Delays, damage, loss, or theft of cargo are costly. Inclement weather, acts of war, and poor infrastructure are just a few of the issues that can prohibit shipment from reaching its final destination on-time and intact. A look at some data points is alarming and begs the question of how can shippers prevent such financial losses?
According to the academic publication, Transportation Research, air cargo delay costs related to late deliveries are $38,000 per flight-hour. These delays substantially increase the probability of late or loss package delivery.
Unfortunately, cargo theft continues to be a concern around the world. While a higher percentage of thefts tend to impact trucking, all modes of transportation are targets. According to the Transported Asset Protection Association (TAPA), cargo thefts in Europe, the Middle East, and Africa more than doubled to 8,548 incidents in 2019 and involved product losses worth over $150 million.
While one associates piracy with such historical characters as Black Beard, Long Ben, and Black Bart, modern piracy is a threat to ocean vessels, particularly off the coasts of Africa and Asia. In 2019, the Regional Cooperation Agreement on Combating Piracy and Armed Robbery Against Ships in Asia (ReCAAP) reported a 9% increase in attempted and actual piracy incidents against ships in Asia.
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What is Cargo Insurance?
Carriers are required to carry a minimum amount of insurance, also known as carrier liability, which provides minimal coverage. Therefore, shippers can purchase cargo insurance to protect their goods from delays, loss, damage, or theft while in transit. Policies can be purchased in the insurance market from niche providers, large brokers, local agents, websites, and freight forwarders. By choosing to pay a small amount of the valued goods, the shipper is protecting himself for the day that the unexpected happens.
At a minimum, cargo insurance should be reviewed annually. However, as business conditions change and the shipper’s products evolve, the cargo insurance coverage will need to change. In addition to that, insurance carriers may introduce new features and withdraw others. Because of this, it’s essential to be aware of these changes and how they will affect business.
When Do I Need Cargo Insurance?
There is certainly no requirement to buy cargo insurance, but that means the shipper assumes all of the risks. If the shipper chose no cargo insurance, then he will have to prepare for potential losses and possible collateral damages that may occur.
This is a decision that should be contemplated carefully with the costs and benefits in mind. Either way, cargo insurance is the best solution for businesses to decrease financial exposure and reduce supply chain risks.
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Factors That Affect Cargo Insurance
Understanding the type of cargo, as well as the trade route, are essential when it comes to how shipments affect the insurance. How the cargo is packed as well as ensuring all packaging is labeled so that it can be identified should also be considered. Keep in mind that it’s best to limit the use of brand names on packages to reduce the invitation for theft.
Make sure to know the route the cargo is traveling – what ports are involved, what are the weather conditions, and are there any political situations that can impact the condition of the cargo –these are just some of the questions the shipper should ask.
Benefits of Cargo Insurance
The primary benefit of cargo insurance is that it protects the shipper’s investment. For just a relatively small investment, cargo insurance can provide significant peace of mind.
Another benefit of cargo insurance is due to the maritime principle of general average, which states that all losses or damages from an unforeseen problem are divided among the owners of the surviving merchandise on that vessel. Even if a shipper’s cargo is not damaged, but other shipments onboard are, the shipper is still financially responsible for compensating the other owners whose cargo was damaged or lost.
Limitations of Cargo Insurance
There are different types of insurance policies, and many of them will exclude coverage in different ways. For example, some types of cargo are excluded, only specific equipment and terminals are covered, losses caused by particular events are not covered, or coverage applies only if a service is performed in a certain way.
Plus, there are national and international treaty restrictions as well as the U.S. Domestic Carmack Amendment that limit the monetary liability of most carriers.
Shippers need to be mindful that transportation providers are protected from all kinds of liability and should always refer to a carrier’s Bill of Lading, tariff, or other Terms and Conditions for specific limits of liability.
Types of Cargo Insurance
Cargo insurance can be taken for both international and domestic transportation, and it’s categorized as:
- Land Cargo Insurance: This insurance provides coverage for all the land transportations covering trucks and other small utility vehicles. The coverage aspects are theft, collision damages, and other related risks.
- Marine Cargo Insurance: This insurance covers transportation carried by sea or by air. It covers damages from cargo loading/unloading, weather contingencies, piracies, and other relevant issues. Plus, this insurance covers international transportation.
Several policies deal with specific types of cargo when the customer is responsible for insuring the goods against loss or damage and coverage of all baggage during a particular period such as a year.
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How to Get Cargo Insurance
Several carriers, brokers, and freight forwarders offer cargo insurance. Freight forwarder, Alba Wheels Up is in a unique position to leverage its industry experience and purchasing volume to provide full cargo insurance coverage at economical rates instead of high premiums, including:
Full Liability Coverage
This covers the full cost of imported goods, includes total duty, terminal fees, and an allowance for lost revenue is covered.
Door-To-Door Insurance Options
Alba Wheels Up will file claims and include reports that provide visibility and details automatically, so shippers always know when and what to expect.
Increasing risks are results of delays, damage, loss, or theft of cargo. Shippers can mitigate these risks by acquiring the right cargo insurance. While not necessarily required, cargo insurance can provide ease of mind as well as protect the shipper’s investment. However, with benefits comes limitations, and shippers will need to be aware of these drawbacks.
Partnering with a forwarder such as Alba Wheels Up will ease any uncertainty and solve all unknowns that a shipper may have. Alba Wheels Up’s industry experience and purchasing volume have put the forwarder in a valuable position to offer cargo insurance solutions to meet the needs of its clients.
- Posted by Joe DeSilvetri
- On May 16, 2020
- 0 Comments