Freight Insurance

Example

“The electronics manufacturer purchased freight insurance to protect their $500,000 shipment of computers during transport from the factory in China to their U.S. distribution center.”

Memory Tip

Think 'Freight = Fraught with risk' - goods in transit face many perils, so freight insurance protects against these transportation risks.

Why It Matters

Carrier liability is often limited and may not cover the full value of your shipment, leaving significant gaps in protection. Freight insurance ensures you can recover the full value of goods lost or damaged in transit, protecting your business cash flow and customer relationships when shipments go wrong.

Common Misconception

Many shippers assume that carriers (trucking companies, airlines, etc.) provide adequate insurance coverage for their cargo. However, carrier liability is typically limited to a few dollars per pound and excludes many types of damage, leaving shippers substantially underprotected without separate freight insurance.

In Practice

A furniture retailer ships $75,000 worth of dining sets via truck from North Carolina to California. The truck is involved in an accident, destroying $30,000 worth of merchandise. Without freight insurance, the trucking company's liability is limited to $1.25 per pound, paying only about $3,750. With freight insurance costing approximately $225 for this shipment, the retailer would recover the full $30,000 loss, protecting their profit margins and ability to fulfill customer orders.

Etymology

Combines 'freight' from Middle Dutch 'vracht' meaning cargo or load, with 'insurance,' reflecting the centuries-old need to protect valuable goods during dangerous sea and land transport routes.

Common Misspellings

Related Terms

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