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Freight Debate

Add insurance to your shipping costs?
June 1, 2002
URL: http://www.entrepreneur.com/article/51898

You may have anywhere from a few hundred to hundreds of thousands of dollars of merchandise in transit at any given moment. Should you insure it?

Shippers typically either declare value (on less-than-truckload [LTL] or package shipments) or purchase insurance (on truckload shipments). But obtaining this coverage can significantly increase your shipping costs. Self-insuring your freight is an option you might want to consider.

"You need to do the math," says Joe Workman, president of Transportation Resources Inc., a freight management company in Winter Park, Florida. "What is it costing you to buy the coverage? What is your loss record and loss potential? Can you save enough in insurance and valuation charges to justify the risk?"

You usually have some coverage even if you don't ask for it. "If you don't declare value on an LTL shipment, it defaults to $25 a pound. If you declare a value higher than that, your freight rate will increase," Workman says. He adds that truckload carriers are typically insured for up to $100,000. If you want more than that, you have to buy it. He recommends asking to see a certificate of insurance to verify the coverage.

With air freight, overnight couriers and small package carriers (such as UPS and the U.S. Postal Service), valuation and insurance policies vary by company. Ask for a full explanation of what you're paying, then decide if the cost is justified.


Jacquelyn Lynn is a freelance business writer in Orlando, Florida.

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