What is Cargo Insurance and does my shipment really need it?

In this post, we would like to take a deeper look at Cargo Insurance. Specifically, what is cargo insurance and if you as an importer/exporter or freight forwarder really need it for your shipments. We also highly recommend that you read our post entitled How much Cargo Insurance cost? first to continue with this topic. 

What is Cargo Insurance or Freight Insurance?

In a few words, Cargo insurance is a type of insurance that compensates a buyer or seller of goods against cargo damage or loss of cargo.

 

Despite the industry has been talking about it for years, there is still a feeling that insurance is unnecessary. Because it is an intangible benefit, one that can only be tested under adverse circumstances. 

 

As we mention in another post legally, all carriers must carry a minimum amount of insurance, known as carrier liability. But as we explain it provides very limited coverage and importers/exporters can request cargo insurance to protect their goods from loss, damage, or theft while in transit.

What could happen to my cargo?

As you may know, cargo is packed inside a CTU(Cargo Transport Unit) that goes through various motions while it is in transit ( road, rail or sea), we are going to explain these movements first to understand. 

 

Movement by Road or Rail: There are several forces acting on the cargo during transport caused by the movement of the truck or the rail wagon, the gradient of the road, in the second case vibration of the rails, the speed of movement or unexpected stops. These forces can cause the cargo to tip, slide, and move may cause damages, sliding and wandering of cargo which could seriously damage the merchandise. 

You have to be assured that the cargo must be secured sufficiently to withstand all these forces en route.

 

Movement by Air: This is less risky because cargo does not suffer a lot of movement only in normal conditions when the plane lands, takes off and sometimes when there is turbulence, and because it spends less time to arrive at its final destination. But These forces can cause the cargo to slide, and move. 

 

Movement by Sea: This is the worst movement a shipment may suffer because it can be moved in different ways. Each of these movements causes a different type of stress on the shipment and there is a high chance of it damaging the container and even coming out of the container.

In terms of rolling, ships have been recorded with rolling movements of up to 40 degrees on the rough seas and, imagine your cargo is moving inside the container with this!  

When you imagine these movements, you can imagine the stresses that the cargo inside the container suffers especially if it is not packed and secured properly. 

 

Your cargo may suffer a lot of movements while it is in transit| Photo taken from Freepik

So, do I really need cargo insurance ?

You may wonder why we are talking about cargo damage instead of whether you really need cargo insurance? Because of claim statistics, cargo damage is the leading cause of cargo claims.

 

So, did you ever think about all of the above mentioned facts? Maybe these facts may not be at the top of your priorities because more often than not, your focus is on the business, the focus is on getting the goods to the buyer in time. 

The fact is that ANYTHING can happen to your cargo while it is in transit in short or long distances, including being damaged or stolen whether you like it or not. 

 

On the other hand, the buyer and seller have to have a correct interpretation of the Incoterms chosen could lull you into thinking that the other person has insured the goods or it is the other person’s responsibility to insure the goods, so as a freight forwarder you have to advise your customer to have all this clear. 

 

If your cargo is not covered sufficiently by insurance and cargo damage or total loss happens due to any of the above movements, you as the buyer or seller will perceive losses. How would that affect your bottom line?

 

So,the answer to our question is YES, CERTAINLY YOU REALLY NEED CARGO INSURANCE. In your own interest and the interest of your business, you need to ensure that your cargo is sufficiently covered by cargo insurance.

The business of packing and securing the goods is left to someone else (3pl) to handle, that’s why CARGO CARE SERVICES is here to help. We can assist you with both matters; Cargo Insurance with ALL RISK coverage, door to door, nil deductible and a Properly Packing and Crating of your goods before shipping it.  

 

Also if you want help to know which cargo insurance is for you and fully understand your actual policy and make sure you are protected. 

So do not hesitate and contact us today ! 

 

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