Cargo Coverage: Protecting Your Goods in Transit

Shipping, whether international or domestic, can be tough for any business. Whether you’re sending goods by air, ocean, land, or a mix of all three, protecting your cargo from risks is crucial. A comprehensive cargo coverage is a key element for managing these risks, with various options available to fit different business needs.

This article dives into the details of cargo insurance to help you understand what it covers and avoid the financial losses that come with inadequate cargo coverage.

What is Cargo Insurance?

Cargo insurance is a type of insurance policy that financially protects the value of goods against loss or damage during transportation.

Cargo coverage applies to shipments traveling by air, land, or sea. Without cargo insurance, the financial burden of damaged or lost goods falls on the owner, potentially creating significant losses.

What Does Cargo Insurance Protect?

Cargo coverage policies can cover a range of perils, depending on the chosen policy type. Some of the most common covered events include:

Physical damage

This covers damage caused by various events like collisions, weather, fire, theft, pilferage (small-scale theft), or inherent vice (defects within the goods themselves).

Total loss

If your entire shipment disappears during transit, cargo insurance can reimburse you for its value.

General average

When sacrifices are made for the safety of the ship or cargo during a voyage (like throwing cargo overboard during a storm), you might be required to contribute. Cargo insurance can cover your share of these contributions.

Policy-dependent coverage

Depending on your chosen policy, cargo insurance can also cover spoilage, delay, and war or civil unrest.

Marine cargo insurance-specific coverage

While cargo insurance encompasses various types of coverage, marine cargo insurance specifically focuses on goods traveling by sea. A specific risk would be damages caused by seawater leakage or other liquids entering the container or hold.

Specific cargo coverage details can vary depending on your chosen policy and its exclusions. It’s crucial to carefully review the terms and conditions before purchasing cargo insurance to ensure it aligns with your specific needs and potential risks.

Reach out and contact our TRS-certified agents to learn more about specific cargo coverage policies.

What are the Different Types of Cargo Insurance?

There are several types of cargo insurance coverage available, each offering varying levels of protection and catering to different needs. Here’s a breakdown of the most common types:

All Risks:
This offers the most comprehensive coverage, protecting against all physical loss or damage to your cargo except for those specifically excluded in the policy. It's ideal for high-value goods or shipments facing significant risks.
Named Perils:
This covers only the specific risks listed in the policy, typically including events like fire, collision, theft, and sinking. It's a more affordable option but may not be sufficient for all situations.
Free on Board (FOB):
Under this, the seller covers the cost of cargo insurance until the goods are loaded onto the vessel or other transport. The buyer then assumes responsibility for further insurance.
Cost, Insurance, and Freight (CIF):
The seller covers the cost of cargo insurance, freight charges, and the value of the goods themselves. This simplifies the process for the buyer but increases the seller's costs.

Who Needs Cargo Insurance Coverage?

Cargo insurance coverage is relevant for a wide range of individuals and businesses involved in the transportation of goods, both domestically and internationally.

Here are some examples of who might need it:

Businesses

Any company that offers transport and cargo services should consider getting ample cargo coverage.

1. Shippers

Any business sending goods to customers or other locations, regardless of quantity or value.

2. Freight forwarders

A freight forwarder manages the logistics of moving goods, often working with various modes of transportation like trucks, trains, and planes. Freight brokers, on the other hand, may look into contingent cargo coverage for protection.

3. Importers

Companies receiving goods from abroad, particularly if dealing with high-value goods, commodities or shipments susceptible to specific risks.

4. Manufacturers

Companies that transport finished products or raw materials, either domestically or internationally.

5. E-commerce businesses

Online retailers selling products that need to be shipped to customers.

Individuals

Online retailers selling products that need to be shipped to customers.

1. People importing personal belongings

Individuals moving overseas or bringing valuable items back from travel.

2. Artists and collectors

Those transporting valuable artwork, antiques, or other collectibles.

3. Small businesses

Even small businesses shipping products online or attending trade shows can benefit from cargo coverage.

What is the Difference Between Cargo Insurance and Inland Marine Insurance?

Both cargo insurance and inland marine insurance cover goods in transit. However, inland marine insurance applies to shipments within a single country, while cargo insurance typically covers international shipments.

Covered risks

Cargo coverage include broader perils like collisions, weather events, theft, spoilage (depending on policy), and even general average (contributions for vessel safety).

Inland marine insurance covers similar risks as cargo insurance but might have specific coverage like exhibition, fine art, motor truck cargo insurance, and builder’s risk coverage.

Who may need it

Cargo insurance are usually geared towards businesses involved in importing and exporting, such as manufacturers, importers, freight forwarders, and e-commerce sellers.

On the other hand, inland marine insurance may have more additional benefits for motor carriers transporting goods domestically, including manufacturers, distributors, retailers, and even individuals moving high-value belongings.

Does Cargo Insurance Have a Coverage Limit?

Yes, all cargo insurance policies have a coverage limit, which is the maximum amount the insurer will pay for a claim. This limit should be carefully considered when choosing a policy to ensure it adequately covers the potential value of your goods.

Several factors determine the coverage limit of a cargo insurance policy:

Declared value of your goods:
The higher the declared value, the higher the coverage limit typically needed.
Frequency and volume of shipments:
Businesses that transport regularly or large quantities may require a higher limit compared to occasional shippers.
Type of goods:
Specific risks associated with certain goods (e.g., electronics, perishables) might necessitate specialized coverage with adjusted limits.
Risk tolerance:
Carefully assess your acceptable level of financial exposure in case of loss or damage.

It can be confusing finding out exactly what coverage you may need to protect your business from claims. This is where Commercial Trucking Insurance can step in.

We provide information on insurance policies for freight forwarders, shippers, and other businesses in the transport industry. We have access with multiple carriers to help you get competitive rates. Get a free insurance quote from our agents and gain access to some of the best deals in the industr.