Carrier Liability vs. Freight Insurance. What’s the Difference?
12/04/2023 — PartnerShip
Freight damage and loss is a reality of shipping. It’snot a matter of if it will happento you; it’s a matter of when.When damage or loss occurs, your first thought is often, “how will I be compensated?”To answer the question, you need to understand the difference between carrierliability and freight insurance.
Carrier Liability
Every freight shipment is covered by some form of liability coverage, determined by the carrier. The amount of coverage is based on the commodity type or freight class of the goods being shipped andcovers up to a certain dollar amount per pound of freight.
In some cases, the carrier liability coverage may be less than the actual valueof the freight. It’s common to see liability restricted to $0.25 per lb. or less for LTL or $100,000 for a full truckload. Also, if your goods areused, the liability value per pound will be significantly less than theliability value per pound of new goods. Liability policies can vary, so it’s very important to know the carrier’s liability for freightloss and how much is covered before you arrange your freight shipment.
Freight damage and loss is a headache. In order to receivecompensation, a shipper must file a claim proving the carrier is atfault for the damaged or lost freight. Carrier liability limitations includeinstances where damage is due to acts of God (weather related causes) or actsof the shipper (the freight was packaged or loaded improperly). In these cases,the carrier is not at fault.Additionally, if damage is not noted on thedelivery receipt, carriers will attempt to deny liability.
If the carrier accepts the claim evidence provided by theshipping customer, then they will pay for the cost of repair (if applicable) or manufacturing cost,not the retail sell price. The carrier may also pay a partial claimwith an explanation as to why they are not 100% liable. The carrier will try todecrease their cost for the claim as much as possible.
Freight Insurance
Freight insurance (sometimes called cargo insurance or goodsin transit insurance) does not require you to prove that the carrier was atfault for damage or loss, just that damage or loss occurred. Freight insurance isa good way to protect your customers and your business from loss or damage to yourfreight while in transit. There is an extra charge of course, and it is typicallybased on the declared value of the goods being shipped. Most freight insurance plansare provided by third-party insurers.
As mentioned earlier, your freight might have a highervalue than what is covered by carrier liability, such as shipping used goods.Another example is very heavy items. Carrier liability may only pay $0.25 perpound for textbooks that have a much higher value. This is a great example ofwhen freight insurance is extremely helpful in the event of damage or loss.
Carrier Liabilityvs. Freight Insurance in the Claims Process
If your freight is only covered by carrier liabilitycoverage:
·Your claim must be filed within 9 months ofdelivery
·The delivery receipt must include notice ofdamage
·Proof of value and proof of loss is required
·The carrier has 30 days to acknowledge yourclaim and must respond within 120 days
·Carrier negligence must be proven
If your shipment is covered by freight insurance:
·Proof of value and proof of loss is required
·Claims are typically paid within 30 days
·You are not required to prove carrier negligence
Deciding which option is best for your shipment
Anything that comes at an added cost needs to be evaluated critically and freight insurance is no different. There are a few things to consider as you weigh the potential cost and risk of damage and loss versus the cost and benefit of insurance. You'll need to think about the commodities you're shipping, how time critical your shipment is, and if you'd be able to weather the financial burden that comes with a denied or delayed claim payout.
Understanding your carrier's liability coverage and knowing the ins and outs of freight insurance can be tricky. If you havequestions like “how much does freight insurance cost?” or “what does freightinsurance cover?” the team at PartnerShip can help.
FAQs
Carrier liability is often limited, covering up to a specified amount per pound of freight, regardless of the shipment's actual value. Cargo insurance, conversely, is typically based on the declared value of goods being shipped, offering more tailored and comprehensive protection.
Is carrier liability the same as cargo insurance? ›
In short, cargo insurance is a risk transfer method that enables the cargo owner to shift the accidental financial loss of cargo in transit to the insurance company, while carrier liability refers to the legal liabilities of the appointed transportation company for goods in their care, custody, and control.
What is the difference between cargo insurance and liability insurance? ›
Cargo insurance is something that you buy to protect against your financial losses from the loss of or damage to goods during transportation. Cargo liability insurance, on the other hand, is intended to protect the transportation company from the financial impacts of your cargo claims.
What is the liability coverage for the carriers? ›
Carrier liability typically only covers damage or loss that occurred due to the carrier's negligence. In many cases, in order to settle a claim, the shipper must prove that the damage was the carrier's fault.
What is the meaning of freight liability insurance? ›
What is Freight Liability Insurance? Also known as Freight Insurance, Freight liability insurance protects your legal liability and responsibility for the loss or damage of goods you're transporting for your customers. It can also include Warehouse Keepers' Insurance and Hauliers' Liability Insurance.
What is the difference between cargo and carrier? ›
A carrier is a company that physically transports cargo from one place to another. A carrier owns and operates vehicles, ships, aircraft, etc. that are necessary for shipping. It has the responsibility of freight shipping.
What is an example of carrier liability? ›
For example, if a carrier's employee mishandles a package and breaks the goods inside, the carrier may be held liable in tort for the damage.
What is not covered in cargo insurance? ›
Issues that arise from areas where the shipper has a lot of control, including damage due to poor packaging, flawed products or hazardous products, may not be covered.
What are the two kinds of cargo insurance policy? ›
Now that we've covered the terms, it's time to dive into the types of cargo insurance—specifically, all-risk cargo insurance and named perils insurance coverage.
Is freight insurance the same as cargo insurance? ›
Freight insurance protects the freight forwarder or carrier who has a legal responsibility for the goods. In the event of a claim, the value is often calculated on the basis of weight. Cargo insurance is designed to protect the sender of the goods – so the manufacturers, wholesalers and retailers.
Who needs carriers' liability insurance? Freight forwarders, forwarding agents, furniture removal companies, couriers, or anyone who, in the ordinary course of business, carries goods owned by someone else, could be liable for damage to the goods and possibly even for secondary damage resulting from their service.
Who is liable for freight? ›
In order to receive compensation, a shipper must file a claim proving the carrier is at fault for the damaged or lost freight. Carrier liability limitations include instances where damage is due to acts of God (weather related causes) or acts of the shipper (the freight was packaged or loaded improperly).
What is the common carrier liability? ›
In common law jurisdictions as well as under international law, a common carrier is absolutely liable for goods carried by it, with four exceptions: An act of nature. An act of the public enemies. Fault or fraud by the shipper.
Who is responsible for freight insurance? ›
It is the shipper's legal responsibility to ensure that the goods that they put on an LTL or Truckload carrier are properly insured.
What is an example of freight insurance? ›
There are different types of freight insurance policies including cargo insurance, marine insurance, shipping insurance, transport insurance, and transit insurance. All these policies cover merchandise and goods against loss or damage during transit from one location to another.
What is the carrier limit of liability? ›
The Carrier limit of liability determines the maximum amount of money that carriers can be held liable for in the event of damage, loss, or delay of cargo. However, limits of liability vary between carriers and situations.
What is cargo insurance also known as? ›
Answer:Marine insurance is also referred to as transit insurance or cargo insurance. It's important to note that marine insurance isn't limited to covering goods transported solely by sea; it encompasses various modes of transportation, including road, rail, sea and air.
What is the difference between marine cargo and carriers liability? ›
Carrier liability insurance safeguards transporters from legal liabilities tied to the goods they carry, but it does not cover the actual value of the goods themselves. On the other hand, cargo insurance directly protects the value of the goods against theft, or the goods being lost or damaged in transit.
Freight damage and loss is a reality of shipping. It’snot a matter of if it will happento you; it’s a matter of when.When damage or loss occurs, your first thought is often, “how will I be compensated?”To answer the question, you need to understand the difference between carrierliability and freight insurance.
