Cargo Insurance offers peace of mind to anyone who buys or sells goods by protecting businesses from financial loss while cargo is shipped. Generally, industries such as manufacturing, import/exports, and freight require cargo insurance to operate successfully. Even small businesses like retail startups can benefit from insuring their property during transit. And yet, many people still wonder if it is actually necessary or just another expense.
We’re here to make the case for cargo insurance because, as a second-generation family-owned customs brokerage, we’ve seen cargo insurance play a critical role in international and domestic shipments for decades. Furthermore, sometimes companies choose to rely on another party’s insurance coverage instead of purchasing their own policy. While this might save cash in the short-term, forgoing cargo insurance could have significant long-term financial consequences.
Here are some of the reasons why we advocate for cargo insurance with our clients:
- The Ability to Choose the Best Policy
Businesses who rely on someone else’s coverage (like the buyer or seller) don’t have the opportunity to select the plan with the ideal balance of coverage relative to cost. By purchasing insurance individually, merchants and shippers can familiarize themselves with their insurance policy, including any exemptions, restrictions, or warranties. This contributes to more personalized coverage and even greater confidence in your policy.
- You Get to Call the Shots
Whoever purchases the insurance for a shipment of cargo is the policyholder, which means the policy exists to protect them. If a shipper or consignee does not have a policy of their own, they are often at a disadvantage when filing claims or communicating with the insurance provider. In addition, the policyholder has more control over the condition of the transaction and can confirm that the insurer checks out. In other words, the policyholder can ensure that everyone is playing fair.
- Dictate the Terms of Sale
Often a sales contract will stipulate who has the responsibility to purchase liability insurance, so companies are often obligated to buy individual coverage. Also, a sales contract will generally specify ownership conditions for the cargo, including when the cargo changes legal ownership. Any policy which covers cargo only when under the policyholder’s ownership will not benefit the other party. That is to say, relying on another party’s insurance might not serve you at all once the goods change hands.
- Covered Perils
Today’s carriers have better safety procedures and protocols than ever before, but they can’t control everything. Cargo Insurance protects one’s property in the event of unforeseen events and natural disasters. Insurance policies generally protect against adverse events such as fire, theft, jettisons, battering, and perils of the sea. Like drivers needing car insurance to cover accidents, cargo insurance is a must-have for anyone sending or receiving goods domestically or internationally.
- Limited Liability for Carriers
Carriers such as airlines, railroads, or shipowners tend to have relatively limited liability in the case of lost or damaged cargo. Even if they are found at fault for an accident, the payout rarely covers the cost of the goods. On the other hand, a cargo insurance policy typically covers the merchandise’s invoice price, freight charges, and a percentage for profit. Rather than having to eat the cost of their lost property and profits, insured businesses are largely unaffected and can still move forward following a loss.
- General Average Protection
If a vessel encounters trouble, and the crew needs to jettison a portion of goods to save the ship, all cargo owners share the “average” or partial loss. Therefore, having property on board any vessel carries some risk due to the possibility of a General Average declaration. Cargo insurance can cover losses due to General Average, which protects the shipper’s bottom line.
Cargo Insurance is vital when sending or receiving goods. Why? Because peace of mind is invaluable. The financial protections provided by a good policy far outweigh the upfront cost of purchasing insurance. Not only is insurance often contractually required by the sales agreement, but it could just make the difference between a potentially catastrophic financial loss and filing a simple insurance claim. Purchasing cargo insurance gives companies greater control over their cargo and a direct link to their property’s protection.
To learn more about cargo insurance for your business, reach out to us today.