Cargo vs. Freight Insurance: What’s the Difference?

Cargo Policy

A cargo policy is a policy that protects goods being transported by sea, air, or land. It covers the physical loss or damage of cargo during transportation. Cargo policy can be purchased by anyone involved in the transportation of goods, including shippers, freight forwarders, carriers, and logistics companies.

Types of Cargo Policy

There are two types of cargo policies:

All-Risk

This policy covers any damage or loss to cargo during transportation, except for a few specific exclusions mentioned in the policy.

Named Perils

This policy only covers damage or loss caused by specific perils listed in the policy, such as fire, theft, or collision.

Freight Policy

Freight policy, on the other hand, is a broader type of policy that covers the transportation of goods from one place to another. It provides coverage for losses related to cargo, as well as other types of losses that may occur during the transportation process. The freight policy includes liability, errors, omissions, and delay in delivery.

Types of Freight Policy

There are different types of freight policy policies available. This includes the following.

General Average

This policy covers losses that occur when a cargo ship intentionally jettisons some of its cargo to save the rest of the shipment from being lost.

Errors and Omissions

This policy covers losses that result from errors or omissions made by the carrier, such as incorrect paperwork or miscommunication.

Delay in Delivery

This policy provides coverage for losses that occur when there is a delay in the delivery of goods. This includes when the goods are delivered after the agreed-upon date.

Differences between Cargo & Freight Insurance

Let us discuss some key differences between cargo & freight insurance. Below are some differences between cargo & freight insurance.

The primary difference between cargo & freight insurance is that cargo policy only covers the physical loss or damage to cargo during transportation. At the same time, freight policy covers a broader range of risks associated with the transportation of goods.

Another key difference between cargo & freight insurance is that cargo policy can only be purchased by those involved in the transportation of goods. At the same time, freight policy can be purchased by anyone who has an interest in the goods being transported.

To illustrate the difference between cargo & freight insurance, let us consider a scenario where a shipment of valuable goods is being transported by a carrier. If the goods are damaged or lost due to an accident, the owner of the goods may file a claim under their cargo policy to recover the full value of the goods. 

However, if the carrier is found liable for the damage or loss, they may file a claim under their freight policy. This will cover the cost of the damage or loss up to the coverage limit of the policy.

Conclusion

Cargo and freight policies are two different types of insurance policies that provide protection for goods being transported. One may purchase marine insurance in order to cover under such policies. Cargo policy covers physical loss or damage to cargo during transportation. While freight policy covers a broader range of risks associated with the transportation of goods. Both types of policies are essential. They help to ensure that goods are protected during transit and to mitigate the financial risks associated with transportation.