Is third party LTL shipping insurance worth it?

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Freight damage during shipping is relatively common. Depending on how far a shipment is going and how often it changes hands along the way, a great number of things can happen in the process that can damage your freight. In order to protect your investment and cover the cost of your shipment, purchasing freight insurance from a third party is highly recommended for all valuable or fragile LTL shipping situations.


Third Party Freight Insurance vs. Carrier Liability

Freight insurance provides additional coverage beyond the legally required protection plan offered by all LTL carriers. Carrier liability is NOT freight insurance and usually only covers lost, damaged, or delayed freight on a flat rate or dollars per pound basis depending on the freight class, packaging, commodity type, and value of the items. Additionally, carrier liability has a number of exceptions, outlined by a law passed in 1935 known as the Carmack Amendment, for which the carrier cannot be held liable in the event of a damage claim.  

Act of God – protects the carrier from liability in the event of a natural disaster or physical anomaly but does not apply to predictable natural events such as severe weather.

Act of War - protects the carrier from liability if a foreign enemy of the country inflicts damage to the shipment.

Act of Default of Shipper – protects the carrier from liability in the event that damages are the shipper’s fault, such as insufficient packaging or mislabeled contents.

Public Authority – protects the carrier from liability in the event of government actions, such as road closures, trade embargos, or product recalls that can cause cargo damages or delays.

The Inherent Vice or Nature of Goods Transported – protects the carrier from liability in regards to temperature-controlled shipping of perishable products, as long as any delays were not the carrier’s fault.


For a carrier to be liable for damages that occur during shipping, the shipper must be able to prove that the goods were undamaged when the carrier received them, that the goods arrived damaged or not at all, and be able to provide the amount of the damage claimed. Basically, carrier liability covers a limited dollar amount for only a fraction of the possible damages that can occur during shipping, and only if those damages are a direct fault of the carrier.


When To Purchase Third Party Freight Insurance

To ensure that your valuable items are covered in the event of unforeseen damage or loss due to inadequate packaging, temperature, shifting cargo, natural disaster, theft, motor vehicle accidents, or any other possibility that can occur during shipping, you must purchase additional freight insurance (often called cargo insurance) from a third party.

The first things to consider when you are planning to insure your freight are deductibles and limits. The deductible refers to the maximum amount you will have to pay out of pocket for damages to your cargo. The higher the deductible, the lower the cost for your insurance policy. The limit refers to the maximum amount that the insurance provider will pay for damages to your cargo. The higher the limit, the more expensive the insurance policy. It is important to look at different third party freight insurance policies, taking into consideration the value of your shipment, the cost of the deductible against the price of the premium, and whether the insurance limit will cover the shipment’s total value in order to determine which policy is right for your needs.


When and How to File a Claim

Obtaining the right third party insurance policy for your valuable freight is the first step toward securing adequate coverage for the goods you are shipping. The next step is knowing when and how to file a claim in the event of damage or loss to your shipment. When dealing with damaged freight, it is critical to identify and record the damage as soon as possible, preferably at the time of delivery. It is of the utmost importance to ensure that all freight is inspected thoroughly at the time of delivery, and the person receiving the delivery should note any damage in detail on the Proof of Delivery form and take pictures of the damage, if possible. It can be challenging to file a successful claim without evidence of damage to the freight at the time of delivery, so it can be proven that the damage occurred while the cargo was in transit. Once the damage is assessed, a claim can be filed for the cost to repair the item or for the entire price of the item. If the shipment is lost, a carrier will typically spend a work or so tracing the path of the shipment to try and locate where it was lost. If the shipment cannot be found, the carrier will declare the shipment officially lost, and you can begin the process of filing a claim for the total cost of the item.

To file your claim, you will need a claim document from your carrier or third party insurance. You will also need an invoice for the damaged or lost goods that includes the manufacturer’s full cost of the items or the repair cost to fix the damages. You will also need any photos taken by the receiver upon delivery and the signed Proof of Delivery form that makes note of the damages. Submitting your claim document with the appropriate invoice, photos, and POD will ensure that your claim is accepted, processed, and paid out in the fastest time frame possible.  

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