A Comprehensive Guide to Cargo Insurance for Shippers

Shipping overseas involves certain risks, such as losing your goods to damage during transit, which can be of particular concern whether you’re a small business or a large corporation. Because of this, safeguarding your cargo should be the topmost priority, which is where cargo insurance becomes an asset.

In this article, we give you a comprehensive guide to cargo insurance for shippers, from the types of policies and their inclusions to the claims process.

What is Cargo Insurance?

Cargo insurance is a policy that protects shipped goods against loss, damage, theft, or other risks during transit. It applies to all modes of shipping, whether by land, sea, or air. This type of insurance coverage benefits shippers, helping them mitigate financial losses that occur during the shipping process.

Freight vs Cargo Insurance

While freight insurance and cargo insurance are both coverages that help protect goods during transit, they differ in scope and coverage.

Freight insurance is a type of coverage purchased by carriers to protect themselves from liability in case goods are lost or damaged during transit. It covers the carrier’s liability, with the insurance paying for the associated costs in case of loss or damage to the goods.

Cargo insurance, on the other hand, is purchased by the owner of the goods. This can be the shipper, consignee, or another party holding insurance interest. It covers a wide range of risks, from theft and damage to accidents and natural disasters, providing more comprehensive protection compared to freight insurance.

Types of Cargo Insurance Policies

There are generally three types of cargo insurance policies. They are:

All-Risk Cargo Insurance

All-risk cargo insurance has the most comprehensive coverage out of all cargo insurance policies. It covers physical loss or damage by external causes, except certain risks excluded by the policy.

Because of its comprehensive inclusions, all-risk cargo insurance is preferred by most shippers. It gives them the most peace of mind and ultimately a reduced financial risk.

Named Perils Cargo Insurance

Named perils cargo insurance is just as its name suggests. It only covers specific risks that are outlined in the policy. That commonly includes the following perils:

• Fire
• Theft
• Collision

Shippers might opt for named perils cargo insurance over all-risk coverage because it’s more affordable.

Specific Perils Cargo Insurance

Special perils cargo insurance is the least comprehensive of the three. It only covers particular risks that are set forth by the policyholder. Some types of specific perils that might be covered include:

• Theft during transit
• Damage caused by handling

While it only covers specific risks, this type of insurance coverage remains attractive to shippers who want customized coverage that is tailored to their shipping needs.

What Does Cargo Insurance Cover?

Cargo insurance typically covers the following:

• Loss or damage to goods during transit.
• Theft or pilferage of goods.
• Natural disasters and extreme weather conditions.
• Handling and storage incidents.

Exclusions in Cargo Insurance Policies

While some types of cargo insurance have extensive coverage, they may still have certain exclusions that you need to be aware of. Common ones include:

• Insufficient packaging or improper handling by the shipper: Damage caused by things like inadequate packaging or mishandling is not commonly covered.
• Delay or loss of market: Any financial losses caused by delays in the shipment are excluded from cargo insurance policies.
• War, strikes, and civil commotions: Unless covered by specific clauses of the policy, these risks are generally excluded.
• Inherent vice: The natural deterioration of goods, such as in cases of spoilage or rust, is not covered by cargo insurance.

Should I Get Cargo Insurance?

The process of transporting goods carries with it plenty of risks. For your protection, it’s very much recommended to get cargo insurance coverage. But if you’re concerned about the cost, you can either opt to or opt out of purchasing cargo insurance depending on the value and nature of your goods, the shipping method and route, and your frequency of shipping.

Generally, cargo insurance is recommended for shippers transporting high-value goods through a high-risk route. It can also provide good value for money for frequent shippers.

But if you’re shipping low-value goods and the shipping route is considered low-risk, then you can opt out of purchasing cargo insurance.

Getting cargo insurance is considered a best practice to give shippers peace of mind knowing they’re financially protected regardless of what happens to their goods during transit.

How to Choose the Right Cargo Insurance

Choosing the right cargo insurance for your shipping needs is crucial to getting adequate protection for your goods. To help you select a good policy, here are some tips:

Assess the Value and Type of Your Cargo

First, evaluate the nature and value of the goods you are shipping. This will help you determine the level of coverage you require. Goods that are high-value or fragile will typically need a more comprehensive insurance policy to ensure full protection.

Understand Your Specific Shipping Routes and Associated Risks

The risks that are involved in the shipping process will differ depending on your shipping routes. Things like weather conditions, the reliability of transportation providers, and political stability can all affect your cargo. Before selecting an insurance policy, determine the associated risks in your respective shipping route.

Compare Different Insurance Providers and Policies

Don’t go for the first insurance policy that is offered to you! Take some time to shop around and compare offerings from various providers. Do your due diligence in assessing the coverage details, inclusions, exclusions, and premiums to make an informed decision. You should also work only with reputable insurers.

Consult with Insurance Experts for Tailored Advice

If you’re unsure about which insurance policy is best for your shipment, don’t hesitate to seek advice from insurance experts. They can help you navigate the complexities of cargo insurance and provide insights into choosing the most suitable policy for your needs.

How to Purchase Cargo Insurance

If you’re ready to purchase insurance for your cargo, here are the steps to take.

Step 1: Evaluate Your Insurance Needs

First, assess the nature of your goods, the value of your shipments, and the risks involved in your shipping route. This will give you a better idea of the type of coverage you need.

Step 2: Contact an Insurance Provider or Broker

The next step is to reach out to an insurance provider or broker who specializes in cargo insurance. Set up a meeting with them to discuss your policy options and coverage details.

Step 3: Review and Select a Suitable Policy

Once you are presented with a policy, take your time to review the offer. Pay close attention to the coverage, inclusions, premiums, and terms and conditions. Study all your options and choose one that best suits your needs.

Step 4: Complete the Necessary Documentation

Once you’ve chosen a policy, you’ll be asked to fill out the required paperwork. While doing this, make sure that all information is correct to avoid issues come time to make a claim. Remember that any wrong or missing information can make your insurance coverage invalid.

Claims Process for Cargo Insurance

In case of the loss or damage of your cargo, here are the steps to take immediately after discovery:

1. Notify Your Insurance Provider Promptly

As soon as you discover that your cargo is lost or damaged, notify your insurance provider at once. The sooner you can inform them, the faster your claim can be processed.

2. Document the Damage or Loss

Proper documentation is key to the success of your insurance claim. Take photos and write up reports of the incident so you have evidence to support your claim.

3. Submit a Formal Claim with Documentation

Take your photos, reports, and other documents and submit them as a formal claim to your insurance provider.

Throughout the process, make sure to maintain an open and clear line of communication with the insurance company. Follow their instructions to a T and be prompt in supplying additional information they request. This will ensure an efficient and smooth claims process.

Benefits of Cargo Insurance

Getting cargo insurance is crucial not only for the protection of your cargo but also for financial protection and peace of mind. Here are the most important benefits of obtaining cargo insurance.

Financial Protection Against Potential Losses

Cargo insurance provides your business with financial security. In case your cargo is lost or damaged, the insurance provider will cover the costs, therefore mitigating the financial impact on your business.

Peace of Mind for Shippers

Knowing that you have cargo insurance will give you peace of mind during transit. You won’t have to worry about risking money in case of shipping risks, allowing you to ship with confidence.

Enhanced Credibility and Trust With Customers

Cargo insurance is proof of your commitment to protecting the goods you ship to your customers. In turn, this can enhance credibility and trust, fostering a good relationship that will lead to return business.

Conclusion

Cargo insurance is an essential part of any shipping process. It provides you with protection against various risks that can occur, from the loss of your cargo to damage during transit. To find the best cargo insurance coverage for your shipment, it’s important that you understand the different types of policies, their inclusions and exclusions, and coverage details.

Consider investing in cargo insurance to protect your goods throughout their journey and safeguard your business against financial losses.

If you need help choosing the right cargo insurance policy, don’t hesitate to reach out to iContainers. Our team of experts will be happy to help you evaluate your shipping needs and find the cargo insurance coverage that suits you. Contact us today.