If you’re only shipping a handful of pallets, it makes sense that you should only pay for that amount of space, right?

Less-than-truckload shipping makes it possible for businesses to cost effectively send smaller shipments. In recent years, it has become an important part of many retailers’ shipping strategies. 

As such, more freight brokers and 3PLs are handling LTL shipments domestically, cross-border and internationally and require extra insurance coverage in case of the unexpected.

While carriers are usually responsible for paying for claims, motor carriers and drivers may be underinsured and claim disputes can burden freight brokers and 3PLs with more work — and they might end up footing the bill because of a carrier’s coverage gaps.

Because of the many touch points inherent with LTL freight, there are some unique exposures compared to full truckload, which make the mode prone to higher claim frequency risk, said Jamie Cannon, vice president of logistics services at Reliance Partners, a Tennessee-based freight insurance agency.

For instance, as opposed to full truckload freight, which is normally sealed upon loading and only opened when delivered, an LTL route consists of multiple stops along a route and more hands in the pot. This opens up the potential for mishandling, jostling or even temperature changes that can damage certain kinds of cargo.

“If it’s a reefer load or load that requires certain temp requirements, the opening and closing of the trailer could impact temperature, resulting in a loss or multiple losses, for example,” Cannon explained.

Just like it’s a good idea to insure full truckload freight, insuring LTL cargo is a smart way for freight brokers to protect themselves against carrier coverage gaps. Often, however, LTL shipments go undercovered and freight brokers may get stuck paying big money.

Cannon advises freight brokers to make sure the LTL commodity is not excluded from carrier insurance policies and confirm the valuation is adequate and in line with cargo value. Purchasing a separate LTL policy is a smart move to avoid losing money on damage or loss claims.

If it’s a low-value shipment, freight brokers, shippers and even motor carriers can take out individual per-load primary policies through Reliance Usage-Based Insurance and get a lower deductible. This same usage-based insurance program can cover higher-value cargo as well. This unique insurance covers gaps that other policies don’t and make it easy to insure by the load, including LTL, regardless of the motor carrier’s cargo limit.

Reliance Partners has a dedicated logistics service team with years of experience in freight brokerage coverage, trailer liability and API-capable usage-based insurance programs. If you’re unsure you’re meeting insurance coverage requirements or concerned about coverage gaps, the Reliance Partners team is ready to answer your questions.

To learn more about Reliance Partners, click here.

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However, although they play an important role, you still need to get insurance in case you mess up. There have been many cases where a broker has made an error and a carrier has not received an important shipment or the cargo is mistreated. In these cases, compensation needs to be issued out because people may have lost money. There are many different types of freight broker insurance and the industry is quite complicated in this respect. A number of the most common ones are featured below.

What Types of Insurance are Available?

There are a lot of different types of insurance available and this often confuses companies about which one they should get. There are, in fact, a number of dos and don’ts when it comes to freight broker insurance because you do not need all the necessary packages that are offered. You only need a select few. Here are a few of the main ones that you’ll probably see during your research.

• Property and General Liability – this liability insurance is there to cover all the areas outside the cargo and driving. It is actually an important one to have and is available to all individuals who own property associated with their base of operations. Property liability and general liability go hand-in-hand so ask your insurance company for quotes.
• Workers’ Compensation – Every State requires that if a company has employees, they should all receive workers’ compensation insurance as part of their contract, just in case anything happens to them during their shift that could injury them (physically or financially). The carrier also needs worker’s compensation insurance, otherwise, a written statement is needed.
• Contingent Cargo Liability – This one is in those cases where the cargo may have been lost, damaged or mistreated in some way. As the Broker, you’re responsible for the cargo and can be pursued if something goes wrong. Make sure you’re covered with this insurance in your policy.
• Contingent Auto Liability – This insurance protects you against third-parties and can be extended using an umbrella policy.

Conclusion

If you’re a freight broker you need insurance if you don’t have any. There are many misconceptions about freight brokers that shippers have and not only will have insurance put their minds at rest but it will also be there if something does go wrong. Freight broker insurance comes in all different shapes and sizes and you need to identify what you want in your policy. The important ones have been listed above and are the most necessary if you want to be protected against common problems, such as mistreatment of cargo.

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