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If your business involves importing or exporting goods or even depends upon shipping items that need to arrive on time and undamaged, Freight Insurance is a necessity for you. You need to ensure that whatever happens on the way, you are covered. Freight Insurance will provide essential financial security and protect your business.
Both importers and exporters tend to face certain risks when they ship goods. In case of an accident they will lose considerable sums of money. Freight Insurance protects their shipment against loss, damage, or theft. It will compensate businesses or individuals whose shipment suffered damage or loss during transit at sea, land or air. In other words, Freight Insurance is an integral part of contemporary shipping environment.
Freight Insurance is an agreement or contract between an insurance company and an individual or a business. It provides compensation if something happens to a specific item or shipment. Like a traditional insurance policy, it should be signed and paid prior to shipment. The terms of Freight Insurance are typically based on sales contracts. You will get a refund on the cost of the shipment if you make a claim on that policy.
Freight Insurance is also called shipping insurance for businesses and should be purchased if you send items through freight. Compared to the potential loss or damage costs, this type of insurance is fairly inexpensive. The price of the policy is basically determined by several factors: the value of the item shipped; the type of commodity; the distance the commodity will travel; the carrier or mode of transportation, and the way the commodity is packaged.
Higher valued and one-of-a-kind items have a high cost of replacement and therefore raise the price of the insurance. Fragile items which are likely to be damaged during transit are considered more likely to require payment from a claim. A shipment that will travel for a long distance also has greater chances of being damaged as during its journey it has to be transferred several times from trailer to terminal. So if it is only a short distance your item will travel, your shipping insurance is most likely to be cheaper.
Freight Insurance policy protects your commodity when it is transferred by truck, train or cargo vessel. Without insurance, the commodity will have to be replaced at the cost of the shipment's owner. If you have a Freight Insurance policy, the compensation will be paid directly to you.
Accidents do happen with any freight carrier, and though claim rates are reported to be fairly low, you don't want to be among those 5% whose shipped items were damaged or lost on the way, and certainly you don't want to be paid out only a minimal amount, which is much less than the value of the lost item.
Freight Insurance policies are based on the International Commerce Terms (Incoterms), a set of sales terms which are considered to be the industry standard in many countries. The parties involved in a particular transaction typically share responsibilities and transaction costs. The U.N. Convention on Contracts for the International Sale of Goods also serves as a guide for the Freight Insurance policy terms. If an exporter undertakes the responsibility for all insurance costs until the goods are safely on board the transport vehicle, the importer takes upon the risk of commodities being lost or damaged from the moment they are on board.
Freight Insurance can be obtained from a number of sources. Check if you are insured through your credit card agreement. In case your business is shipping items in your country, the items in transit may already be covered by your Business Insurance. If your business involves shipping many goods to a number of areas, consider a specific kind of discount shipping insurance, which is typically provided at a yearly rate.
The company that is going to ship your item can also provide you with Freight Insurance. It will be responsible for paying you if the items you send with them happen to be lost, damaged, or stolen. However, it is very important to read the terms of the policy, as sometimes certain situations which are deemed out of the shipping company's control, won't be covered. In case the shipping company has certain stipulations on their shipping insurance, you might need to buy additional insurance from a third party. Also, you may want to need third party insurers in case your items are worth more than the shipping company can offer to insure.
If we are speaking about a personal shipment, your Home Owners or Renters Insurance will often cover it. If it is not already covered, ask your insurance agent to add a one-time policy to your existing insurance. For businesses which seldom send freight shipment, purchasing shipping insurance for freight on a one-time basis is also advisable.
In case you have to send a lot of items, consider purchasing full time shipping insurance. This type of shipping insurance will cover you irrespective of where you are and what you send. If you want to obtain full time shipping insurance, you should deal with your regular insurance provider. This type of insurance is likely to have a cap on the amount of money for which an item can be insured, as well as for the amount of money you will get if you file a claim.
Temporary shipping insurance is the type of insurance you will find with shipping companies, mail carriers, postal and package services. This insurance is taken out on the specific item you want to ship. Temporary shipping insurance allows for getting insured for as much as you would like on the particular item.