Cargo insurance is a form of insurance that covers the protection of all risks and losses for a freight during shipping from air, land, sea or rail. The types of coverages can vary from product to product as some insurances can cover deliveries from door-to-door while others cover from warehouse to warehouse. Hence, customers can choose from a number of available products to meet their needs at the moment.
Why you will need cargo insurance
In this day and age, some might be wondering why incur additional expenses by purchasing cargo insurance. All it does is to eat into profits. However, in times of uncertainty, when unexpected events are on rise, you do not want to sustain losses due to damaged or lost goods. As such, these are some compelling reasons to purchase cargo insurance:
According to BSI’s Supply Chain Risk Exposure Evaluation Network, one of the largest issues for the global shipping industry in 2015 was due to cargo theft which amounted to an estimated cost of $22.6 billion. One of the reasons that cargo theft occurs is due to criminal rings targeting goods in transit. Some collude with truck drivers to steal an entire container worth of goods or use fake identities to perform a heist on cargo.
Natural disasters such as earthquakes and tsunamis are good examples as they can affect both ships as well as ports. This may result in a loss of entire ships carrying a full load of containers. Other incidents could involve political tension or acts of terrorism whereby shipments could be delayed by on-going labour strikes or ports being targeted by terrorists.
On-going piracy acts have often led to financial losses for both importers and exporters as trade vessels were robbed of all of their goods.
Another factor that cannot be discounted is the number of goods damaged in transit. Damaged goods often result in losses as these goods are no longer fit for sale. The damages could be physical in nature or temperature-related and can be due to infestation, contamination or mishandling of goods.
Loss of Goods
Sometimes, in the event of bad weather, certain containers may be jettisoned to ensure the buoyancy of the ship. In addition, containers may also fall off if they are not secured properly.
Cargo insurance can help by mitigating losses due to the above mentioned reasons by ensuring that value of the merchandises being shipped are covered. This could reduce the burden for business owners during times of unfortunate events and ensure their businesses’ survival.
It is an international practice that losses due to accidents will be split equally among all parties. Hence, there may be times whereby you are required to pay a bond/ deposit for the release of your cargo, even if there are no losses or damages to your goods. In these events, the insurance company can assume responsibility and help to speed up the process to ensure the timely arrival of your cargo.
Depending on the terms defined in the contract, the exporter or importer may be held responsible for purchasing cargo insurance before the goods are sent over.
By law, most carriers are not held accountable for losses due to certain acts, such as Acts of God or terrorism. And in instances that they are, carriers often have limited liability. Hence, the financial losses are mainly shouldered by the exporter or importer, depending on the terms stated in the contract. As such, it is crucial to have cargo insurance to cover you when unfortunate events occur to provide a financial peace of mind.
Who needs cargo insurance protection?
All importers and exporters, especially if the goods are:
Who provides cargo insurance?
Rates may be higher for new or small business with little to no track records of shipping as insurance companies may view your company as a riskier business. However, private companies can often provide specialized insurance plans if you are shipping over any odd or unique cargo.
Application of cargo insurance with freight forwarder is relatively straight forward because they may provide the administrative processes, to ensure that you get the kind of coverage you require, as long as you hire them for their freight services.
Here at M&P International Freights, we pride ourselves in being a one-stop freight solution centre. We have assembled an elite team of professionals who are able to expedite all of your logistical and administrative needs such as the application of cargo insurance to ensure that you obtain the most cost-effective plan to cover all your goods.
Being situated in the world’s second busiest port, we have worked with an international clientele and are certain that we can provide you with world-class expertise to negotiate the best terms for your cargo insurances, hence, ensuring that you and your cargo are insured from head to toe.