Freight Insurance: When You Need It and How It Works

There’s a gap between what your freight is worth and what the carrier will pay if it’s damaged. Understanding that gap is the difference between a minor inconvenience and a major financial hit.

Carrier liability is not insurance

This is the most common misconception in freight shipping. When a carrier damages your goods, they’re liable under the Carmack Amendment. But that liability has limits.

Most LTL carriers limit their liability per pound in their tariff. Common limits:

Here’s why those limits matter:

Scenario 1: Dense, low-value goods. You ship 1,000 pounds of steel brackets worth $3,000. Carrier liability at $25/lb covers $25,000. You’re fully covered. No problem.

Scenario 2: Light, high-value goods. You ship 200 pounds of medical devices worth $40,000. Carrier liability at $25/lb covers $5,000. You’re exposed for $35,000. Big problem.

The per-pound calculation is what matters. If your product’s value per pound exceeds the carrier’s liability limit, you have a coverage gap.

What carrier liability covers

Carrier liability under the Carmack Amendment covers loss or damage that occurs while the freight is in the carrier’s possession, but only if the carrier was at fault. The shipper must prove:

1. The freight was in good condition when tendered to the carrier
2. The freight was damaged when delivered (or not delivered at all)
3. The amount of damages

The carrier can defend by showing that the damage was caused by:

• Act of God (extreme weather, earthquake)
• Act of a public enemy (war, terrorism)
• Shipper’s own fault (inadequate packaging)
• Inherent vice (goods that deteriorate naturally)
• Authority of law (government seizure)

Notice that “act of God” defense. If a tornado destroys the carrier’s terminal with your freight inside, standard carrier liability may not cover your loss. Insurance would.

When you need freight insurance

High value per pound. Electronics, medical devices, specialty chemicals, artwork. Any time product value exceeds $10-$15 per pound, evaluate insurance.

Irreplaceable or custom goods. One-of-a-kind items, custom-manufactured products, trade show displays. If you can’t simply reorder from inventory, the financial and time cost of loss is magnified.

Fragile or damage-prone items. Glass, ceramics, precision instruments. Products with higher-than-average damage rates benefit from insurance coverage.

Long or complex supply chains. Cross-border shipments, multi-modal transport, or shipments that pass through many hands have more exposure points.

Customer obligations. If you’ve committed to delivering goods and a loss would require expensive expedited replacement, insurance covers that risk.

How freight insurance works

All-risk coverage

Freight insurance is typically “all-risk,” which means it covers any external cause of loss or damage unless specifically excluded. This is broader than carrier liability, which only covers carrier negligence.

Common exclusions in freight insurance:

• Inherent vice (product defects, spoilage of perishables)
• Insufficient packaging (must meet reasonable standards)
• Delay (pure delay without physical damage)
• War, nuclear events (standard exclusions in most policies)

Cost

Freight insurance typically costs 1-3% of the declared value. The rate depends on:

• Commodity type. Fragile goods cost more to insure than durable ones.
• Lane. Some routes have higher loss/damage rates.
• Packaging. Well-packaged goods get better rates.
• Deductible. Higher deductibles reduce premiums.

For a $10,000 shipment, insurance might cost $100-$200. For a $50,000 shipment, $500-$1,000. Consider that against the alternative: absorbing the full loss.

Per-shipment vs. annual policy

Per-shipment coverage is purchased for individual shipments. Good for occasional high-value shipments. No commitment, pay only when needed.

Annual policy covers all shipments up to a per-shipment value limit. Better for businesses that regularly ship high-value goods. Lower per-shipment cost and simpler administration.

Filing an insurance claim

Insurance claims are typically faster and more straightforward than carrier liability claims:

1. Report the loss or damage to your insurance provider within 48-72 hours
2. Provide documentation: BOL, commercial invoice, delivery receipt with damage notes, photos
3. The insurer assesses the claim and pays the declared value minus deductible
4. The insurer subrogate against the carrier to recover their costs (this is the insurer’s problem, not yours)

Claims are usually resolved in 15-30 days with good documentation, compared to 30-120 days for carrier liability claims.

Declared value vs. insurance

Some carriers offer “declared value” coverage, where you declare the full value of your shipment and pay a premium for higher liability limits. This is different from insurance:

Declared value increases the carrier’s liability limit but still requires you to prove carrier fault. It’s governed by the carrier’s tariff terms.

Insurance provides all-risk coverage regardless of fault. It’s a separate contract with an insurance company.

Declared value is simpler to arrange (just a checkbox at booking) but narrower in coverage. True insurance costs a bit more but protects you more broadly.

A simple framework

When in doubt, calculate: what would it cost your business if this shipment was a total loss? If that number makes you uncomfortable, buy insurance.

How FreightSimple helps

FreightSimple offers cargo insurance options during the booking process, making it easy to protect high-value shipments. Select your coverage level, and the cost is included in your all-in quote.

Ship with confidence knowing your freight is protected.