What Is All-Risk Insurance For Freight Brokers?

When it comes to freight brokering, you can never have too much insurance. Every shipment carries risks like damaged goods and theft.

While carriers usually carry their insurance, it doesn’t always cover every situation, and that can leave you exposed. All-risk insurance fills those gaps and offers broader protection for your client’s cargo.

This article will explain what all-risk insurance covers, why it matters for freight brokers, and how it can help you build a more reliable and trusted brokerage.

What is All-Risk Cargo Insurance?

All-risk cargo insurance is a type of insurance policy that covers loss or damage to property from any cause that is not explicitly excluded from the policy.

Unlike limited or named-perils cargo insurance, which only covers specific risks like fire or theft, all-risk cargo insurance assumes coverage for all unexpected events unless the policy says otherwise.

Common risks covered in the policy terms include:

• Theft during transit
• Lost or damaged shipments during loading and unloading
• Equipment failure, such as a broken refrigeration unit
• Natural disasters like storms, earthquakes, or fires

This business insurance does not cover everything. For example, it often excludes financial losses due to poor packaging, delays, government seizures, or intentional damage. However, it offers broader protection than most standard policies.

What Does All-Risk Mean?

Most programs base ” all-risk ” on institute cargo clauses, which include protection for general average and salvage charges, subject to stated exclusions. The all-risk policy also includes a warehouse-to-warehouse duration that follows goods in the ordinary course of transit from their place of origin to their final destination.

Warehouse-to-Warehouse Scope and Storage Limits

While all-risk normally covers the ordinary course of transit from the original warehouse to the final warehouse, the storage that is not related to transit might require a separate endorsement or a stock throughput policy (STP) in order to avoid gaps during extended dwell times.

Temperature Controlled Shipments

A large amount of losses are a result of temperature deviation due to operational errors, set points that have been incorrectly calibrated, or mechanical failure. It’s important that you clarify:

• Whether the coverage extends to such deviations.
• What specific data logger proof is required by the insurer to substantiate a claim.
• If conditions such as pre-cooling your goods before transit are classified as warranties.

Common Exclusions and Optional Buy-backs

Even the most comprehensive all-risk insurance policies have limits on what they will cover. You can expect very specific situations to be excluded, which include but are not limited to:

• Inherent vice – Damage caused by the cargo’s natural characteristics (e.g., fruit spoiling on its own)
• Insufficient packing – Losses that occur because the goods were not packaged correctly
• Delay – Financial loss due to cargo being late.

Furthermore, major risks like strikes, riots, and civil commotions are typically not included in a standard policy. These risks are usually added via separate endorsements, so be sure to ask your insurer exactly how these endorsements work and confirm that coverage is provided for all specific trade routes that you make use of.

Clauses that Change Outcomes

Two specific clauses can significantly change how much money you receive when settling a claim. These clauses are:

• Sue and Labor Clause: The insurer will pay you back for any reasonable steps taken in order to protect your cargo from damage after you encounter an issue. For example, the cost of moving goods to a secure warehouse after a flood.
• Pairs and Sets Clause: If only one part of a set is damaged, the insurer is only required to pay for the value of the single damaged item and not the value of the entire set. This will vary depending on whether or not you have specific extra coverage for such incidents.

Understanding these clauses is essential for successful claims management and ensuring that you are fairly reimbursed.

How Much Does All-Risk Insurance Cost?

All-risk insurance pricing isn’t fixed, but varies from one brokerage to another. Insurers look at the risks involved in your day-to-day operations to determine the cost of your policy.

Insurance providers take the following factors into account when calculating your premium:

• Type of freight: High-value, fragile, or temperature-sensitive goods usually cost more to insure.
• The volume of shipments: More shipments mean more risks involved, which can raise the premium.
• Coverage limits: Higher limits mean higher costs.
• Deductibles: Lower deductibles generally lead to higher premiums.
• Broker experience and claims history: Newer brokers or those with past claims may face higher rates.

How To Get All-Risk Insurance As A Freight Broker

Access your insurance coverage needs. Consider the type of freight you handle, your average shipment value, and your client’s expectations. This will help determine how much coverage you need and what risks you want to protect against. Contingent Cargo Insurance may be more than enough.

Find a freight insurance specialist. Look for insurance providers that specialize in freight and logistics. These companies are more familiar with the risks facing brokers and can offer tailored policies.

Request multiple quotes. Compare quotes from at least three providers. Ask for details on what’s covered, policy exclusions, deductible amounts, and any add-ons or bundles they offer (like contingent cargo or general liability).

Review the policy carefully. Make sure you understand what the policy includes and excludes. If you’re unsure, ask the provider for clarification before committing.

Maintain good records and practices. To keep your rates low and your policy in good standing, document each shipment, vet your carriers, and handle claims professionally.

FAQs

1. What other types of liability insurance products are there?

Insurance companies also provide the following types of liability and cargo-related insurance products:

• Contingent cargo insurance. Protects brokers in case a carrier’s insurance fails to cover a claim. It acts as a secondary layer of protection.
• General liability insurance. Covers non-cargo-related claims like bodily injury or property damage that may occur in your office or during business operations.
• Errors and omissions (E&O) insurance. Protects against negligence claims, paperwork errors, or failure to deliver agreed services.

Many freight brokerages combine different insurance products to ensure complete protection for themselves and their clients. This helps them build credibility with shippers.

2. Can all-risk insurance help me win more shipper contracts?

Yes. Shippers feel more comfortable working with freight brokers who offer full cargo protection. Having all-risk insurance shows you are prepared for unexpected issues like accidents, physical loss of goods, etc.

Proper insurance coverage can set you apart from other brokers and give potential clients more confidence in trusting you with their freight.

3. Is all-risk insurance required for freight brokers by law?

No, freight brokers don’t legally require all-risk insurance. The Federal Motor Carrier Safety Administration (FMCSA) requires brokers to carry a BMC-84 surety bond or BMC-85 trust fund (usually $75,000), but all-risk policies and other cargo insurance are optional.

Final Thoughts

All-risk insurance is a smart investment for freight brokers. It helps you manage risk and protect your clients’ cargo. While it’s not legally required, having this coverage can give you a competitive edge and peace of mind.

Understanding insurance is just one part of the puzzle. Our 90-Day Freight Broker Course will teach you how to get licensed, vet carriers, and more.

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Sources:

1. https://dimerco.com/blog-post/all-risk-cargo-insurance-your-questions-answered/
2. https://falveyinsurancegroup.com/blog/shipping-insurance/what-is-all-risk-shippers-insurance/
3. https://www.df-alliance.com/freight-dictionary/all-risk-cargo-insurance
4. https://www.flexport.com/glossary/all-risk-coverage/
5. https://kaseinsurance.com/news/types-of-freight-insurance/
6. https://www.freightamigo.com/blog/all-risk-coverage-comprehensive-protection-for-your-cargo/
7. https://www.petersandmay.com/guide/all-risks-cargo-insurance/
8. https://ship4wd.com/resource-center/glossary/all-risk-coverage-insurance
9. https://www.crowley.com/wp-content/uploads/2018/10/Central_America_Cargo_Insurance_Policy.pdf