of goods the claim is triggered by the notification in case of complete loss or at the realisation of the physical loss at receipt in case of partial loss.

How is a Cargo Insurance Claim Processed?

Most cargo insurance claims usually take several weeks to process. Loss quantification must take place and loss-adjuster reports have to be compiled. The customer also needs to sign a discharge receipt letter before any compensation will be paid.

How Much Can You Claim on Cargo Insurance?

Cargo insurance will typically provide full compensation for the loss or damage to the goods, up to 110% of the value of the commercial invoice, as well as other expenses incurred, if any. Therefore, the exact amount payable will depend on the value of the cargo and the associated shipping costs as declared by the shipper and charged for by the insurer in the premium.

Arranging Cargo Insurance With Your Freight Forwarder

As your freight forwarder will be responsible for coordinating almost every aspect of your shipment, it may make sense to let them handle the cargo insurance too. If you decide to exercise this option, it does not mean that the forwarder will act as the insurer of your goods.

Instead, the forwarder will engage a cargo insurance company on your behalf, submitting a written request, paying the premium, and receiving an insurance policy that’s subject to terms and conditions.

The cost of this service will usually be incorporated into your quote. In the event of a claim, the freight forwarder will file it with the cargo insurance company on your behalf, and will handle any correspondence until a settlement is reached.

Arranging Cargo Insurance With a Broker or Insurance Company

You can choose to arrange cargo insurance yourself. This will almost certainly involve contacting various insurers and outlining the details of your shipment with each one before receiving and comparing quotes. In the event of loss of or damage to your goods, you will have to file your claim, sign a discharge receipt and waiver letter, and correspond with the insurer until a settlement is reached.

Do I Have to Insure my Shipment, and is Cargo Insurance Worthwhile?

When shipping goods by air or sea, you are putting them in the hands of freight forwarders and carriers. You are trusting these service providers to safely ship your goods from the point of origin to your specified destination.

In the vast majority of cases, freight is transported by air or sea without incident. But, as with all things in life, there are no guarantees. All shipping carries an element of risk.

The hazards that your cargo can potentially face include fire, theft (including piracy), damage, and jettison. For peace of mind, it’s advisable to insure your goods against such incidents, just as you would insure your car or items in your home. If you don’t do so, the cost of the loss or damage of the goods will be yours to bear.

Avoid Mistakes when Insuring Your Freight

In the final analysis, you’re free to bear the risks of shipping in any way your business pleases. However, if you prefer to take the safest approach, we suggest that you protect your goods for their full value by investing in cargo insurance.

We hope that the knowledge gained from this quick read should spare you from the common, but potentially costly, mistake of assuming that your forwarder’s freight service liability insurance, often just called “freight insurance”, will be sufficient to protect your assets while at sea or in the air.


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