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How-to insure my shipment: Standard Carrier VS. Third Party Insurance 

 

Shipping insurance is a key defense to aid if a shipment gets damaged or lost during transit. Depending on the volume and value of a shipment, shippers may opt out of shipping insurance all together. However, it is widely recommended that businesses should utilize some form of insurance in order to maintain reputation and peace of mind.  

The type of insurance a shipper may choose is up to their own discretion. Most shippers end up conflicted between the choice of standard carrier insurance or a third-party insurance.  

So what’s the difference? 

The first point to note is that standard carrier insurance is not actually insurance coverage, but value coverage. Declared value coverage, or bare minimum carrier insurance, considers only the carrier’s maximum liability if a package is lost or damaged. Value of the package is based on the shipping unit or weight of a shipment, not the monetary value of the goods. 

Conversely, third-party shipping insurance, also known as “all-risk” cargo insurance, provides actual insurance coverage for a shipment in a more comprehensive and transparent manner. 

It is important to note that standard carrier insurance is part of the cost of freight; however, third party insurance is an additional fee on top of the freight cost. 

Which Insurance is Better? 

When it comes to filing a claim: 

Standard Carrier: In the event that a package is lost or damaged, a shipper with declared value coverage would need to personally file a claim with the carrier. Unfortunately, this process is notoriously tedious, and involves digging for the proper documentation to prove a loss.  

Third Party: Third-party shipping insurance is a significantly smoother process. When filing a claim, the third-party will actually provide a representative to complete the claim on behalf of the shipper, and in many cases the whole action is completed online.  

Winner: Third-Party Shipping Insurance 

When it comes to processing efficiency: 

Standard Carrier: Carriers typically take 7-10 days to just locate a lost item. When it is finally confirmed to be lost, a physical authorization letter must be sent and received by the shipper to begin the time-consuming file claiming process. All together the process could take up to 17 days if not more.     

Third-Party: Third-parties have an average waiting time of 3-5 days and the payment and claim process is much more efficient. Payments are delivered swiftly via check or electronically. 

Winner: Third-Party Shipping Insurance (in most cases) 

When it comes to insurance coverage: 

Standard Carrier: With declared value coverage, shippers are provided with an automatic US$100 coverage for free. Carriers in Canada (and many in the U.S.) are required to have a minimum standard carrier insurance coverage of $2.00/lbs. If the commercial value of the shipment is less than $2.00 / lbs., the shipper should consider using standard carrier insurance and not pay a premium for third party insurance.  

Third-party: “All risk,” cargo insurance provides full coverage reported shipment values including all risks in the event of package loss or damage. In most cases, it is also cheaper than standard carrier insurance.  

Winner: Third-Party Shipping Insurance 

After this analysis, third-party insurance has risen as the clear winner for claim filing, processing efficiency, and actual coverage. When booking with OpenBorder Shipping, third-party cargo insurance is offered with every order. At the end of the day however, the choice of shipping insurance is fully in the control of the shipper. 

Here are some general shipping insurance tips:  

  1. Always expect the unexpected! 
  2. File your claim as soon as possible and note the cutoff time according to your insurer. 
  3. Make sure your specific items are covered by your insurance.  
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