What You Should Know About Freight Insurance

Freight Insurance

Freight insurance, also known as cargo insurance, goods in transit insurance and/or cargo and storage insurance, grows increasingly important and has become an absolute necessity as the global economy gets more interconnected and more cargo is being shipped than in any previous time in history. While technology evolves at an exponential rate and tasks such as tracking and communications are done in real-time, comparatively, the modes of transportation have changed little over the years. 

Frustrating Factors in Freight Delivery

With an increase in demand severely outpacing the number of available carriers and conveyances, more shipments are spending more time in storage and increasing the risk of loss and damage due to theft, peril (e.g., fire) and spoilage. The number and severity of natural disasters have also increased with climate change, contributing to the challenges, delays and risks in transporting freight internationally. Adding to those challenges and risks is a rise in collisions and piracy. And exacerbating it all, as alluded to above, is a consumer demand that matches technological progress with the expectation of same-day delivery. It may not be crazy to suggest that consumers will soon be demanding their custom, imported and special order items in the time it takes to deliver a pizza – and taking to social media if they don’t get it.

The Necessity of Having Your Own Freight Insurance Coverage

For a business operating in the world of logistics, carrying your own freight insurance policy is the only way to control your risks. Organizations such as:

  • Exporters
  • Importers
  • Charterers
  • Logistics companies
  • Freight forwarders
  • Transportation brokers
  • Customs brokers
  • Manufacturers
  • Distributors

can really only relax by taking the fate of your insurance coverage into your own hands. Carriers have limited liability exposures because they are only responsible for insuring freight to a maximum that is often well below the value of the freight being shipped. They are also excused from all liability in certain situations that can sometimes include natural disasters and work stoppages (these conditions will vary depending on various factors such as jurisdiction and the carrier’s insurance policy). 

Other reasons for purchasing your own freight insurance include: 

  • Freight insurance policies written for other parties (like those of trucking, logistics & transportation companies) may include coverage for your company’s assets but typically are mainly concerned with that party’s interests. Meaning any dispute will likely be resolved in their favour not yours.
  • Relying on someone else’s freight insurance means you have no control over the deductible you would be responsible for paying – along with other policy terms. It could also mean trying to deal with an insurance company in another country, time zone and language.
  • With increased demand resulting in increasing backlogs, more freight is spending more time in storage where it is essentially uninsured as most carrier insurance policies will only cover losses due to carrier negligence. This means that a fire or theft could very well leave you owning the loss.
  • As an exporter, manufacturer, supplier, etc., if freight arrives damaged, spoiled or deficient in some way, the purchaser may refuse to pay which, again, would leave you with the loss or a long and costly legal battle. 
  • Investors, including banks, may insist on freight insurance coverage to protect their investments.

On the flipside, having your own freight insurance means getting your freight insured at its full value (including profits), having a local broker who can explain the policy’s terms to you and negotiate the best terms (including the deductible) for your company and many other benefits.

The Problem is…

Unfortunately, because of the dangers that come with shipping freight and the typically high dollar value of shipments that easily total in the millions of dollars, many insurance companies who routinely pay billions of dollars a year (in aggregate) in claims for lost and stolen cargo have either severely capped their policy limits and raised their premiums or have exited the market altogether. 

Fortunately, ALIGNED works with Canada’s top insurance providers and can offer reliable freight insurance coverage that addresses the needs of Canadian-based companies relying on the transport of freight.

Freight Insurance Coverage Highlights

Freight insurance policies available through ALIGNED for Canadian-based entities can carry limits of up to $20M for any one conveyance, any one location and any one occurrence. Other features of our freight insurance policies include:

  • All-perils coverage for goods in transit around the world, including while in storage
  • Coverage options that include ocean & air transit and domestic & international transit
  • True stockthroughput coverage meaning no sub-limits for flood, sewer backup, earthquake, and named storm

The fast and flexible underwriting of our freight insurance policies includes project cargo and consideration of a wide variety of potentially difficult to insure commodities including:

  • Consumer electronics
  • Grains, seeds, and pulses
  • Fresh and frozen food items such as produce, fish, seafood, meat and poultry

Factors that Affect Your Freight Insurance Premiums

These are some of the factors that are considered when determining your rates for freight insurance:

  • Value of freight being shipped
  • Type of freight being shipped
  • Freight origin, destination, voyage and means of conveyance
  • Coverage limit and deductible
  • Insurance history (your record of insurance claims)
  • Number of years in business

Other factors not listed here may also affect the amount of a freight insurance premium.

Don’t take chances with a policy that maroons you when you need it most. Get ALIGNED with reliable freight insurance coverage.

Commercial insurance is all we do. But our brokers are not just commercial insurance specialists, we’re advocates who work for you. Our job is to get you exactly the protection you need from Canada’s top insurance companies at rates you can afford. Contact an ALIGNED advocate to get a free quote on freight insurance in minutes or get started right away by using our free online tool.

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