You may have anywhere from a few hundred to hundreds of
thousands of dollars of merchandise in transit at any given moment.
Should you insure it?
Shippers typically either declare value (on less-than-truckload
[LTL] or package shipments) or purchase insurance (on truckload
shipments). But obtaining this coverage can significantly increase
your shipping costs. Self-insuring your freight is an option you
might want to consider.
"You need to do the math," says Joe Workman, president
of Transportation Resources Inc., a freight management company in
Winter Park, Florida. "What is it costing you to buy the
coverage? What is your loss record and loss potential? Can you save
enough in insurance and valuation charges to justify the
risk?"
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You usually have some coverage even if you don't ask for it.
"If you don't declare value on an LTL shipment, it
defaults to $25 a pound. If you declare a value higher than that,
your freight rate will increase," Workman says. He adds that
truckload carriers are typically insured for up to $100,000. If you
want more than that, you have to buy it. He recommends asking to
see a certificate of insurance to verify the coverage.
With air freight, overnight couriers and small package carriers
(such as UPS and the U.S. Postal Service), valuation and insurance
policies vary by company. Ask for a full explanation of what
you're paying, then decide if the cost is justified.
Jacquelyn Lynn is a freelance business writer in Orlando,
Florida.
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Originally published in the June 2002 issue of Entrepreneur Magazine