Understanding the differences between freight insurance and carrier liability is crucial, in understanding where you stand in times of a crisis. Both have their own important roles and offer different levels of coverage, limitations and responsibility.

Unfortunately, damage and delays to freight shipments are a true reality. In some cases, the probability of them can never be entirely eliminated. If you don’t want to be left wondering how your shipment issues will be resolved, then keep on reading and hopefully, we can provide a clearer insight into how these two cover policies differ and the level of cover to your valuable shipments that you can expect from both.

What Is Freight Insurance? 🚚📄

Freight insurance is normally down to the shipper to obtain through a third-party insurance company. Each policy is different and has different levels of coverage depending on your requirements. These policies work to protect your cargo against damage, loss, theft and other unforeseen circumstances while in transit. The cost of freight insurance completely depends on the value of the cargo being shipped. Pros of freight insurance vs. carrier liability:

• Generally pay out quicker than carrier liability payouts
• Cover more of the declared value of your shipments compared to carrier liability
• The carrier doesn’t have to be declared liable for damage (no proof of fault is needed)

What Is Carrier Liability? 🚛📃

Each carrier has its own determined liability cover for every shipment they fulfil. It’s the legal responsibility of the transportation provider (carrier) to provide this cover for all cargo that they transport. This cover should never be seen as insurance, because it simply isn’t. Carrier liability should only be treated as supplementary protection. In fact, some cargo based on type can even become excluded from carrier liability.

So, with carrier liability how much will your shipments be covered for?

Well, all different freight gets valued by a class system, and either freight class or cargo type determines the liability cover value. One thing to bare in mind, with carrier liability, is that the entire value of your shipment is never covered, only a fraction. This is normally calculated by a set amount of dollars ($) per lb of freight.

Another thing to consider about carrier liability is that if you ever need to make a claim, you will need to provide proof that your carrier caused the damage, loss or delay to your shipment and it needs to be recorded at the point of delivery on the receipt. If not, the carrier can deny all knowledge of damage, and will inevitably not have to pay out.

Lastly, carrier liability is also not valid in circumstances where there is damage and delays inflicted due to an ‘act of god’, meaning weather or other natural disaster cause.

Pro of carrier liability vs freight insurance:

• Inexpensive freight might not require the added protection of expensive freight insurance due to its low value, it can end up being a waste of money. Carrier liability on its’ own could be the way to go for these sorts of shipments, and you could save some money by not taking out a freight insurance policy.

How Do Claims Work For Both? 🤔

Freight Insurance

As freight insurance is usually obtained through third-party insurance businesses, the insurance companies are then the ones held responsible for paying out to the shipper for the insured value. This includes instances of damages, delays, loss and theft (anything that the policy covers). The process is fairly straightforward, by providing evidence of damages or losses to the insurer they can get the compensation ball rolling according to their policies. In most cases, compensation is paid out relatively quickly and within 1 month of reporting.

*Be sure to use a reputable insurance company though, as we all know what they’re like and a lot have a bad reputation when it comes to payouts and may try to avoid them like the plague!

Carrier Liability

Carrier liability holds the carrier liable. Therefore, when it is proven that the carrier has caused damages and delays through negligence, fault or in most cases human error/accident, they’re then responsible for compensating the shipper on the agreed value for their shipment. To be clear, as we mentioned before this is not usually for the entire value of the shipment but a fraction.

This can then take a lot longer than the freight insurance payout, as carriers have around 4 months (120 days) to action your claim. It’s important to note that any claims must be filed within 9 months of the delivery of your cargo and at the time of delivery. This HAS to be recorded on the receipt of delivery too!

By doing so, you can avoid back-and-forth disputes, as otherwise, you can struggle to prove the carrier made the damage if it was not picked up at the point of delivery. So take that little bit of extra time to give your shipment a proper look over before signing off on it.

What Is The Best Solution For Your Shipments? 🚚

We can always recommend the best solution for each shipment but truly, only you can make that decision. Freight insurance can become extremely costly depending on the freight you’re planning to ship. So weighing up the pros and cons of the added cover is extremely important, you should consider factors like, whether you could afford to lose a claim against costs of lost or damaged freight.

Essentially, if your freight is extremely important, delicate and/or highly valuable we would recommend the extra precautionary step of taking out a freight insurance policy. Just to be on the safe side of caution.

Conclusion 💭

Carrier liability offers a base level of protection that is mandated by law, but it doesn’t always offer the full cover of the entire goods’ value. On the contrary freight insurance offers a fully comprehensive cover and customized and tailored options. Freight insurance almost bridges the gap between the amount of cover from carrier liability and the actual value of your goods. Because in a ton of instances, the freight value is higher than the carrier liability. So the extra layer of protection from the added freight insurance means in instances of the above scenarios of damage, loss or theft you’re more likely to recuperate much more of the freight value by having both.

To make the best decision, businesses needing to ship goods should weigh up their needs and risk tolerance. While adding the extra freight insurance can become costly, sometimes it’s worth spending the extra to have peace of mind and greater financial security.

How Can PEI Help? 😄

Nobody can ever guarantee 100% that there will never be any issues relating to damage to your freight. If you’ve ever been told differently, they’re lying!

However, we can reassure you that we are experts in everything logistics and we know that with us, your freight is always in extremely caring hands. We are sure to do everything in our power to get your shipments from A to B in perfect condition and on time, every time!

If you have any questions or concerns about insurance policies and what coverage you can expect to receive when you ship with us, then give us a call on Phone: 888-SHIP-911 24/7/365 to speak to one of our friendly experts. We can’t wait to hear from you!😁