When shipping internationally, cargo passes through many more hands than it does when shipped domestically. The longer the trip, the greater the risk of damage, and while insurance is not mandatory, damaged products can cause unexpected costs for shippers.
Unpredictable events like damage, loss, and delay to shipments can hurt shippers’ bottom line and reputation if there is no cargo insurance. Acquiring cargo insurance can protect against all physical loss, risks, or damage from any external cause during shipping.
Just like other insurances, however, there are different types of cargo insurance. For shippers, deciding on the type and how much can be a time-consuming and challenging ordeal. Just imagine if a claim file needs to be done – documentation, paperwork, filing, and monitoring—no wonder some shippers shy away from investing in cargo insurance.
But, the benefits of having cargo insurance far outweigh not having it. In many cases, shippers’ supply chain partners often provide insurance coverage at a reasonable cost and, in some instances, will also handle the claims process if needed.
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What Is Cargo Insurance?
Cargo insurance is a type of insurance that protects against physical loss or damage of goods carried by vessel, road, rail, aircraft, or post. It protects those who have an insurable or financial interest in the cargo.
All carriers must have carrier liability (a minimum amount of insurance). However, this liability provides limited coverage. Instead, shippers or consignees can purchase policies from niche providers, brokers, agents, and freight forwarders. There are different types of coverage ranging from all risks to named perils, with common extensions and customized wordings.
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Types of Cargo Insurance
Land Cargo
Land cargo insurance covers land transportation, such as trucking. This insurance is domestic and operates within the boundaries of the nation.
Marine Cargo
Marine cargo insurance is the most common type and is used to protect the value of goods from physical damage, theft, or general average. It covers the cost of damage to goods imported or exported to or from one country as well within the national boundaries through any means of transport.
- Open cover cargo policies are used when insurance holder opts for coverage against various consignments.
- Specific cargo policies ensure particular consignments.
- Contingency insurance policies are used when the customer, not the seller, is responsible for insuring the goods against loss or damage.
Are You Required to Have Cargo Insurance?
It is not a requirement to purchase cargo insurance. However, it is crucial to weigh the insurance costs with potential losses and collateral damage without insurance. Without insurance, if a shipment is damaged and proved an ocean carrier is legally liable, a shipper could lose a big part of the value of cargo without the proper insurance.
What Is General Average?
When General Average is declared, not only are ocean carriers not liable for loss or damage to cargo, but every cargo owner is responsible, in part, for the shipment of others. In other words, all cargo owners are held accountable to share in the loss.
If an ocean carrier declares general average, the shippers’ cargo will not be released until the salvage security and deposit are calculated. This process can take weeks and be quite costly. However, if the shipment is insured, the insurance company will provide the guarantee and contribution required for the loss. The liability for General Average makes purchasing cargo insurance an important business decision.
Benefits of Cargo Insurance
Cargo Insurance provides coverage shipment against damage or loss or the result of external factors during a shipment’s journey. With Cargo Insurance, shippers can also protect their shipment while on land but still en route to the buyer.
The following aspects are covered under the benefits of cargo insurance:
- All Risk Coverage protects against damage or loss due to external factors such as inappropriate packing, infestation, or cargo abandonment.
- General Average Coverage covers only some loss that happened in shipment. It requires all the other cargo holding owners on the ship to pay compensation.
- Warehouse to Warehouse Coverage is applicable when the shipment is unloaded from the ship, and it is transported to the customer’s warehouse.
Deciding the right insurance acquire, documentation, paperwork, and filing are daunting tasks. As part of Alba Wheels Up’s comprehensive approach to cargo freight services, the company handles all insurance-related documentation, payment of premiums, regular reporting and can assist in claims settlement processing. Thus, eliminating the need for shipment-by-shipment declarations and giving shippers the peace of mind that insurance coverage obtained is adequate to cover all cargo needs.
Risks of Shipping without Cargo Insurance
There are several risks if a shipper does not have adequate cargo insurance. Accidents happen. For example, equipment used for handling and unloading such as cranes and forklifts presents multiple cargo risks, particularly to fragile or special care products. What if a shipper’s shipment is transported via a container vessel that capsizes? How about the third-party warehouse that puts products at risk by not properly storing or handling goods? While shippers of uninsured freight can depend to a certain extent on carrier insurance for accident coverage, identifying the precise details of when a shipment was compromised becomes challenging.
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Cargo Insurances Tips and Best Practices
Many companies offer cargo insurance. Determining the right one for your business may take some additional research. Higher insurance provider rates do not always guarantee the best coverage. The right cargo insurance provider should provide a variety of flexible policies based on your needs. Find a provider who can cover all of your standard commodities against physical loss, damage, or financial exposure while your goods are in transit.
Alba Wheels Up provides several cargo insurance solutions and services, including:
- Full Liability Coverage which covers the full cost of imported goods including delivery, total duty, terminal fees, and an allowance for lost revenue
- Door-To-Door Insurance Options that include coverage anytime and anywhere
- Local, Responsive Representation can be critical when dealing with time-sensitive transactions and when trying to recoup costs quickly
- Alba Wheels Up works with the shipper and file claims. Shippers have visibility throughout the entire process automatically
Curious to know more about Alba Wheels Up’s insurance services? Contact us to answer your questions!
Should You Get Cargo Insurance?
Convinced yet? Cargo insurance should be included anytime a shipper is organizing a shipment. Global risks continue to rise, and no matter how careful a carrier is, stuff happens. Furthermore, carriers do not guarantee the safe delivery of cargo. There is always the chance that cargo will be damaged during the transportation process. Additionally, the carrier may not be responsible for the cargo loss or damage by the terms of the contract or as a matter of law. Even if the shipper can prove that the transporter was at fault, the shipper may still not get the maximum value of your goods. Carriers strictly limit their liability.
There are numerous cargo insurance types, but perhaps the best place to start is with the shipper’s supply chain partners. Many forwarders, for example, will offer cargo insurance or recommend someone who does. Those shippers who want peace of mind find a forwarder such as Alba Wheels Up that will handle any necessary claims process while keeping the shipper notified in real-time throughout the process.
