Freight Insurance: Cost, Coverage & Meaning | Freightos

When your business ships valuable cargo across the globe, you need the peace of mind that comes with reliable freight insurance.

What is Freight Insurance?

Freight insurance is a type of policy that safeguards your goods against loss, damage, or theft while they’re in transit. Many shippers assume that the carrier’s liability will fully protect them, but that’s often not the case. Carrier liability is limited and may not cover the full value of your goods.

Types of Freight Insurance

Within cargo insurance, there are three main levels of cover:

1. Basic Cover: Minimal protection against major disasters like accidents and natural disasters. Not recommended for high-value or sensitive goods.
2. Broad Cover: Expands on basic to include theft, non-delivery, and more. Good mid-range option for many businesses.
3. All-Risk Cover: The highest level of protection, covering all risks unless specifically excluded. Recommended for high-value, fragile, or critical shipments.

Other types:

• Cargo Insurance: Covers physical damage or loss of goods during shipping
• Liability Insurance: Protects against third-party claims of bodily injury or property damage
• All-Risk Coverage: Most comprehensive option covering a wide range of risks

Freight Insurance Coverage

What freight insurance covers:

• Physical damage from accidents, rough handling, or extreme weather
• Theft, pilferage, and non-delivery of goods
• General average sacrifice in maritime incidents
• Loss overboard on sea voyages
• Customs rejection or delays

Common exclusions:

• Wear and tear or gradual deterioration
• Improper packing or labeling
• Employee dishonesty or intentional damage
• Delay-related losses (unless specifically included)
• War, strikes, or civil unrest (unless specifically included)

Freight Insurance Cost

On average, freight insurance premiums cost around 0.3% to 0.5% of the commercial invoice value of the goods.

Factors affecting cost:

• Type and value of goods
• Mode of transport (air, sea, road, rail)
• Destination country and shipping route
• Level of cover selected

Ways to reduce costs:

• Properly packing and labeling cargo
• Providing accurate declarations and documentation
• Choosing reputable carriers with good safety records
• Opting for appropriate, not excessive, levels of cover

Specialized Freight Insurance Types

Air Freight Insurance

Protects against airport handling risks and potential delays. May also cover the costs of the air freight itself.

Container Shipping Insurance

Protects against marine-specific risks like rough sea conditions, port congestion, delays, and containers lost overboard.

How to Choose the Right Freight Insurance

1. Assess your risks: Evaluate types of goods, transport modes, routes, and destinations
2. Check carrier liability: See what’s covered by your carrier’s insurance
3. Get the right level of cover: Choose from basic, broad, or all-risk based on needs
4. Compare providers: Look for reputable insurers with competitive rates
5. Review regularly: Update coverage as your business evolves