What is freight forwarder insurance?
Freight forwarder insurance is designed to help freight forwarders or carriers cover the cost of damage or loss of goods during transportation, effectively reducing various risks in international freight transportation. In addition, freight forwarder insurance covers legal liabilities arising from transportation delays, document errors, operational errors, etc., providing comprehensive risk protection for freight forwarding companies. Freight forwarder insurance is an essential risk management tool that fosters customer trust, safeguarding the company’s financial security and enhancing the transportation business’s stability and reliability.
How can freight forwarders reduce the risk of transporting goods?
We all know that transporting goods from one place to another can be tricky. Things can go wrong, such as damage or loss of goods and deliveries taking longer than expected. This can lead to financial losses and affect customer relationships and your business reputation. But don’t worry, freight forwarders can help! They can help you reduce these risks.
- Optimize packaging and loading solutions: Ensure that goods are packaged in a way suitable for the mode of transport and use professional loading and reinforcement measures to reduce the risk of damage during transportation.
- Rationally plan transportation routes: Avoid high-risk areas, inclement weather, and unstable international situations to improve transportation safety and reduce the risk of delays and damage to goods.
- Real-time tracking and monitoring: Monitor the status of goods in transit in real time to promptly identify and respond to abnormalities.
- Improve insurance coverage: Purchase appropriate insurance for the goods, such as freight insurance, liability insurance, delay insurance, etc., to ensure compensation in an accident and reduce economic losses.
- Optimize document management and compliance operations: Ensure that information such as bills of lading, customs declaration documents, and insurance documents is accurate to reduce the risk of customs clearance problems or delays caused by document errors.
The main areas of coverage of freight forwarder insurance
Freight forwarder insurance generally covers the following risks
- Cargo damage or loss liability
- If the customer’s goods are lost or damaged due to the freight forwarder’s negligence, wrong operation, or failure to fulfill the reasonable duty of care, insurance can provide compensation.
- Transportation delay liability
- If the goods are not delivered on time due to the freight forwarder’s fault and the customer suffers economic losses (such as default fines and production losses), the insurance can partially bear the compensation.
- Document errors or operational errors
- The insurance covers compensation for errors made by the freight forwarder in handling transport documents (e.g., bills of lading, customs documents, insurance documents, etc.) that result in the customer’s goods not being cleared for customs or transported properly.
- Third-party liability
- The insurance covers compensation for losses suffered by third parties (e.g., docks, warehouses, or carriers) due to the freight forwarder’s negligence.
- Legal costs
- The insurance covers legal costs if the customer or a third party sues the freight forwarder in a business dispute.
What insurance do freight forwarders need to buy?
Freight forwarders face many risks when transporting goods across borders. Purchasing the right insurance is an integral part of a freight forwarder’s risk management strategy to protect their and their customers’ interests. The following are the main types of insurance that freight forwarders need to buy:
Freight Forwarder’s Liability Insurance
- Protects freight forwarders against legal liability in the event of operational errors, documentation errors, transport delays, etc., and reduces the risk of customer claims.
Cargo Insurance
- It protects against losses caused by accidents such as damage, loss, theft, natural disasters, etc., while transporting goods and reduces economic risks.
Delay Insurance
- It applies to goods with high time requirements, such as fresh food and medicine. The insurance can provide compensation if the delivery is delayed due to force majeure.
Carrier Liability Insurance
- This policy protects non-vessel operating common carriers against liability arising from accidents during the carriage of goods. It applies to freight forwarding companies with independent transportation capabilities.
Comprehensive Logistics Insurance
- It applies to freight forwarders that provide value-added services such as warehousing and distribution and covers liability risks in warehousing, loading and unloading, and distribution.
Who pays for freight forwarder insurance?
Freight forwarders usually take out liability insurance to cover the risks of liability arising from operational errors, documentation errors, transport delays, etc. This can effectively mitigate the financial losses that the risks above would cause.
Insurance recommendations for freight forwarders
• Choose the right coverage: Based on your business model (Ocean Freight, Air Freight, Land Freight, or Multimodal Transport), choose the right insurance plan.
• Pay attention to the exclusion clauses: Different insurance companies may have different definitions of the scope of liability, such as whether force majeure, war, strikes, etc. are covered.
• Use in conjunction with cargo insurance: To reduce operational risks, freight forwarders are recommended to take out freight forwarding insurance for themselves at the same time as they recommend that their clients take out cargo insurance.
