WHAT IS THE CARGO INSURANCE?
Marine cargo insurance known as freight insurance is the most common method used to protect the value of your goods from physical damage, theft, or general average.
Cargo insurance is not always automatically included for all shipped goods—this often varies by region. Instead, shippers or consignees can purchase policies in the insurance market from niche providers, large brokers, local agents, websites, and freight forwarders.
The movement of goods around the world is fraught with dangers. Because there is no certainty that harm or loss will not occur, these risks are reduced by insurance coverage
WHY IS IT IMPORTANT?
While it’s important (and highly advised) to take all precautions possible to avoid damage to your shipment, there are always situations beyond your control. Unpredictable poor weather and, in the case of LCL shipments, a lack of effective packing by other shipments on board the vessel your cargo is traveling on might easily harm your cargo. The fire that erupted earlier this year on board the Maersk Honam should serve as an excellent example. It’s always better to be safe than sorry when it comes to ocean freight, and cargo insurance is one method to do so.
All shipping lines are required by law to insure the cargo that they transport aboard their ships. However, this coverage is extremely restricted, and it is recommended that you purchase supplementary coverage to properly protect yourself.
HOW MANY TYPES OF CARGO INSURANCE?
There are 2 types of cargo insurance:
Land cargo insurance
As the name implies, land cargo insurance protects your shipment while it is being transported by land. This typically occurs when your cargo is loaded onto a truck, but it can also occur when it is being transported or maintained by other utility vehicles. This is a domestic policy providing coverage that is only valid within the United States.
Coverage: Theft, damage from collision, and other risks.
Marine cargo insurance
The water (and air for air freight) portion of your shipment’s voyage is covered by marine cargo insurance. This, unlike land cargo insurance, covers international transit.
Marine cargo insurance coverage can be renewed or remain in effect indefinitely. If you’re not a frequent shipper, the renewable policy is preferable because it only applies to one-time, single voyages. These are typically inexpensive and can save you a significant amount of money. A perpetual policy will cover you for a specific amount of time, regardless of the number of shipments you make.
Coverage: Damage from loading/unloading, bad weather, piracy, and other risks.
WHICH TYPES OF CARGO INSURANCE COVERAGE?
Shipment transportation through water, air, road, and rail are all covered by cargo insurance. However, the level of your coverage will be determined by the type of policy you select. Before signing your policy, pay special attention to the specifics and clarify any questions you may have with your insurance provider.
All risk
All-risk coverage is one of the most comprehensive types of coverage, providing a wide spectrum of protection against external factors. In general, it encompasses most forms of physical losses and damages caused by external factors that a product may face. This is typically done for what are known as “authorized” or “generic” items, which are brand new and not easily susceptible to losses and damages.
Excludes:
- Negligence has resulted in cargo damage. A good illustration of this would be sending time-sensitive cargo to a port that is known to be congested all of the time.
- Inherited vice: This is when cargo deteriorates due to its inherent character rather than external forces. The shipping of wine and beer, for example, is a popular trigger for this clause because the quality of these items might be damaged by movement and temperature fluctuations during transportation.
- Customs refusal
- Abandonment of cargo
- WSRCC is referred to as conflict, strikes, riots, and civil unrest.
- Loss of use/market. This applies when the damaged cargo causes profit losses.
- Failure to pay/collect. Loss of goods as a result of non-payment will not be covered.
- External factors including but not limited to: earthquakes, war, pollution, infestation, etc.
Named perils policy
The “Free of Particular Average” policy was once known as the designated perils policy. Unlike an all-risk policy, it solely covers losses caused by the risks listed in the policy. As a result, it’s usually more limited. This policy may contain the following:
- Collision of vessels
- Sinking of a vessel
- Derailment
- Non-delivery due to inclement weather
- Fire, Earthquake, Theft, and other natural disasters
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