What Is Freight Insurance And What Do Your Freight Insurance Rates Cover?

What Is Freight Insurance And What Do Your Freight Insurance Rates Cover?

Your freight insurance rates protect you as an importer against potential losses to the shipment during transit and carriers for potential loss of a customer. There are many different types including shipping insurance, freight insurance, cargo insurance, moving insurance, transit insurance, and transport insurance. All of these terms are names for insurance that covers goods or merchandise against damage or loss while in transit from one location to another. There are 2 types of cargo insurance, contingent cargo, and primary cargo insurance.

Contingent Cargo Insurance

Contingent cargo freight insurance is a requirement of all freight forwarders and has a legal minimum requirement. Cargo weight is the basis for coverage; for example, $0.60 per pound.

Primary Cargo Insurance

Primary cargo insurance insures goods for their full actual value, and this can be issued per shipment or via an annual policy to cover many shipments per year. For example, if the value of the shipment is $500,000, the primary cargo insurance policy will cover $500,000.

Are You Covered?

Most carriers have freight insurance, but as an importer, you should look into separate cargo insurance such as marine freight insurance as carrier liability is often limited to $0.50 per pound rather than on the actual value of your goods. For example, if your cargo is worth $100,000 and weighs 10,000 lbs, your carrier's liability insurance would only cover $5,000 in cargo loss.

If you require full value coverage, you should look into replacement value cargo insurance. Carriers should always know the value of the goods they are transporting. If the value of goods is not covered by the carrier's liability coverage, they should notify the client and determine if additional insurance coverage should be purchased.

Make Sure You Are Covered With The Assistance Of PCB Freight Management

Inland Cargo Insurance

Inland cargo insurance is another type of insurance. It covers domestic shipments via land (truck and rail) and air. Ocean cargo insurance provides coverage for shipments travelling via ocean whether on boat or container ship alike.

Coverage for cargo insurance is often referred to as 'warehouse to warehouse.' This coverage begins when transit begins and terminates when the cargo is delivered to the final destination.


The responsibility for organizing insurance can be shared between the importer or buyer and exporter or seller or can be undertaken by just one of them. Make sure that the contract confirms the party responsible for the insurance policy. A clear way to do so is to use an internationally recognized term of sale, also known as Incoterms®.

Incoterms® clarify to what extent a party must take responsibility for particular risks during transportation. They define the responsibilities of the buyer and the seller and are recognized as the international standard by customs authorities and courts in all the main trading nations. Incoterms® reduce the risk of misunderstandings and legal disputes and also specify the loading and unloading responsibilities of the buyer and seller.

Download Your Own Incoterms Guide

What To Consider When Deciding On Insurance:

  • Know the costs and inclusions if you are responsible for arranging insurance.
  • Know the details of the insurance coverage if your supplier arranges insurance.
  • Check with your business insurance provider to understand what coverage is already available to you.
  • Make sure you inspect the goods upon receipt so you can remedy any problems promptly. If you discover damage or loss to your shipment follow the instructions outlined in your insurance policy or certificate to submit a claim.
  • Know that carriers, freight forwarders, and third-party service providers will only arrange insurance if so instructed in writing. They do not do so automatically.

Know Before You Go

In keeping with the Customs motto of "Know before you go", "Know before you ship" as it relates to insurance coverage for the goods shipped is also imperative. Do not count on your freight broker's insurance policies to fully cover your shipment.

Freight Manager Insurance
Share this post
About Author
PCB Group

PCB Customs Brokers, PCB Freight Management

While we strive for accuracy in all our communications, as the Importer of Record it is incumbent upon your company to ensure that you are aware of the requirements under the new regulations so that you maintain compliance as always.