Freight Insurance Coverage Logo

Business Cargo Insurance: Protect Your Shipping Operations

October 4, 2023
 By Jacob Lee
Business Cargo Insurance: Protect Your Shipping Operations
Last Modified: April 18, 2024
Shipping goods to consumers is part of achieving. With business cargo insurance, you can guarantee that all shipments will be financially protected.

Business cargo insurance is a great defense for companies of all sizes. It gives shippers the financial protection they need in the event something goes wrong with an order. Without this type of defense, companies could find themselves shouldering hefty financial burdens and facing unexpected disruptions.

The International Federation of Freight Insurers describes business cargo insurance as coverage that protects goods from potential risks, such as:

  • Damage
  • Theft
  • Loss

Companies that use this type of protection for their shipping operations will save themselves from heavy financial loss if their freight falls victim to these risks.

Business cargo insurance is a must for enterprises of all sizes. Find out how it works and the benefits of using it. 

Why is Business Cargo Insurance Essential?

All companies have to ship their freight to customers across the country. With so many dangers that can harm products in transit, business cargo insurance stands as the frontline defense against damage and cargo theft.

Understanding the Core Risks of Shipping

Shippers have to be prepared for the dangers their freight can face. When goods are in transit, there are multiple factors that can lead to damage, loss, or theft.

Causes of damage can include:

  • Weather
  • Temperature
  • Mishandling
  • Accidents 

Weather is a common cause of freight damage. Anything from storms to floods could harm goods during transport operations. Business that ship temperature sensitive products must be careful as well. Perishable goods can be lost in warmer environments should cooling equipment malfunction. Many companies opt to use reefer cargo insurance to protect these kinds of items.

Mishandling is perhaps the most common cause of damage. While warehouse workers are trained to handle freight carefully, mistakes can still occur.

Mishandling may include:

  • Dropping cargo
  • Storing freight incorrectly
  • Palletizing incorrectly
  • Placing perishable goods in the wrong climate

Finally, traffic accidents can damage freight. A vehicle that crashes into a dry van or reefer trailer could very likely damage the goods inside. Theft is another danger that comes with shipping freight. It occurs most often during last mile delivery. 

This is the final step of the supply chain, where goods are moved from local distribution centers to the final destination. Carriers make efforts to increase security during last mile delivery, but the threat of theft still remains. In some cases, freight can be completely lost while in transit. 

Reasons include:

  • Mislabeling 
  • Transit mix-ups
  • Abandonment

In the case of mislabels, goods aren’t necessarily lost, but  they’re sent to the wrong destination.  With multiple goods moving simultaneously, items can be mistakenly placed on the wrong transport vehicle. Transit mix-ups like these can result in a customer not getting their products.

Abandonment is an unfortunate fate for cargo. This usually occurs if there’s confusion about a shipment’s destination or receiver. When this happens, the load will be left in storage and forgotten.

When shipping goods by vessel, it’s essential to learn about the potential dangers. Read our article on ocean freight safety to learn more.

Financial Implications of Uninsured Shipments

Cargo insurance for small businesses is a great way to avoid the financial challenges that come with shipping freight. While transport goes smoothly most of the time, all it takes is one misstep to cause a catastrophe. 

Financial implications that come with uninsured shipments include:

  • Immediate Monetary loss
  • Operational Setbacks

Goods damaged or lost during transit equate to an instant financial loss. For small companies, this can be particularly impactful. Without insurance coverage, the burden of replacing or refunding these goods falls squarely on the business itself. 

Lost or damaged shipments can lead to production halts, especially if they contain essential components or materials. These operational delays hinder a company’s ability to send out more orders.

Continuity and Recovery

In the business world, shipping orders smoothly is crucial. If one part of the process breaks down, the whole operation will begin to fail. Small business cargo insurance will ensure a company keeps moving forward.

Ways that this form of coverage can help include:

  • Swift reimbursement
  • Crisis support
  • Risk management

Shipping insurance for business means being provided with  payouts in the face of disaster. This allows companies to swiftly replace lost or damaged goods. Many insurance providers will go beyond just handing out compensation; they offer guidance on how to manage future crises. Assistance can come in the form of advising and assistance with documents.

Insurance providers often give insights into risk management, helping businesses anticipate and prepare for potential shipping threats. This helps companies approach future problems with ease. 

Improves Credibility

Shipping insurance for small business give a company better credibility amongst its buyers. This lets customers know their goods will be replaced if something goes wrong with their order. As a result, buyers will return for more purchases.

The credibility that comes with business cargo insurance for shipping will also help companies attract partners. Having coverage makes transporting freight less risky for everyone involved. Companies that order goods from their partner have the assurance their cargo will be protected.  

Learn how marine cargo insurance can protect your ground and ocean shipments. 

What Small Businesses Need to Know Before Getting Cargo Insurance

Getting coverage from cargo insurance companies essential. That said, businesses need to do some homework before picking a policy. 

Factors they should consider include: 

  • Their needs as a business
  • Cost vs. benefit
  • The fine print

Every business deals with different types of products. A company shipping electronics might require more from their insurance coverage than one sending sheet metal. Figuring out the most relevant risks will help shippers determine what level of protection they need. 

Analyzing the cost vs. benefits for protection and coverage for different types of cargo is a must. When transporting extremely expensive products, paying a little extra for coverage is a must. However, cheaper goods that are easy to replace might not need this insurance. 

Finally, it’s important that companies read policies carefully. There might be exceptions or conditions hidden in the details. Shippers should always ask their providers questions about insurance policies to fully understand what each one offers.

Read our article on how to get cargo insurance if you’re ready to apply coverage to all your shipments. 

Small boxes with hands on either side

Is Drop Shipping Business Insurance Necessary?

Drop shipping is a strategy used by many small ecommerce businesses. This retail method doesn’t keep goods in a store or warehouse. Instead, when businesses make a sale, they order the product from a third party. Despite the benefits of this strategy, drop shipments can face the same dangers as any other. 

Drop shipping is an industry that will continue to grow in the future. Therefore, obtaining insurance for this kind of cargo is essential. We have data that shows how drop shipping will grow in the years to come.

Projected Growth of the Drop Shipping Market

YearMarket Size in Billions

Provided by Statista

It’s very likely  drop shipping will become an even more important retail method for ecommerce businesses. With more freight being transported, the need for insurance will grow. 

Although a third party is responsible for sending out orders, it’s the businesses that handled the initial purchase which will be held accountable if something goes wrong. Therefore, insurance is essential for even small companies that use the drop shipping strategy. 

Unique Challenges of Drop Shipping

When it comes to drop shipping, ecommerce business have very little control over the products they sell. As a result, there are many unique challenges that come with this retail strategy. 

This includes:

  • Quality control
  • Shipping delays
  • Returns and Warranties

Since the retailer never sees or handles the product, there’s a risk of selling poor-quality or counterfeit items. If a customer receives a subpar product, the retailer could be held responsible, even if the fault lies with the supplier.

With drop shipping, retailers rely on third parties to transport products in a timely manner. Delays or errors, even if they’re the supplier’s fault, can reflect negatively on the retailer. This leads to customer complaints or potential legal actions. 

A customer’s return expectations may not align with the supplier’s policy, creating situations where the retailer either absorbs the cost or faces buyer dissatisfaction. Insurance coverage can  help businesses replace orders that can’t be returned. 

A man in a warehouse with a clipboard talking on the phone about the types of business cargo insurance

Types of Business Shipping Insurance

There are numerous types of business shipping insurance that a company can obtain. The best policy depends on the needs of shippers. Two common forms of insurance are All Risk and Named Perils.

As the name implies, all risk insurance applies to just about every possible danger that could harm cargo in transit. Named perils will only protect what is explicitly listed in the policy. Using all risk will give a company a comprehensive level of protection. Businesses that are only worried about a limited amount of risks can pick named perils. 

While these two options are frequently used in the realm of transportation, there are many other types of cargo insurance that shippers can use to protect their freight. This includes total loss and contingent policies.

The total loss plan is limited in scope. It can only be used when an entire load of cargo perishes, and not when minor damage occurs. Contingent policies are used as a safety net to cover risks that primary plans don’t protect against. 

Every company should review all available policies and carefully weigh their options.  

Secure the Financial Safety of Your Business with Freight Insurance Coverage Today!

In the dynamic world of shipping, securing your goods with a reliable insurance policy isn’t just an added bonus—it’s essential. With Freight Insurance Coverage, you’re not only getting insurance; you’re getting a commitment to safety, efficiency, and unparalleled service.

Every time you ship with us, we’ll automatically apply the cost of coverage to your products. While our carriers handle all cargo with care, problems can still occur. Therefore, you can rest easy knowing your goods will be protected. 
If you’re ready to ship with the shield of insurance, then fill out your quote today. You can also contact the Freight Insurance Coverage team at (866) 975-0749 for more useful information.

Leave a Reply

Your email address will not be published. Required fields are marked *

Freight Insurance Coverage
315 NE 14th Street #4122
Ocala, FL 34470

(866) 975-0749
Copyright © 2024 AFC International, LLC. All Rights Reserved