General Info regarding Cargo Insurance

The purpose of this page is to provide you with additional general information and pointers in considering cargo insurance for your shipment(s).

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 for clarification on any issues you do not fully understand.

Some points that get overlooked:

Does Coverage Exist: Many times Shippers assume the Carrier has or is required to include Cargo Insurance, this is a fallacy, as there is no such requirement in the US or Canada, such a legal requirement does exists 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 SuperLoads. RailRoads (RR) have and provide in their Tariffs a limit of liability of generally $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.

Many shippers rely on their Insurance Umbrella Policy to cover their shipment. All umbrellas do not necessarily cover rail service. Those that do sometimes have very specific requirements and most have very high deductible’s. One of SuperLoads customers has a complete coverage umbrella but were unaware that the deductible was $10,000,000. Contact your Insuror and verify, in writing, your cargo coverage before shipping by rail.

Other Deductible Issues: 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 Excess Coverage Policy from their insurance company to cover your shipment, at an additional cost of course. Ask for a certificate of insurance for your cargo.

Certificate of Insurance: This is a document that your Carrier can provide at no cost, readily upon your request, the secret being 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 Bill of Lading.

Declared Value: This is the most important information on a Bill of Lading. If it is $0 or blank and you make a claim you will likely not prevail in pursuing your claim, you must include the amount on the Bill of Lading

How much is the Declared Value: For certain if there is a claim you will have to prove what the value is/was, sometimes, the driver shows up at your establishment and asks the employee present what is the declared value and not knowing exactly he responds, “I guess about a hundred grand”. Other times, the driver knowingly, says, “well if you don’t know shall we just leave it blank??” the employee responds, “I guess that’s OK and off goes your shipment with $0 value. This is not a good thing. Any one 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, as you will see why in the following paragraph.

Calculating Declared Value: Most Shippers are unaware that unless otherwise stated Declared Value equals; the value of the cargo plus the Insurance costs plus the freight (CIF) and CIF can sometimes include; plus D (Duties/Taxes) 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.

The reasoning behind this formula is you just shipped a new Widget from your factory that you sold “FOB customers dock for $500,000”. You floor planned it with your Bank and you owe the bank $450,000 the freight charges were $25,000 and the excess Insurance was $5,000 and the Deductible was $10,000.

And there was an accident and the Cargo 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, it may not happen that way of course. 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.

SuperLoads 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.

SuperLoads 303-360-7535