Getting cargo insurance is a reasonable consideration for businesses that import and export and individuals that ship valuable items. Cargo insurance is a type of insurance that protects shipments during transportation against loss or damage. Despite its importance, many people do not know what it is or when they need it.
Hence, this article will explore what cargo insurance is, when you need it, its importance, and its types, such as progressive, commercial, and motor truck cargo.
Cargo Insurance
Cargo insurance is a type of insurance that protects the value of goods in transit from physical damage, theft, or general damage. Shippers and consignees can purchase it from specialized vendors, sizable brokers, neighborhood agents, websites, and freight forwarders. It is not a requirement for all shipped goods.
This kind of insurance is important because transporting goods around the world comes with certain risks that can cause damage or loss to shipments. Hence, insuring cargo ensures that the value of goods is protected against potential losses that may occur during air, sea, or land transportation.
Types of Cargo Insurance
There are two types of freight insurance: motor truck and marine cargo insurance.
Motor Truck Cargo
This insurance covers goods transported on land via utility vehicles or trucks and covers some risks related to shipping freight on lands, such as collision damage or theft.
Marine Cargo
This insurance ensures ocean and air freight and is mainly used for international shipping. It covers damage due to loading/unloading, weather conditions, hazards, and other risks faced by ships and airplanes.
Benefits of Getting Cargo Insurance
- It helps minimize financial loss in the event of damage or loss of shipment.
- Professional freight insurance services offer an efficient claims process, ensuring businesses can recover their losses quickly and smoothly.
- Freight insurance offers different types of coverage, such as physical loss or damage, stock throughput risks, rejection insurance, exhibition risks, shipment legal liability, professional liability, political risk, and supply chain/trade disruption
- Freight insurance is essential for businesses dealing with fragile goods, as it helps protect their investment and profits.
- Getting freight insurance helps ensure that a business’s profit generation remains relatively constant, even after damage or loss of shipments.
- Cargo insurance providers can help businesses customize insurance programs based on their specific needs
Commercial Cargo Insurance
Commercial cargo insurance is an insurance product that provides coverage on the freight or commodity hauled by a for-hire trucker. It covers liability for lost or damaged cargo due to causes like fire, collision, or striking a load.
Cargo insurance is part of commercial truck insurance, which is coverage that protects trucking businesses, businesses that use trucks, or independent truck drivers. Commercial cargo insurance aims to provide financial and legal protection from bodily injury and property damage, as well as coverage for specialized goods and trucking equipment.
Furthermore, commercial cargo insurance only applies when individuals listed on the insurance policy use the vehicle for business purposes, and it is important for long-term carriers to safeguard the items they transport.
Certain types of cargo are excluded from commercial truck insurance policies. These include valuables such as money and jewelry; drugs such as alcohol, tobacco, and pharmaceuticals; contraband; live animals; property in another carrier’s possession; and explosive materials.
Progressive Cargo Insurance
Progressive cargo insurance is a type of motor truck cargo insurance that provides coverage for the freight or commodity hauled by a for-hire trucker. It covers your liability for lost or damaged cargo due to causes like fire, collision, or striking a load. It is designed to protect the owner of the cargo as well as the carrier, and it is recommended for long-haul carriers and other motor carriers, including owner-operators.
Progressive cargo insurance is only available for for-hire trucking, such as:
- Dump truck
- Tractor
- Box trucks
- Cement mixers
- Dually pick-ups
- Flatbeds
- Car haulers.
Some of the benefits of using progressive cargo insurance include the following:
- Large selection of truck policies covering owner-operators, motor carriers, and private carriers
- Discounts for using electronic logging devices (ELDs), business experience, CDL certification, paying in full, signing up for EFT/autopay, and bundling coverage with personal vehicle insurance.
- Expert support for commercial truck customers, including specialized heavy truck claims service, free state and federal insurance filings, and 24/7 claims filing
- Progressive cargo insurance has a strong national reputation
In addition to standard policies, Progressive cargo insurance offers customized truck coverage, including general liability, motor truck cargo, trailer interchange, and non-trucking liability.
Motor Truck Cargo Insurance
Motor truck cargo insurance is a type of insurance that provides coverage for the freight or commodity hauled by a for-hire trucker. It covers liability for lost or damaged cargo due to causes like fire, collision, or striking a load.
Here are some key points to consider regarding motor truck cargo insurance:
- Many risk managers require insurance for truckers to insure their shipments.
- It can protect you from a variety of losses. Beyond coverage for the typical perils you face on the road, policies may also cover you for losses due to mechanical reefer breakdown, debris removal, and freight charges you’ve earned but can’t collect after a covered loss.
- When you select this insurance type, you must select a limit for your coverage. This limit determines how much your insurance company will pay for damaged or destroyed goods.
- Freight insurance policies are written based on the actual commodities being hauled and are very specific. Insurance premiums and deductibles vary depending on the commodities hauled.
- Choosing a higher deductible is an easy way to lower the price of your insurance, but be sure you choose a deductible that you can afford to pay out of pocket at any time.
Cargo Insurance Cost
The cost of cargo insurance can vary depending on several factors, including the value of the goods being shipped, the shipping route, and the insurance company’s own rates and policies. Generally, cargo insurance will cost between 1% and 2% of the value of the goods being shipped.
For example, if you ship goods worth $10,000, you can expect to pay between $100 and $200 for insurance.
Then, the cost of cargo insurance premiums is calculated based on several factors, including the type of commodity being transported, the limits of your shipment policy, and your loss history. Prior losses will most likely be factored into your premium. Also, the type of commodity being transported is a major factor in determining how much your insurance will cost.
The cost of cargo insurance also depends on what the policy covers. Some common coverages that a cargo policy might include are pollution liability, debris removal, sue, labor coverage, earned freight coverage, infidelity/dishonesty coverage, loading and unloading coverage, and reefer breakdown. Be proactive with your agent, and make sure you are covering your risk exposures.
What Is Meant by Freight Insurance?
Freight insurance is a type of insurance that protects against financial loss due to damage or loss of shipment during transit. It is important to have freight insurance because transporting goods worldwide is not without certain risks, and many things could go wrong while goods are in transit.
The primary benefit of freight insurance is that it minimizes financial loss even if the shipment is damaged or lost. Hence, providing peace of mind as the goods leave the warehouse.
What Does Cargo Insurance Cover?
Cargo insurance protects you from financial loss due to damaged or lost shipments. It covers various causes of loss, including natural disasters, vehicle accidents, cargo abandonment, customs rejection, acts of war, and piracy. The coverage can be categorized into land and marine insurance, with marine also covering air shipments.
Freight insurance covers the following:
- Theft, collision damages, and other risks involved in land freight shipping.
- Ocean and air freight mainly used for international shipping.
- It covers damage due to loading/unloading, weather conditions, piracies, and other risks faced by ships and airplanes.
Freight insurance does not cover damage due to inadequate packaging, flawed products, specific hazardous materials, customs rejection, or highly valuable or fragile products.
It is essential to understand the exclusions and inclusions of your insurance policy and not hesitate to ask questions. Additionally, ensure that your sales contract is well-drafted and covers property rights, possible force majeure situations, and breach of contract.
What Type of Insurance Is Cargo?
Cargo insurance is an insurance policy specifically designed to protect goods in any mode of transportation, whether air, sea, land, or rail. It has different types, including:
- Shipper’s interest insurance: This first-party coverage option provides the owner with more excellent protection if freight is lost, damaged, or stolen. Shippers can add this coverage without requiring establishment or acceptance by the carrier. It is an all-risk insurance policy, meaning it covers losses from external causes unless explicitly omitted in the policy.
- Land cargo insurance: This insurance covers goods moved via land transportation, such as by trucks and small utility vehicles. It covers theft, collision damages, and other risks involved in land freight shipping. It is also typically used for domestic cargo since its scope is within a country’s boundaries.
- Marine cargo insurance: This type of insurance covers ocean and air freight and is mainly used for international shipping. It covers damage due to loading/unloading, weather conditions, piracies, and other risks faced by ships and airplanes.
- Contingency cargo insurance: Freight brokers carry this insurance to cover gaps in the underlying motor carrier’s insurance when damage happens. It only applies if the motor carrier fails to cover cargo damage or loss.
- Specific cargo policy: There are times when it makes sense to purchase additional shipment coverage, hence a specific freight insurance policy. When the insurance is unavailable, or a motor carrier’s underlying insurance is less than the cargo’s worth, this insurance is arranged. The customer does not want to risk loss or damage.
Is Cargo Insurance Worth It?
Cargo insurance is worth it because it protects against cargo damages during transit. Also, it can restore financial stability in the event of any mishap during the voyage. It can also prevent a lawsuit if a carrier ghosts you on a claim. Generally, it is better to have it and not need it than the other way around.
An insurance policy that defines what the items are insured from and covers the time is worth it. It should work both during loading and unloading.
Are There Two Types of Cargo Insurance Policies?
Yes, there are two types of freight insurance policies: land and marine insurance.
Land cargo insurance covers cargo that is shipped or transported through land. It includes shipments boarded on trucks and other vehicles. This policy covers collision risk, damage risk, theft risk, and other risk factors. It is commonly used for domestic cargo since its scope is only within a country’s boundaries.
Marine cargo insurance covers shipments transported by sea and air freight. This policy applies to international transportation and has a broader boundary. It covers damages caused while loading or unloading, bad weather, piracy, and other relevant risk factors while the cargo is in the possession of the airline or shipping line.
Can I Purchase Cargo Insurance?
Yes, you can purchase freight insurance to protect your shipment in transit. The insurance is not automatically included for all shipped goods, so shippers or consignees can purchase policies in the insurance market from niche providers, large brokers, local agents, websites, and freight forwarders.
Who Is Responsible for Buying Cargo Insurance?
The responsibility for buying insurance for goods depends on the terms of sale agreed upon between the buyer and seller. Generally, the seller will want to arrange coverage that will cover their interest until they have delivered the goods to the place named in the sale contract. The buyer will want to arrange coverage from that point forward, including during any storage awaiting pickup by the carrier.
If the buyer is not sure about whether or not they will have proper recourse against the seller for loss or damage during their responsibility, they may wish to review these doubts with their insurer and arrange additional coverage in the form of “contingency” insurance.
If the shipment is on CIP or CIF terms, the seller must provide insurance for the buyer’s benefit. Also, if the buyer has not been paid for the goods at the time of shipment and the terms they sell on make them responsible for loss or damage during any phase of transit, they would be well advised to ensure this exposure to financial loss.
Related Articles
- Commercial Truck Insurance In 2023: How It Works
- HOW MUCH IS COMMERCIAL INSURANCE? For Trucks, Cars & Ubers
- CARGO MANAGEMENT SYSTEM: Definition, Features, and 2023 Pricing
References
