Do you know that during an annual voyage, a container ship travels a distance that’s equal to three-quarters of the way to the moon and back?
Considering the distance a ship takes on a single trip, why don’t you consider taking cargo insurance.
If you’re expanding your business overseas, taking cargo insurance can help to protect your ocean shipment. What makes this insurance different is that it comes with unique laws that limit the liability of carriers.
While there are different policies under a single cover, you’re always guaranteed full protection in case of a tragic loss.
Choosing the right cargo insurance is important for any freight business. Our complete & easy guide will clear your doubts & help you choose the best insurance.
What Is Cargo Insurance?
Cargo insurance is a policy that protects against damage or loss to freight from external cause during shipping either by rail, road, air, or water.
With the right insurance cover and proper physical risk management, you can handle any financial impact in case of damage or loss.
Some insurance companies have the option to insure your shipment from “warehouse to warehouse” regardless of the sub-contractors involved.
How to Evaluate Insurance?
When it comes to evaluating cargo insurance, you’ll need someone with a supply chain background.
If you already have a track of your lost history, you’re likely to have data sets that will make it easier for insurance underwriters to determine whether you have low impact/high-probability losses.
They can also evaluate your premium based on losses that occur during rare events. This is done by multiplying the perceived impact of occurrence by the perceived probability of occurrence.
For instance, if you have a ship with goods worth $5,000,000 with a likelihood of losing cargo being 2%, then your loss is estimated at $100,000. So, your annual coverage can be estimated at $50,000.
Given that rare but devastating events may happen tomorrow or decades to come, such calculations are designed to spread the impact over time. If you are looking to get the best deal, there are different websites you can use to compare insurance plans.
Types of Cargo Insurance
You can take insurance for domestic as well as international transportation. This is however difficult to standardize and control if there isn’t proper cooperation from states and country due to the variation of the insurance. Cargo insurance can be categorized as follows;
This insurance covers all land transportation, including small utility vehicles and trucks. Some of the aspects covered by this insurance include collusion damages, theft, and other related risks. This insurance is domestic, operating within boundaries of a nation.
Marine cargo insurance covers transportation carried out by air or in the sea. Under this form of transport, insurance will cover damage due to weather contingencies, loading/unloading as well as pirate issues.
Marine cargo insurance mostly covers international transportation. Some of the policies included in this insurance plan include;
Open Cover Cargo Policy
If you choose to cover against different consignments, you’ll activate the open cover cargo policy. This policy can also be categorized further into permanent and renewable policy.
The renewable policy is designed for a single trip voyage whereby the insurance value set has to be renewed once a trip is complete. Permanent policies are drawn for a specified period and can permit several shipments in that period.
Specific Cargo Policy
If a company approaches a broker or insurance company for a particular consignment, then the cover taken falls under the specific cargo policy. This policy is also known as voyage policy as it only includes shipments.
Contingency Insurance Policy
There are instances where a customer, and not the seller may be the one responsible for insuring the goods against damage or loss. The policy taken in such a case is contingency insurance.
Why Do You Need Cargo Insurance?
There are different benefits associated with cargo insurance. Here are just but a few.
It Expedites Cargo Release During a General Average
Following a general average you may be required to post a cash deposit/bond to release your cargo even if they’re damaged. If you already got an insurance cover, your company will take responsibility and expedite the release.
General average is internationally recognized, so if anything happens to the vessel; both parties will share the responsibilities equally.
Warehouse to Warehouse Coverage
An insurance policy can cover shipment being unpacked from the ship and transported to the client’s warehouse. In case of damages, the insurance company will most likely compensate the insurance holder cargo, and not the owner’s cargo.
Natural events are almost impossible to avoid. Events like pirate attacks, explosions, and shipwrecks are just a few occurrences that are common in the shipping industry.
In such events, the chances are that an entire shipload might be lost. With an insurance cover, you can rest assured that you’ll be compensated for your loss.
Learn Why You Should Get Cargo Insurance!
With cargo insurance, you are bound to get protected in case of loss on land or at sea.
If you’ve got trucks or small utility vehicles, taking a land cargo insurance ensures that you’re protected in case of theft, collision damage, or any other related risks.
You should go for marine cargo insurance if you want to cover goods transported by sea or air. This cover also comes with a different insurance policy.
If a customer and not the seller is responsible for insuring goods, then the contingency insurance policy comes handy.
If you take cargo insurance, it will help to expedite the release of cargo during a general average. This way, if anything happens to the vessel, you’ll still be compensated.
A lot of things can go wrong when you transport your shipment from one warehouse to another, but you can sleep easy if you’ve already taken an insurance cover.
This is the same case for catastrophic events like a shipwreck, explosions, and a pirate attack.
Are you already part of the logistics industry? Check out our blog to learn about how the internet of things is transforming logistics management.