Why Cargo Insurance Policies Are the Best Ways to Protect Your Shipments
It’s vital for your business that your shipments arrive at their destination safely. While it’s true that carriers offer some amount of protection for your shipment, this coverage is very limited. To protect your business and your goods against unexpected events, purchasing cargo, or freight, insurance is crucial. Read on to learn more about the types of policies available, the limitations of carrier liability, and how Sheltered International can help you find the right insurance for your business and your peace of mind.
Understanding Carrier Liability and Declared Value
Warehouses and carriers will only be required to pay when loss or damage to your goods is proven to be their responsibility – and the burden of proof is usually on the shipper. That means that natural disasters, Acts of God, fire, and numerous other potential problems will leave you without financial protection. Likewise, all carriers have a limit of liability, resulting in a compensation far lower than the actual value of the goods. For example, an ocean carrier is limited to $500 per package.
Declared Value is a means of increasing this potential value; however, it still does not remove the burden of proof placed on the shipper and often still results in compensation less than the shipment value. Though often confused with cargo insurance, Declared Value is not the same and does not offer the same level of protection.
What Cargo Insurance Covers
Cargo insurance protects your shipment while it is in transit, even as it moves through different modes and carriers. While carrier liability is limited, cargo insurance offers door-to-door coverage and will pay for losses that are outside the carrier’s control. Additionally, the shipper will recuperate the full value of the cargo lost or damaged, as well as freight or other associated costs. Coverage is generally either All-Risk or Free of Particular Average (FPA); which of the two primary types of policies is chosen will determine the spectrum of situations covered.
All Risk Insurance is the most common type of policy and covers by far the broadest range of incidents. All events are covered unless explicitly excluded in the policy. Commonly excluded situations include nuclear events, strikes, and riots, as well as innate flaws in the goods like inadequate packaging or decay.
By contrast, FPA coverage, or ‘named-perils coverage’ is more limited and excludes most partial losses of shipments due to common causes such as rough handling or pilferage unless explicitly named in the policy. It also does not cover heavy weather, theft of an entire shipping package, improper stowage, and other more common occurrences. A full coverage comparison can be found at right, via Roanoke Trade. Often, FPA coverage is the only available option for shipments of used merchandise and bulk goods. It is also most common for marine insurance policies, as compared to those covering other methods of transport like air freight or trucks.
What Cargo Insurance Doesn’t Cover
Of course, regardless of the type of policy chosen, it is important to note that cargo insurance only protects physical loss or damage. Customs rejection, cargo abandonment, delays, and other events that could result in financial losses are not covered, even under an All Risk policy.
How Sheltered International Can Help
Cargo insurance is an undeniably important part in protecting your business. Through our shipment-management software SiShips, we offer consultations and support in finding a policy that works for you.