Being a freight forwarder, you are responsible for the damages or lost goods during a transit and in such cases, you might get sued against damaged goods. In order to be on the safe side, a freight forwarder should always ask its clients to buy cargo insurance. Clients should buy cargo insurance as it is their insurable interest to protect the cargo and it is also a standard and good practice to maintain an optimum cover to protect goods in transit. A freight forwarder should always make sure that the consignment is insured on the client’s end and if not, they should ask the clients to buy cargo policy since freight forwarders liability is limited and sometimes the value of the limit of liability is less than the value of consignment.

In order to achieve a competitive advantage, a freight forwarder can also buy cargo insurance for its clients and provide coverage for a client’s consignment as a value addition. Most of the big logistics firm invest in cargo insurance to provide an additional protective layer to their business.

Read: What is covered under cargo insurance?

For a freight forwarder, the freight forwarder insurance policy is the most important policy as it provides coverage against negligence, error or omission. Any claim arising because of weather-related causes or inadequate packaging will not be addressed under freight liability insurance policy so it becomes important to buy cargo insurance. It is important to understand the difference between freight forwarder liability policy and freight insurance since both trigger different types of claim and the reason for the loss is the line of demarcation between them.

If any damage occurred to cargo during shipment because of a negligent act performed on freight forwarder’s end, it will be covered under freight forwarders liability insurance. Freight liability policy triggers claims in which carrier or freight forwarder is at fault and negligence must be proven in freight liability claims. But this is not the case in cargo or freight insurance as there is no need to prove negligence. As cargo insurance does not cover consequential losses or any liability-related losses so it is crucial to buy both the policies to avail complete protection against mishaps.

Read About: Tips to buy the best freight forwarder insurance policy

Case Study: XYZ Logistics Ltd. company has freight liability insurance. One of its clients sued XYZ Logistics company against loss of good during transit. The client has not bought cargo insurance which turned the situation worse as the limit of liability under freight liability insurance is less than the value of lost goods. Since the loss amount is not fully settled, the client will be at loss. If either the client or the logistics firm would have availed freight insurance, complete loss amount would have been recovered. Freight liability insurance only covers a specified amount which is mentioned in the policy as the limit of liability. It is crucial to prove negligence or unprofessional acts being performed by freight forwarders which caused all the damage.

As goods are not automatically insured, it is important for clients to mitigate the series of risk that can cause damage to goods in transit by purchasing cargo insurance. On the other hand, a freight forwarder should always buy freight liability insurance to cover all the liabilities which could befall on him if goods would not be transported authentically and in good condition. Freight Liability insurance can provide assistance in handling complaints from clients against error or omission or any negligent act. Cargo or freight insurance can do wonders for a freight forwarder if purchased with freight liability insurance as these insurance policies will cover almost all probable risk during a transit.