Carrier Liability vs. Freight Insurance. What is the Difference?

Freight damage and loss is a reality of shipping. If you are a frequent buyer or seller, it’s a matter of when you will be party to damage, loss or pilferage. Freight Claims has risen over 5% over the past year and with the capacity issues and staffing, we expect that number to rise by no fault of the shipper. When damage or loss occurs, your first thought is, Great, am I out the money I spent? To answer the question, you need to understand the difference between carrier liability and freight insurance.

Carrier Liability 

Every freight shipment is covered by some form of liability coverage, determined by the carrier. The amount of coverage is based on the commodity type or freight class of the goods being shipped and covers up to a certain dollar amount per pound of freight and regulated by the government.

In most cases, the freight carrier’s liability coverage will be less than the actual value of the freight. It’s common to see carrier liability restricted to $0.10 per lb. or less for used items shipping via LTL or maximum of $100,000 for a full truckload.

When you are processing freight shipments it’s very important to know the carrier’s liability for freight loss and how much is covered. If you do not know, now is the time prior to finding out you have no recourse.

Freight claims are a headache when dealing with a transporter. In order for them to pay on a claim, a shipper must file proof of transit, invoices, damage repair estimates and other forms to placate the carrier. It seems easy to prove the carrier is at fault for the damaged or lost freight. But the carrier liability limitations or obstacles they place during the claim process could negate any claim you have and although it is evident your shipment was damaged/lost/pilfered, it is never as simple as that with the carrier. Important: Always inspect while the carrier delivery driver is there and notate any issues on the BOL and have the driver sign to acknowledge this. Additionally, if damage is not noted on the delivery receipt, carriers will typically deny any liability unless a concealed damage claim is filed.

If the carrier approves the claim after inspection or research, then they will pay for the cost of repair (if applicable) or manufacturing cost, not the retail sell price. The freight carrier could also pay only a partial claim amount and offer an explanation as to why they are not 100% liable. NOTE: The freight carrier will try everything in their power to not pay on a claim or reduce their payment for the claim as much as possible.   

Freight Insurance

Freight insurance (sometimes called cargo insurance, shipping insurance or goods in transit insurance) does not require proof that there was carrier fault for damage, pilferage or loss. Freight insurance is the best possible way to protect your customers and your business from loss or damage to your freight while in transit and lets not forget the damage to your companies reputation if you have a upset client. Freight insurance rates are usually based on the declared value of your shipment (and shipping costs). Typically you will work with an agent of the insurance underwriter.

What happens if your shipment has a higher value than what is covered by carrier liability, such as when shipping used goods? Maybe you have a shipment that is light weight but high value? Carrier liability probably is going to fall short of your needs. This is why it is important to know carrier valuation to see if you need added coverage and protection in the event of damage or loss.

Carrier Liability vs. Freight Insurance in the Claims Process

If your rely upon carrier liability coverage: 

  • Your claim has to be filed within 9 months of the delivery date
  • The delivery receipt must include notice of damage (for obvious damage)
  • Concealed damage must be reported to the carrier within 48 hours
  • Proof of value and proof of loss is required
  • Packaging has to be kept for inspection by the carrier
  • The carrier has 30 days to acknowledge your claim and must respond within 120 days
  • You will need to provide proof of carrier negligence as well.

If you purchase freight insurance: 

  • You will need to present proof of shipment value.
  • Proof of damage/loss will be required.
  • Inspection if required is timely.
  • Claims are typically paid within 30 days
  • You are not responsible to prove there was carrier negligence

We hope we have shed some light on Carrier liability coverage and Freight Insurance to help you decide if you are protected or if you need additional shipping insurance.

If you have questions like “how much does freight insurance cost?” or “what does freight insurance cover?” or to get a freight insurance quote, visit our calculations page. We’ll help you insure and ship smarter so you can stay protected.