What is Freight Insurance?
At Shipping Discounts, customers often ask about freight insurance and what it means. Simply put, freight insurance is a contract or an agreement between an individual or a business and an insurance company wherein the insured party is awarded an indemnity in case something happens to their goods.
Consignors and consignees face potential risks when shipping products. A consignee who has already paid for his goods can potentially lose money if the goods are lost or damaged. Likewise, a consignor who has invested an amount of money on the goods he is shipping also stands the potential to lose money in case of an accident. Freight insurance offers them a safety net in case their goods are somehow lost or damaged while in transit.
Most carriers already provide insurance – it is included in their rate of transporting the shipment. The amount that carriers will insure varies, but universally the insurance covers an amount on a per pound basis. If the value of your freight exceeds this amount per pound, then it is advisable to purchase freight insurance.
Freight insurance terms usually follow the guidelines of Incoterms. Incoterms, also known as International Commerce Terms, are a set of sales terms that are considered to be the industry standard for many countries. These terms are often referred to when dividing the responsibilities and transaction costs between the sellers and buyers involved in a particular transaction. These terms are also guided by the U.N. Convention on Contracts for the International Sale of Goods. Incoterms also set the conditions on where the responsibilities and obligations of all parties involved begin and end. These terms are all described in the documentation created by the International Chamber of Commerce.
There are many different kinds of freight insurance terms and an understanding of shipping services will help businesses and individuals avoid losing money over shipping mishaps. Planning and research can assist you when dealing with freight insurance policies. You can familiarize yourself with the basics of shipping with online research. The following article would be a good place to start: Shipping Basics.