What is Cargo Insurance?
Cargo insurance, or marine cargo insurance, is a type of property damage insurance that protects your physical assets. While All-Risk Property Insurance covers assets located on business premises, cargo insurance is designed to cover assets while they are moving during local or international transit.
The policy can also provide corresponding coverage when your goods are temporarily stored in transit warehouses while awaiting transshipment to their final destination.
How Does Cargo Insurance Work?
Cargo insurance covers specific types of events that may occur to your goods during air, sea, or land transport. Cargo insurance will indemnify the value of the goods damaged during transit, providing compensation for the replacement cost of the damaged cargo. This helps you reduce losses and mitigate the impact on your supply chain.
Cargo insurance is categorized into All-Risk and Basic Coverage. The Institute Cargo Clauses A (ICCA) is the All-Risk coverage, while Basic Coverage includes ICCB and ICCC (Institute Cargo Clauses B and C). ICCA (All-Risk) provides a much broader scope of protection.
What Does Cargo Insurance Cover?
The scope of coverage for goods during transit is very broad. Simply put, the policy can cover damage or loss to the cargo during transportation due to circumstances such as theft, force majeure, severe weather, collision, fire, loading/unloading, and more.
However, it is important to note that cargo insurance will not cover losses resulting from inadequate packaging, improper storage, or delay in delivery of the goods during transit.
How Much Does Cargo Insurance Cost?
The premium rate depends on the value of the goods being shipped, the type of cargo, the mode of transport, the country of destination or origin, the past loss record, and the scope of coverage. This type of insurance can be purchased on a per-shipment basis or for a defined policy period, typically one year.
When Should You Purchase Cargo Insurance?
There are two key elements to consider.
First, it is crucial to know that while the goods are the responsibility of the carrier or freight forwarder, their contractual liability is usually very limited. Their liability is often capped at a certain amount per kilogram of transported cargo or per package.
Second, it is important to understand the Incoterms (International Commercial Terms) mentioned in the purchase/sales contract. Some Incoterms transfer the risk from the seller to the buyer at a specified point in the transport journey.
Therefore, the decision on when to purchase cargo insurance should be based on the specific contract and the responsibilities agreed upon within that contract.
For more information regarding cargo insurance, please contact our professional team.
