Whenever the cargo is in-transit, it is open to damages due to unpredictable events on the road, sea, or air. In case of such an event, the cargo is damaged, and the carrier’s liability will not be enough to compensate for the loss. Cargo/freight insurance safeguards these owners from bearing those losses.
According to a report by the World Shipping Council, between 2008 and 2019, an average of 1382 containers were lost at sea each year.
The typical year witnesses hundreds of containers lost at sea. On average, there are somewhere between 700 and 1000 sunken containers annually. For example, in the three years from 2017-2019, there was an average of 779 containers lost per year.
Meaning of Cargo insurance
Cargo insurance is essentially a risk management tool that protects the business against financial losses due to lost or damaged cargo. It covers up to the limit of an amount insured and is different from carrier liability. Opting for preventive measures before the cargo is damaged is a prerequisite for businesses that ship frequently. Cargo or freight insurance offers advantageous solutions to decrease financial liability when there is any damage to a shipment.
What are the Types of Cargo Insurance?
Broadly there are two types of insurance – land cargo and marine insurance.
Land Cargo Insurance
Land cargo insurance is for the cargo which uses the road as its mode of transportation (Inland movement) and is usually moved in trucks and other utility vehicles. This insurance offers coverage in incidence related to collision damages, theft, and other risks in freight shipping. This type of insurance is for the shipment of goods within the country’s geographical boundaries.
Marine Cargo Insurance
Marine cargo insurance is used for international shipment through sea routes and covers the air portion when it is part of that same journey. This type of insurance offers coverage on any damages due to bad weather conditions, loading and unloading of goods, piracies, and other possible losses involved while the cargo is in possession of the Airline and Shipping line.
How much does Cargo Insurance Cost?
Generally, the cost of cargo container insurance is approximately 0.15% of the total value of goods. This is as per the commercial invoice. However, this cost may vary across insurance companies and their offerings.
What are the Benefits of Cargo Insurance?
Cargo insurance covers the business’ liability when it comes to any unforeseen events. To safeguard shipments, this insurance offers a certain amount of the cargo’s value as claim money and protects the carrier to the extent possible.
Overall, freight insurance provides the following other benefits to businesses:
Offers protection to the cash flow of a business from unfavorable obstruction of shipment.
Freight insurance coverage help secure a profit even after a loss of cargo.
A small investment in cargo insurance saves from forfeiture of greater investment related to the overall business.
Opting for cargo insurance is necessary for businesses dealing with fragile goods.
Insurance ensures that a business’s profit generation is nearly constant, even after damage or loss of shipments. Based on a business’s nature and the products the business deals with, owners must choose the insurance policy mindfully. Cargo insurance is an astounding tool for managing liabilities as it involves high-reward coverage to share financial liabilities of unanticipated damages.
Contributed by :- G V S K Vedant, Sales, Hyderabad, 20Cube Logistics.