Cargo insurance is one of the most proactive steps companies can take to protect their supply chain. Insurance safeguards shippers' financial investments during domestic and international transit, when product is the most vulnerable. While in transit, cargo is susceptible to natural disasters, severe weather, theft, pilferage, damage, fire and other challenges.
In addition to base cargo insurance, additional insurance coverage is encouraged for High Value, High Risk or Used Equipment/Machinery.
So, what characteristics cause cargo to fall under these three categories?
- High Value cargo is any shipment valued at greater than $100,000 (Truckload) or more than $25 per pound per package (LTL).
- International freight is slightly different as the High Value designation occurs if the shipment value is higher than the terms and conditions noted on the back of the carrier’s (Steamship Line) Ocean Bill Of Lading.
- High Risk cargo includes commonly stolen items such as electronics, precious metals, pharmaceuticals, liquor, apparel, cosmetics or appliances. High Risk cargo can also be identified due to the specific route, time period for shipping or due to the destination, transship or origin country.
- Used Equipment/Machinery is any cargo that is a piece of equipment or machinery that is no longer new, has been reconditioned, refurbished or rebuilt.
In regards to domestic over-the-road cargo, truckload shipments differ from less-than-truckload when exploring the need for additional insurance.
Truckload Cargo Insurance
If a truckload shipment will exceed $100,000 in value, the carrier and the third party logistics provider need to be aware in advance. Carriers will only be liable for up to $100,000 of cargo value. If a shipment will surpass this threshold, it is crucial to proactively work with your third party provider to obtain contingency cargo insurance to cover the remaining value.
For cargo with a value over $250,000, it is strongly encouraged to only utilize C-TPAT carriers due to the additional screening processes and security requirements associated with the C-TPAT designation.
Ascent Global Logistics can help you obtain base or additional insurance for truckload shipments, regardless of the requirements. Contact us today to learn more.
Less-Than-Truckload Cargo Insurance
When considering additional cargo insurance for Less-than-Truckload freight, knowing the NMFC (National Motor Freight Classification) class is extremely important. The class typically dictates the amount of payback from the carrier to the shipper in the case of damage or loss.
Carriers publish governing rules tariffs which state recovery rates for particular classes. Therefore, when considering additional cargo insurance it is first imperative for shippers to identify the threshold of carrier liability based upon the class.
For example, under general rules tariffs, a class 300 product has varying payback rates dependent on the carrier chosen. The carrier could be subject to liability ranging from $5.00 - $25.00 per pound. If the cost to produce the product is greater than the carrier’s coverage rate, damage or complete loss of the product would be detrimental to the shipper.
Ascent clients whose pricing is based off Ascent tariffs (between Ascent and the carrier) benefit from our expert carrier negotiation regarding liability. Ascent Global Logistics has negotiated higher liability standards and these are not based upon the classification. Of our Preferred Carriers, 98 percent are under contract for Liability Coverage of $25.00 per pound per package, up to $100,000 per shipment (regardless of class). The sole exception to our negotiated Liability Coverage is Used Equipment/Machinery.
Ascent clients whose pricing is negotiated by Ascent (but resides between the customer and the carrier) will carry the liability in the carrier's rules tariffs. This is based on either the actual class, the fak class or the amount listed for released or limited liability items (whichever is the lowest).
Many LTL carriers will not offer or extend additional cargo insurance on Used Equipment/Machinery. Typical liability for Used Equipment/Machinery will range between $0.10 and $1.00 per pound. A shipper with Used Equipment/Machinery cargo will need to contact an outside cargo insurance provider to insure Used Equipment/Machinery.
Learn more about Additional Cargo Insurance and the benefits of becoming an Ascent Global Logistics customer here.
International Cargo Insurance
Similar to domestic cargo insurance, additional coverage is available for international cargo. For international cargo, it is important to work with your freight forwarder well in advance of the shipment departure.
Typically, an insurance underwriter will require a questionnaire to be completed by the exporter prior to extending additional coverage. These questionnaires cover items such as what the product is, why the cargo needs additional insurance, the shipper’s claims history, yearly shipment volumes, where the cargo is being shipped to, the ocean carrier and other shipment details.
When shipping High Value cargo overseas, it is best practice to send shipments on multiple different sailings to lower the overall risk.
To learn more, click here to read our latest blog post.
How To Manage Cargo Insurance For All Modes Of Transportation
Regardless of the mode, route or product, it is important to work with the carrier, third party logistics provider and the insurance underwriter to guarantee you are covered in the case of damage or complete loss.
Ascent Global Logistics can help manage your insurance needs with efficiency and experience. Contact us today to learn more about our comprehensive cargo insurance offerings.