Every time you ship something domestically in the United States, you are gambling with the potential of damage or loss. How confident are you in your knowledge of your carrier’s freight insurance policy and how much coverage you truly have?
If you ship goods domestically, you need to understand the basics of freight insurance to protect your business from unexpected losses.
Freight insurance covers the cost of liability and meets the requirements of the Carmack Amendment. Keep reading to learn more about how freight insurance works and why it matters for your business.
What is the Carmack Amendment?
Understanding shipping rules protects both the shipper and carrier when transporting goods. One such rule is the Carmack Amendment. The Carmack Amendment, made in 1906, is a law that holds carriers responsible for damaged or lost goods during transport. Carriers must provide a bill of lading. This document outlines the terms and conditions of the shipment. It also serves as a legal agreement between the carrier and the shipper.
Here are some of the key takeaways that you need to know about the Carmack Amendment:
- You must submit a written claim to the shipping company if they lose or damage your items during shipping. You must submit this claim within 9 months of receiving the items. A carrier cannot provide you less than 9 months to file your claim.
- If you want to sue the carrier, you have 2 years from the delivery date to take legal action. The time limit is not a legal deadline, but a minimum time carriers must give for filing a lawsuit. Even if the bill of lading states otherwise, a carrier cannot require the filing of a lawsuit within 2 years.
- If the carrier does not want to accept a compromise, they must write it down and tell the claimant why.
- If the carrier’s insurance company contacts you, it doesn’t mean they’re denying any part of the claim. The insurance company needs to notify you about the portion of the claim they will not cover. They should also provide an explanation for the denial. Additionally, they should clarify that they are representing the carrier.
What is Freight Insurance and What Does it Cover?
It is extremely important you understand the insurance policy requirements that your carrier provides. What is most important is that you fully understand what the exclusions are in their policy.
A carrier is liable for only a portion of the cost when transporting your goods. If the shipment sustains damage or gets lost, they will not fully cover the cost. This amount varies with each carrier, but the general accepted amount is $100,000 for a truckload.
“THE GENERAL ACCEPTED AMOUNT IS $100,000 FOR A TRUCKLOAD”
Shipping via LTL has a maximum freight claim value that ranges from $0.50 to $20 per pound. The carrier, product class, and product determine this amount.
If you don’t have insurance, you must prove the carrier was responsible for your loss or damage to receive compensation. For Damages or shortages, best practice is to take pictures and put notes on the BOL.
Freight insurance can help protect you if the declared value protection is not enough. It provides coverage for lost, damaged, or stolen items during shipment. It can also pay for legal costs associated with making a claim and getting refunds from carriers.
Freight insurance coverage varies. This depends on the value of the cargo and the risk associated with it. Higher value shipments will have higher premiums but also greater levels of protection if something goes wrong.
Types of Freight Insurance Coverage
The type of freight insurance you select will depend on the value and complexity of your cargo. The most common coverage is:
- All Risk: All-risk coverage is the best freight insurance. It protects against losses or damage from things like theft, disasters, or accidents during transit. It costs more but gives the most protection.
- Named Perils: These policies offer less protection than all risk policies. They only cover specific categories like fire, theft, and explosions. These policies have limited coverage and may not include events like water damage or mishandling during shipping.
- Limited coverage: These offer the least protection and are for less valuable shipments. The policy only covers losses mentioned in it. It’s important to read all the details before choosing this option.
When do you Need Freight Insurance
The answer to this question depends on your situation. Shipping goods with a high value or having a lot of risk in transport requires investing in freight insurance. Investing in freight insurance is likely necessary in such cases.
If your shipment is not worth much or if the items are not easily damaged, you may not need extra insurance. It is your decision to decide how much protection your shipments need.
Understanding What’s Not Covered in Freight Insurance Policies.
When you buy freight insurance, make sure you know what it covers and the terms of your policy. Look for things like exclusions or limits that might apply in certain situations. For example, there could be restrictions on certain types of claims.
- Time Limitations: Some policies only cover for a certain period during transit, after which any claims become invalid.
- Commodity Exclusions: Not all goods have insurance. Check your policy and know the limits.
- Conditions of Claim: To get approval for a claim, provide the required documents and understand your policy terms.
Determining Shipment Value Prior to Purchasing Coverage.
When you secure insurance for your goods, you must accurately declare the value of the items being transported.
Not realizing the true value of your things can have serious consequences. If you don’t accurately state their worth, the insurance might not fully cover any damage or losses that happen during shipping.
Also make sure to document both deductibles and maximum coverage correctly prior to shipping. Failure to do so could leave you vulnerable to potential monetary loss.
The carrier will only consider the cost to produce your goods for your coverage limit. This is different from the retail price you would charge your customers.
The Risks Involved in Not Having Adequate Coverage
The risks of not having adequate coverage vary depending on the type of cargo you are shipping.
The monetary loss of damaged or stolen shipments may be small. Your company can handle this without much disruption.
For more valuable items, inadequate coverage could have a devastating impact on your business if something goes wrong.
One of our customers had an unpleasant experience. A food and beverage manufacturer shipped out a truckload of frozen goods. Unfortunately, the transport caught fire, leading to an extensive monetary loss as the carrier’s maximum coverage was insufficient – by over $100,000!
This serves as an important reminder that adequate protection is essential to protect against unexpected losses during shipping.
What to Expect When you File a Freight Claim
- You must contact the carrier, or the company responsible for your freight shipping, and file a claim.
- You may need to provide evidence such as photographs and detailed information about the incident.
- The carrier will investigate the damage. They will assess the situation and determine if they are responsible for the losses.
- If found responsible, they can then process the claim and pay out any applicable compensation.
Consider a Third-Party Logistics Provider for Tailor-Made Solutions
Working with a third-party logistics provider can reduce stress. You do not need to worry about managing your freight during transport.
Partner with MVP Logistics to reduce the stress of freight transport and have peace of mind in case something goes wrong. We are dedicated to managing any claims that arise during transit. We aim to resolve them within 30 days. In some cases, we even cover the claim upfront.
Let us lighten the load for you. Contact us today to learn more about our freight shipping services.
