Freight insurance

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Freight insurance
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Freight insurance is a type of insurance which provides coverage against theft of, damage to, or complete loss of freight. Excluded from the coverage of freight insurance services is the insurance of the vehicles that are used to transport the goods [1].

In many cases, the owner of goods is bound to pay freight, under the terms of the contract, only when the goods are safely delivered at the port of destination. If the ship is lost on the way or the cargo is damaged or stolen, the shipping company loses the freight. Freight insurance is taken to guard against sich risks [2].

Owner of freight

There are basically three types of freight: ordinary freight or bill of landing freight: charactered freight; and owner's trading freight. Ordinary freight and chartered freight may be payable in advance, in which case it is called 'advance freight'. The moment a ship commences her voyage with cargo on board, not only both ship and cargo but also ordinary freight and chartered freight are at risk. If ship and cargo are prevented by any peril from arriving at the agreed port of destination, a loss of cargo and freight would occur. The earning of ordinary bill of laning freight, but not advance freight, is dependent upon the performance of the adventure and the arrival of the cargo, albeit in a damaged state, at its proper destination. Thus, should the cargo, by reason of a peril insured against, fail to arrive at its proper destination, a loss of ordinary freight would accrue [3].

Cases that are covered by insurance

Freight insurance cover is to provide coverage of expenses, costs and obligations that may arise, among others, as a result of events such as:

  • loss of goods or cargo,
  • ship collisions or other collisions (e.g. with quay),
  • pollution,
  • fines and penalties imposed by maritime organizations,
  • damage to goods and cargo,
  • damage to existing property on board the insured ship,
  • shortage of goods or cargo.

Freight insurance service

Freight insurance service relate to insurance provided on goods that are in the process of being exported or imported, on basis that is consistent with the measurement of goods free on board and freight transportation. This means that freight insurance services should be included in the compiling economy when they relate to exports of goods beyond the customs frontier of the compiling economy and are supplied by resident insurers or relate to imports of goods to the compiling economy, beyond the customs frontier of the exporting economy when they are provided by nonresident insurers [4].



  1. United Nations, (2002)
  2. Gupta C. B, (2007)
  3. Hodges S., (2013)
  4. United Nations (2002)

Author: Piotr Tarsa