Freight Insurance and Cargo Protection: Complete Guide

Freight damage and loss represent major risks in transportation. Understanding carrier liability and insurance options protects your business from financial loss. Carrier liability is limited by law and terms of service. For US interstate freight, Carmack Amendment limits carrier liability to declared value or actual loss, whichever is less. Canadian interprovincial freight follows similar principles under federal regulations. Standard carrier liability for LTL is typically $2 per pound unless higher value is declared and paid for. FTL carrier liability varies but rarely exceeds $100,000 without additional coverage. These limitations mean a 1,000-pound LTL shipment worth $10,000 has only $2,000 carrier liability without declared value. Cargo insurance fills this gap, providing coverage for actual freight value regardless of carrier limits. All-risk cargo policies cover most loss or damage causes except excluded perils like war, terrorism, and inherent vice (product defects causing self-damage). Typical coverage includes physical loss or damage during transit, theft, weather-related damage, and vehicle accidents. Premiums vary based on freight value, commodity type, packaging quality, and transportation mode. High-value or theft-prone commodities face higher premiums. Valuation declarations inform carriers of freight value, triggering higher liability and corresponding freight charges. Declaring higher value costs more but ensures adequate carrier liability. The calculation weighs increased freight charges against potential uninsured loss. Claims procedures vary by carrier and insurance provider. Typical requirements include immediate notification of loss or damage, freight inspection before accepting delivery if visible damage exists, detailed damage documentation with photos, and filing formal claims within specified timeframes (often 9 months for carrier claims). Prevention reduces claims frequency through proper packaging (adequate cushioning, appropriately sized containers, and palletization for LTL), quality carrier selection (vetting carrier safety records and insurance coverage), and special handling labels on fragile freight. Understanding the distinction between carrier liability and cargo insurance is critical. Carrier liability is the carrier's legal responsibility for freight in their care, limited by law and tariffs. Cargo insurance is shipper-purchased coverage protecting against loss exceeding carrier liability. High-value freight warrants cargo insurance regardless of carrier reliability.