Cargo Insurance
Transporting goods around the world is not without certain risks. And if you’ve ever shipped something internationally, you realize just how many things could go wrong while goods are in transit. That’s where cargo insurance comes in.
What is Cargo Insurance?
Marine cargo insurance is the most common method used to protect the value of your goods from physical damage, theft, or general average. Cargo insurance is not always automatically included for all shipped goods—this often varies by region. Instead, shippers or consignees can purchase policies in the insurance market from niche providers, large brokers, local agents, websites, and freight forwarders.
Why is Cargo Insurance Important?
You can’t always protect your freight from loss. In fact, the number of containers lost at sea each year is staggering. The good news is insuring your goods can protect the value of your goods against potential losses that can happen while in transit during air, ocean, and rail shipments. All too often, shippers misunderstand how liability works in the event of loss to their goods. And the various rules and regulations surrounding the topic can make things even more complicated. To clear up these confusions, this post will explain key cargo insurance information and how it can help mitigate your shipping risks.
Is Cargo Insurance a Requirement?
There is no requirement to buy cargo insurance. However, it is highly recommended so you can better protect your goods from exposure to risks—some that could be catastrophic. It’s important to weigh the insurance costs with the potential losses and collateral damage that could occur without insurance. Keep in mind that even if you prove an ocean carrier is legally liable, their limit of liability is $500.00 USD per package or customary shipping unit, or the actual value of the goods, whichever is less. And air freight carriers are only liable for 19 SDR per kilo (around $24.00 USD). As you can imagine, most freight has a much higher value than these rates. Therefore, without the proper insurance, you could lose a big part of the value of your cargo.
Who is Liable for Damage?
Some of the most common types of damage are outside a carrier’s liability, including fire, acts of God, strikes, accidents of the sea, insufficiency of packing, and more. Marine cargo insurance has unique and arcane aspects that must be considered by any policyholder seeking to protect its cargo shipments. In addition to basic coverage for loss or damage to cargo, there may be important insurance protection under other provisions of the marine insurance policy.
I hope you find this article informative and helpful. Let me know if you have any further questions!
Source: Conversation with Bing, 1/15/2024
(1) What Is Cargo Insurance and Why Is It Important? - C. H. Robinson.
(2) What Is Cargo Insurance and Why Is It Important? - C. H. Robinson.
(3) Marine Insurance Guide 2024 | Trade Finance Global.
(4) Understanding Marine Cargo Insurance Policies - Magazine.
