Freight Forwarders Liability Insurance: The What, Why, How

Even the best freight forwarders cannot predict accidental damages to the cargo. Freight Forwarders Liability (FFL) Insurance provides coverage against these unforeseen damages or losses. Something that eases the financial strain on the company and reducing the risks involved.

With global trade increasing every day, freight forwarders are expanding their network around the world. But, sailing in the uncertain waters comes with a host of possibilities and uncertainties. Having insurance during your operations can become more of a necessity than an option. Especially during unexpected circumstances and accidents leading to damages and financial losses. And for the freight forwarding company, who is liable for the shipment and has to bear the costs in case of any uneventful situations, it is important to keep in mind.

That’s where Freight Forwarders Liability Insurance comes in. Here’s everything you need to know about it. The What, Why, and How…

What is Freight Forwarders Liability Insurance?

Freight forwarders are companies that handle and coordinate the shipment of goods through carriers via sea, air, rail, or road. The FFL insurance is specifically aimed to protect the freight forwarders. Against accidental damages or losses to the cargo until the time it is delivered. This insurance is crucial. It provides financial cover to the companies from the claims made by third parties for the lost shipment.

Depending on the terms in the insurance, the FFL Insurance can cater to many. Such as: freight forwarders, non-vessel operating common carriers (NVOCC), haulage companies, warehouse keepers, logistics operators, multimodal transport operators, among others.

Why is the Liability Insurance Important for Freight Forwarders?

Liability = When a company is legally responsible for something.

The freight company is responsible for the goods after it is handed over. The company is then liable for any damages or losses until the shipment is delivered to the receiver.

Recently, a cargo ship lost 40 containers due to rough sea conditions off Australia’s east coast. Additional 70+ containers were damaged by heavy rolling due to instability. The key point is that even the best freight forwarders cannot predict accidental damages.

There are many ways cargo is damaged – in ways that you wouldn’t have foreseen. Cargo can get damaged due to mishandling, natural calamity, any consequential losses, abandonment, vessel rerouting, late custom release, or even delay in paperwork. The cover for these losses can be fairly high – sometimes, even thousands of dollars!

These unexpected damages can be financially heavy on the freight forwarding company. The FFL Insurance comes into play here, thus providing cover insurance for the losses and easing the financial strain.

What is Covered in the FFL Insurance?

Depending on the insurance company, the FFL Insurance cover:

Damage or loss to the cargo during transit,

Custom fines and duties (due to errors and omissions) including delays,

Third-party liabilities (like legal expenses, mitigation costs, debris removal, etc.),

Port authorities for any breach of regulation or duties,

Uncollected or abandoned cargo,

Financial claims from shippers and receivers,

Operational services (like distribution, storage, haulage, packaging, etc.) against fire, explosion, or other natural calamities,

Legal protection services to tackle unjustified third-party claims,

Coverage for personal injury or employee injury during operations,

Damage repair and lost units,

Recovery and maintenance costs (full cover), etc.

During insurance claim, your underwriter may assess several risk and liability factors, like:

Cargo Details (Type of cargo being shipped, the value of goods, how it is packed, reefers or normal containers, etc.)

Type of Service (How is the cargo transported, warehousing options, chassis services, etc.)

Subcontractors Involved (their credibility, contracts, etc.)

Receipt of the Freight (including payments to subcontractors, fines, duties, tax, fiscal charges, etc.)

Other Important Documents (mainly Bill of Lading, and any other contract involved)

How to Choose the Best Freight Forwarders Liability Insurance?

Before you choose a company for insurance, there are a few things that you can keep in mind:

1. Know your exact requirements

You need to have complete details about the shipment and your needs, before getting insurance. The insurance depends on the modes of transport being used, risks involved, customs duties, etc.

2. Check the ‘Inclusion’ and ‘Exclusion’ list

It is extremely important to know what terms are included in the policy. On the contrary, do ask your insurance provider about what is not covered under the insurance. And whether you can cover that through extra charges.

3. Be assured of the credibility of the insurer

The company providing the insurance should be backed by proof and provide credible information. Make sure to check the company and beware of any frauds.

If you have any doubts or questions, don’t hesitate to ask the insurer about your concerns. We never know the risks and circumstances that may arise. Having freight forwarders liability insurance is a huge relief by reducing the risks involved and providing loss coverage.

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