How much would you stand to lose if your cargo was damaged or lost in transit? If freight damage or loss could be costly for your business, you should invest in insurance. Cargo insurance allows you to file a claim to your insurance provider for damages that occur in transit (with a few exceptions depending on the policy) and recover in full, making your deductible your maximum financial loss.
Read on for the tips and advice that we’ve compiled on selecting the right cargo insurance coverage for your company’s shipments.
Types of Cargo Insurance Coverage
The specifics of land insurance packages are decided by the regulations of the nation in which shipments are transported. The main types of marine cargo insurance include open cover (all-risk) and specific (named perils). Open insurance covers almost everything that could go wrong, with a few exceptions. Specific (named perils) will cover only anything that is named in the insurance clause, such as collision. Air cargo, also known as air freight, insurance is fairly straightforward, without the subcategories of marine cargo insurance.
- All Risk: This type of policy typically covers any physical loss or damage from external causes, with some exclusions listed. Things this type of policy should cover include collision with external object, jettison, train derailment, truck overturning, deliberate destruction, improper stowage by ship owners, theft, and acts of God (e.g. earthquake, lightning strike).
- Free of Particular Average (FPA): This is what’s known as a Named Peril policy, which will list exactly what is covered. It is important to note that theft is usually not covered under this type of policy. The policy usually covers collision, stranding, burning, sinking, train derailment, truck overturning, and some acts of God.
- Shipment-by-Shipment: This is insurance coverage through the carrier who is shipping your goods. There may be certain exclusions, including defects in the transportation vessel, criminal acts on the part of the vessel’s crew, acts of God, and acts of war.
Shopping for Cargo Insurance
Consider the following questions: which parts of the shipping journey are the riskiest? For example, cargo traveling by sea is more susceptible to uncontrollable factors, such as storms. Ask yourself if any of the items in the shipment prone to theft or damage. Additionally, although companies are not legally required to have cargo insurance, it can play a factor in whether or not lenders offer financial support to a company.
Costs of Cargo Insurance
The cost of a company’s particular cargo insurance policy is determined by numerous factors, such as origin and destination points. The more likely the cargo is to be stolen, the higher the cost of insurance. Additionally, marine insurance is more expensive than land or air insurance.
If you need any information regarding cargo insurance or have more questions, please give us a call.
