Cargo insurance is something you should not ignore in case of overseas shipping. Wonder why? It will be transported via land, air and/or sea and is potentially subject to natural disasters and accidents. So, in order to be on the safe(r) side or to prevent any huge loss, cargo insurance is advisable. This means that if the cargo gets stuck in customs, is lost or damaged during transit, the insurance holder will be compensated. This post answers the most common questions asked about cargo insurance.
Answers to Common Questions About Cargo Insurance
What Is Cargo Insurance?
Generally, all cargo carriers carry a minimum amount of insurance. This is called carrier liability. But this may not be enough for big cargo. That is why business houses opt for a special type of insurance to safeguard their goods from theft, loss or other kinds of damage. Usually, goods are insured while being dispatched from the warehouse or another place of storage until they reach the buyer or the destination where they will be distributed.
What Are the Types of Cargo Insurance Policies?
There are two main types of cargo insurance that can be taken out for domestic and international transportation. However, their terms and policies may differ from country to country. To find out about these different types of cargo insurance, keep reading:
Land Cargo Insurance
This type of insurance provides coverage for all land transportation via trucks and other utility vehicles. It protects cargo from theft, accidents like collision and other related risks but generally operates within the borders of a single nation. This is because every nation has a different policy, which is why special permits must be filled out in the case of cross-country transit.
Marine Cargo Insurance
Marine cargo insurance covers transportation that is carried by both sea and air. This makes it suitable for international shipping. It covers cargo from damages that occur due to loading and unloading, piracy, weather and other issues.
What Are the Types of Cargo Insurance Policies?
Here is a list of some policies to better help you understand cargo insurance:
Open Cover Cargo Policy
When the insurance holder selects coverage for many consignments shipped together, open cover cargo policy is activated. This policy is divided into two main categories: renewable and permanent. A renewable policy is needed for a specific value that requires renewal after it expires. Most voyages or single trips fall into this category. A permanent policy is for a stipulated period of time in which several shipments are made.
Specific Cargo Policy
Many companies only ship a particular consignment and insure only that specific shipment. That’s where specific cargo policies come into the picture. This policy is also known as a voyage policy, as only shipments are covered.
Contingency Insurance Policy
Sometimes customers do not insure their goods and will refuse them if they are damaged during shipment. This is solely done by customers to avoid liability and incurs a heavy loss on the seller’s end. This is when a contingency insurance policy can save the seller. The premium rate for this type of policy is comparatively lower than other types of cargo insurance.
What Are the Different Types of Cargo Insurance Coverage?
Here is a list of different types of cargo insurance coverage:
All risk insurance covers any physical loss or damage by external reasons. Some aspects covered under this category are train derailment, collisions, natural disasters and accidents like overturned trucks. Some exceptions to this coverage include infestation, abandonment, damage due to improper packing, rejection by Customs, unethical employee behaviour, and what is known as WSRCC (war, strikes, riots and civil commotions).
Free of Particular Average
This is also known as a named perils policy and covers losses caused due to the perils listed below:
- Bad weather
- Vessel collision
- Vessel sinking
Warehouse to Warehouse Coverage
This is only applicable when a shipment is unloaded from a ship and transported to the customer’s warehouse. These days, insurance companies are specific about compensating only the insurance holder’s cargo and not that of other cargo owners.
General Average Coverage
General average coverage is a basic requirement in marine cargo transit and covers only partial losses accrued due to shipment. It also requires that all the cargo holding owners pay compensation to the cargo owners who suffered loss.
Why Is It Wise to Insure Your Cargo?
It is important to take cargo insurance in terms of local and international trade. This is applicable to business houses that regularly import and export their goods overseas. Cargo insurance not only prevents unnecessary losses but also guarantees that your products get delivered in good condition and on time.
What Risks Are Covered by Cargo Insurance?
Here are a few risks covered by almost all types of insurance coverage and policies:
- Natural disasters like earthquake, lightning, flood and storm
- Riots, strikes and wars
- Impact by rail or road vehicles
- Accidental physical loss or damage
That is everything you need to know about cargo insurance. It is important to buy this insurance in order to safeguard your cargo against theft, natural disasters, accidents and other problems. In this way, sellers can rest easy about the money involved in shipping their merchandise.