Cargo Insurance A very important and often overlooked piece of the transportation puzzle is cargo…
7 Considerations When Choosing A Freight Brokerage Insurance Firm
Broadly speaking, freight insurance protects a shipping company from the risks associated with shipping freight, especially physical loss or damage to cargo on transit. As such, it is vital to select the right insurance broker when shopping for freight insurance. Some of the key considerations when choosing a freight brokerage insurance firm include:
The Federal Motor Carrier Safety Administration (FMCSA) regulates all freight brokerage insurance firms operating in the US. To register with the FMCSA, brokers have to submit their registration applications via the Unified Registration System (URS). In essence, the FMCSA ensures that freight brokers complete the required training and are competent to work in the insurance industry. As such, you should choose an freight brokerage that is registered with the FMCSA.
Federal law requires all insurance brokers to be bonded to the tune of $75,000. In fact, it is illegal to sell insurance products without a surety bond or a Trust Fund Agreement, according to the FMCSA. As such, ensure your broker can provide documentary bonding evidence, not just verbal assurances. Besides being bonded, freight insurance brokers must have liability insurance ranging anywhere from $750,000 to $5,000,000. The actual amount of coverage required depends on the type of freight being shipped. For instance, companies that ship non-hazardous freight must have liability insurance worth $300,000.
Policy premiums are an important factor to consider because brokers typically act as intermediaries between shippers and carriers. Moreover, freight insurance premiums vary from one carrier to the next depending on the policy specifications, nature of goods being insured, and carrier pricing model. As such, you should shop around and compare the cost of insurance products from different brokers. It is also worth noting that brokers may earn a commission from the freight insurance products that they sell to consumers. This has often raised concerns that brokers may be biased towards coverage products that offer high commissions and thereby press consumers to purchase insurance policies that do not necessarily suit their needs. Finally, you should evaluate all freight coverage costs such as deductibles to determine whether you can afford to make monthly payments. Deductibles for freight insurance products in the US range from 1 to 5% of the total insured value.
Purchase cargo insurance from a brokerage that can provide you with a valid insurance certificate. The standard practice across the US is for consumers to retain the original certificate of insurance. This ensures policy buyers can provide proof of insurance coverage when submitting compensation claims. With this in mind, ensure the insurance certificates given to policy buyers are unaltered (similar to certificates acquired directly from insurance companies). One way of accomplishing this task is by requesting insurers to verify the authenticity of certificates acquired from freight brokers.
It is advisable to purchase freight insurance from experienced brokers that have been operating preferably for several years. Such brokers can provide reliable on freight insurance industry trends, available coverage products, and help you select a policy that suits your coverage needs.
A broker with a good reputation is likely to be a true professional. Thanks to the Internet, you can learn a lot about a broker’s reputation by running a simple Internet search. However, since unscrupulous brokers may suppress negative content by setting up sites that largely publish positive content, your search should extend beyond the information presented on the first search engine results page. Overall, you can utilize online resources including insurance blogs, forums, and websites to learn more about an insurance brokerage. Alternatively, you can visit the Better Business Bureau (BBB) website and check the rating of every broker you are evaluating. The higher a broker scores on a scale of A to F, the better the reputation of the freight brokerage insurance firm.
Wide Range Of Insurance Coverage Products
In general, freight insurance policies can be broken down into two main categories: basic and all-risk. Policies that fall under the basic category only cover a limited number of risks related to shipping goods. Some of the risks covered include collision, flooding, hurricanes, fire, lightning, cyclones, stranding, sinking, as well as overturning of delivery train, ship, truck, or bike. On the other hand, policies under the all-risk category cover almost every conceivable freight industry risk. This includes rare events such as radioactive contamination, nuclear weapon detonation, improper packaging, and delivery delays related to cosmic occurrences. Policies in each of these categories can still be broken down into multiple sub-categories. For these reasons, select an insurance broker that sells a wide range of freight insurance policies because so that you can choose policies that suit your shipping company’s coverage needs. For example, the insurance needs of a business that ships luxurious and fragile goods are quite different from the needs of a company that ships household furniture.
Some of the key considerations when choosing a freight brokerage insurance firm include the policy premiums, reputation, insurance certificate, experience, registration and bond.