Freight Insurance? Cargo Insurance? Same Thing, Aren’t They? If you believe that freight insurance and cargo insurance are the same thing, you are by no means the first person to have fallen into that trap.
When you are shipping your goods overseas, whether by sea or by air, it is critical to understand that there is a difference between freight insurance and cargo insurance. You should know that they are not automatically covered for loss or damage, and in order for everything to be covered fully, there needs to be both freight insurance and cargo insurance in place.
Whether you are a seller of goods or a buyer, freight insurance alone will not cover the full value by any means. Freight insurance only covers the freight forwarder. In order to cover your goods for their full value, you need to buy cargo insurance. At The Insurance Broker, we can provide you with the right cargo insurance from one of the commercial cargo insurance companies.
Freight insurance simply covers the freight forwarder or logistics provider against claims as a result of their negligence or mistakes. Any damage to your goods, or total loss, must be a direct result of negligence or mistakes, and does not cover, for example, the ship sinking because it struck an iceberg. Freight insurance is calculated as a percentage of the freight forwarders charges. It is payable by the freight forwarder, but if you haven’t already guessed, this is passed on to you as a part of the freight forwarder’s charges. So, you finish up paying for freight insurance anyway.
Furthermore, all freight insurance is worked out based on the weight of the goods, so if you were shipping a pound of diamonds or a pound of sausages the amount paid out would be the same. Not only that, but the amounts paid out are governed by international conventions that vary according to the method of transport. So, the amounts paid out vary depending upon whether the goods are travelling by road, sea, or air freight.