Businesses lose a staggering $50 billion annually due to cargo loss. These losses not only impact the financial health of companies but also disrupt supply chains and customer satisfaction. In such a scenario, one might wonder if investing in freight insurance is smart. Here, we’ll understand the real value of freight insurance, helping you decide if it’s actually a worthwhile investment for your business.
What is Freight Insurance?
Freight insurance protects businesses from losing money if their shipments get damaged or lost while being transported. This type of insurance covers the cost of fixing or replacing goods and any extra shipping fees. Freight insurance is especially important in sustainable freight shipping because it helps companies avoid having to send items again if something goes wrong, which can save money and reduce environmental impact.
Types of Freight Insurance
Generally, freight insurance is of three types:
LTL Carrier Insurance
This insurance is typically offered by carriers handling smaller shipments that don’t fill an entire truck, known as less-than-truckload (LTL) carriers. It covers a basic amount that might not match the total value of your items. This means if something goes wrong, the payout may not cover all your losses.
Third-Party Insurance
Third-party insurance is a great option if you need more comprehensive coverage than what LTL offers. It usually comes with a $500 deductible, but it compensates quickly and provides bigger payouts compared to LTL insurance. This kind of insurance is generally more suited for more valuable shipments or at a higher risk of damage.
Truckload Insurance
When you’re shipping large amounts that require an entire truck, truckload insurance is your best option. This covers the full value of your shipment and includes any extra costs that may come up, like storage fees or additional freight charges. This is important for businesses shipping expensive or oversized loads.
What are the Benefits of Freight Insurance?
Here are some important benefits that freight insurance offers:
Mitigating Risk
The primary advantage of freight insurance is reducing financial risk. If your shipments are damaged or lost during transit, having insurance ensures you are not directly bearing the financial burden. This protection is necessary for maintaining your financial health.
Customer Satisfaction
Customers feel more secure about their purchases when they know their goods are insured. A survey by Statista revealed that 80.2% of consumers returned items because they were damaged upon arrival. Freight insurance can decrease such occurrences by facilitating quick replacements or refunds.
Business Continuity
Freight insurance helps safeguard your operations against unexpected disruptions. If a shipment is lost or damaged, insurance can help cover the costs, allowing your business to continue operations without significant financial strain.
Legal Compliance
In some industries and regions, carrying certain types of insurance is a legal requirement for transporting goods. Having the right freight insurance guarantees compliance with these regulations, avoiding legal troubles and potential fines.
Competitive Advantage
Offering insured shipments can set your business apart from competitors who do not provide this benefit. It reassures clients that you are committed to delivering their goods safely and responsibly, which can be a decisive factor for customers when choosing a supplier.
Challenges of Not Having Freight Insurance
Without freight insurance, businesses expose themselves to significant risk. For example, if a shipment is lost or damaged, the company must bear the full cost of replacement, which can be financially crippling, especially for high-value items. The risk is compounded during international shipments where the logistics are more complex, and the chances of mishaps are higher.
Considering the economic implications of freight insurance, it’s evident that the upfront costs of purchasing insurance are far outweighed by the potential losses it prevents. The global statistic between 29% and 73% of consumers report returning online purchases highlights the vast potential losses businesses face without insurance.
Wrapping Up
Freight insurance is essential for any business that ships goods regularly. Considering the massive potential losses as evidenced by the $50 billion annual cost of cargo loss, investing in comprehensive freight insurance is a wise and essential business decision. With the right type of insurance, businesses can protect against unexpected financial burdens and maintain an efficient supply chain.
