A freight insurance policy insures the total or partial value of the cargo. The insurance is provided by a third–party company. The policy would be exclusive to the specific freight shipment and shipper. The structure of freight insurance is similar to that of a general insurance policy.
Why do shippers need Freight Insurance Policy?
The purchase of freight insurance will cover your cargo. Whilst buying such insurance, you can negotiate the terms of the policy and pay a premium dependent on a predetermined contract. The policy evaluates the cargo’s total value and bases its premiums on a percentage. Upon experiencing damages, loss, pilferage or theft, you can file a claim within 30 days. The claim will be processed, and the compensation will be awarded based on the terms agreed upon.
Things to consider when buying a freight insurance policy?
Here are things to consider whilst buying a freight insurance policy:
Packaging should be optimal for fragile items:
All fragile items such as ceramic, glass, clay pots, tiles, granite/marble slabs and other items that can face breakage easily need professional packaging. The freight insurance company would require proof of professional packing, pre-shipment photos, and original manufacturer packing before the release of the claim amount. Packaging the items is of utmost importance whilst availing freight insurance policy.
Declarations about the consignment:
It is always important to make true and accurate declarations about the consignment. This will save time and money in the event there is a need to file a claim. Irrespective of the type of freight insurance, you need to always make accurate, detailed declarations, which will facilitate smooth and seamless claims.
Value of consignment:
It is important to declare the correct value of your shipment. This will ensure that the claim settlement is accurate and is based on a pro-rata basis. In case, at the time of claims, there is a difference between the declared value and true value, the claim amount reduces on a pro-rata basis.
Proof of consignment:
Remember to take pictures of your consignment before transit. These photos are authentic proof if and when the goods are damaged. For assessment purposes, you must submit proof to the insurer upon examination of freight damage and loss.
Additional Read: How is the Marine Insurance premium calculated?
What is the difference between freight liability and freight insurance?
There is somewhat limited liability coverage for every shipment. This limited liability defines freight and the difference between freight insurance and freight liability.
The type of goods is imperative for assessing the sum insured amount and the applicable tariffs. The liability coverage is not for the entire shipment’s value if the value of the shipment is too high. There is an obligation on the movers to refund the money that they charge for the shipment if there is damage to the goods due to their fault.
To ensure that your claims are honoured in total and without any reduction, the packing of the goods should be optimal to ensure that the damage does not occur due to negligent packing. The coverage liability under the freight liability has multiple exclusions which are critical for your claims if you want full coverage.
A freight insurance policy ensures safety across all circumstances, including any untoward event happening to your cargo. So, there is no need to worry if the total amount of your claim is honoured. There is no onus upon the policyholder to prove that there was a fault in the carrier. Freight insurance does not have as many exclusions as in the case of freight liability and ensures optimal coverage and timely payout of claims.
Additional Read: Conditions of Claim settlement under a Marine Transit Insurance
How does Freight Insurance policy work?
Freight insurance is a form of insurance which indemnifies the policyholder against any loss incurred by the shipowner due to his inability to complete the contract of carriage due to unforeseen and unavoidable perils of the sea.
What is the meaning of freight?
Freight means the goods transported in bulk by road or air. Under the freight insurance coverage, the seller is responsible for covering all costs, including insurance and freight charges, while in transit.
The buyer is responsible for the cargo once it has reached the buyer’s destination. The freight insurance coverage bought by the seller does not offer coverage beyond this point.
What are the benefits of freight insurance?
A freight insurance policy’s most prominent and apparent benefit is that it reduces financial losses during any unforeseen damage or loss of shipment during transit. Further, like any other form of insurance, freight insurance provides peace of mind in exchange for a nominal amount called the premium amount.
In addition, the following benefits accrue from a freight insurance policy:
- You can avoid unexpected glitches in your cash flow
- Loss of potential profits generated if the coverage includes them
- Accessibility to loss reporting
- Efficient claims procedure due to competent services across insurers.
Read More: What are the different types of Marine Policy available in India?
For what purposes you would require freight insurance?
While availing of freight insurance, remember to assess the maximum liability coverage for goods under transit. It is important to assess the exclusions and restrictions of the freight insurance. Upon freight value surpassing the coverage amount, then freight insurance would come in handy to counter any unforeseen damage to your goods. The following are instances when you need a freight insurance policy:
- Shipment includes fragile items which can be damaged by minimal turbulence
- Value of shipment is high
- If you do not have the time for claim processing in the event of damage or loss of goods during transit.
About The Author
Simran
MBA Insurance and Risk
With extensive experience in the insurance industry, Simran is a seasoned writer specializing in articles on marine insurance for SecureNow. Drawing from 5 years of expertise in the field, she possesses a comprehensive understanding of the complexities and nuances of marine insurance policies. Her articles offer valuable insights into various aspects of marine insurance, including cargo protection, hull insurance, and liability coverage for marine-related risks. Renowned for their insightful analysis and informative content, Simran is committed to providing readers with actionable information that helps them navigate the intricacies of marine insurance with confidence.
