Freight Insurance

Example

“The electronics manufacturer purchased freight insurance to cover their $100,000 shipment of computers, protecting against potential damage during the cross-country truck transport.”

Memory Tip

Think 'Freight Needs Protection' - valuable cargo needs insurance protection while moving from place to place.

Why It Matters

Shipping carriers typically have limited liability (often just $0.60 per pound), meaning you could lose thousands on valuable shipments. Freight insurance ensures you're compensated for the full value of your goods, protecting your business from significant financial losses.

Common Misconception

Many shippers assume the carrier's insurance or liability coverage will pay full replacement value if goods are damaged or lost. In reality, carrier liability is often minimal and may not cover the actual value of shipped items, especially for lightweight but expensive goods like electronics or pharmaceuticals.

In Practice

A company ships $50,000 worth of medical devices weighing 200 pounds via truck. Without freight insurance, the carrier's liability is limited to $120 (200 lbs × $0.60). If the shipment is destroyed in an accident, the company would lose $49,880. With freight insurance costing $150 (0.3% of shipment value), they would receive the full $50,000 replacement value, protecting their investment for a minimal premium.

Etymology

Combines 'freight' from Middle Dutch 'vrecht' meaning cargo or loading, with 'insurance,' reflecting coverage for goods in transit.

Common Misspellings

Related Terms

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Other insurance terms you should know

See Also