Cargo Insurance (CI) can be very complex and sometimes very expensive when using multiple modes of carriage. So it is very important to get all the information and requirements from the Carriers involved. Review the CI provisions and ask your Carrier to clarify any issues that remain unclear.

Additional general information and pointers considering cargo insurance for your shipment(s):

Does Coverage Exist?: Very often Shippers assume the Carrier is required to include Cargo Insurance. This is a fallacy, as there is no such requirement in the U.S. or Canada, though such a legal requirement does exist in Mexico. Check with your Carrier and get it in writing on the Bill of Lading as this is your primary legal instrument. Verbal assurances don't count.

Cargo Insurance on Rail Shipments does not exist, except through The SuperLoads Freight Exchange. RailRoads (RR) have and provide in their Tariffs a limit of liability of $25,000 for any and all damage to the cargo on a rail car. You will not prevail if you attempt to claim a larger amount.

Deductibles: Are they acceptable and how do they relate to the entirety of the shipment if there is more than one item?

Excess Coverage: This is a term used primarily in the trucking industry; it means an additional policy over and above the Carriers standard policy. For example, ABC trucking carries a standard Cargo Insurance Policy of $25,000 with a $10,000 deductible. You have a shipment valued at $500,000 and you only want a $5,000 deductible. ABC must acquire a separate policy from their insurance company to cover your shipment, at an additional cost, of course.

Certificate of Insurance: This is a document that your Carrier can provide at no cost upon your request. The secret is to ask to be declared a named insured to guarantee you are an unquestionable claimant and beneficiary in the event of a claim. You automatically receive one with coverage included in a SuperLoads Freight Exchange Bill of Lading.

Declared Value: This is the most important piece of information on a Bill of Lading. If you leave this information blank, you will likely not receive any money when pursuing an insurance claim.

Declared Value Amount: If there is an insurance claim, you will have to prove the value of the shipment. This amount is agreed upon between the driver and the recipient at the time of delivery. Sometimes, the driver arrives and asks the employee present to declare the value. Not knowing the exact value, the employee is likely to guess or just leave it blank, leaving the shipment with a declared value of $0. For your protection, anyone involved in the Bill of Lading should understand Declared Value and how to calculate it and never sign a Bill of Lading without a declared value.

Calculating Declared Value: Most Shippers are unaware that unless stated. Declared Value equals the value of the cargo plus the insurance costs plus the freight (CIF). Sometimes Duties/Taxes (D) is added to CIF, plus up to 10% for margin. CIFD+10% = Declared Value. This is the amount you want shown on your Bill of Lading and Certificate of Insurance, if you had the forethought to request such a certificate as a named insured.

Let's look at the reasoning behind this formula. Say you just shipped a new Widget from your factory that you sold FOB customers dock for $500,000. You financed it with your bank and you owe the bank $450,000. The freight charges were $25,000, the excess Insurance was $5,000 and the Deductible was $10,000.

Now, imagine there was an accident and the Cargo was totally destroyed.

If your Declared Value (DC) was $500,000 (the value of the cargo itself), the settlement check would likely be calculated as follows:

  DC = $500,000
  Deduct = $10,000
  Pay Bank = $450,000
  Pay Shipper = $40,000 Cargo

Total paid on Claim = $490,000.00

If your Declared Value (DC) was CIFD+10%, the settlement check would likely be calculated as follows:

  DC = $500,000 + $25,000 + $5,000 + 10% = $583,000
  Deduct = $10,000
  Pay Bank = $450,000
  Pay Bank = $10,000 For Interest during settlement period
  Pay Shipper = $25,000 Freight
  Pay Shipper = $5,000 Insurance
  Pay Shipper = $40,000 Cargo
  Total paid to Shipper = $70,000

Total paid on Claim = $530,000.00

The only real difference between the foregoing examples is the interest that was still accruing at the bank, and because there was a 10% margin, it is safe to assume that it was covered by the insurance company in good faith.  Of Course, it may not happen that way. If we take out that aspect, the difference is still significant - $490,000 payout versus $520,000 without the interest aspect.

We hope you found this page informative.

The SuperLoads Freight Exchange will add to this page from time to time, so come back again and see new pointers and info to assist you with your freight needs.

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