Trading globally involves risks, but having international cargo insurance is one of the best ways to offer peace of mind to both the buyer and the seller. Ascent Global Logistics wants your shipments to be monetarily safeguarded against physical loss or damage while in transit. If you have shipped many times before, or are new to the international shipping trade, it is worthwhile to review how insurance can help your company be protected.
Cargo Insurance Basics
Cargo Insurance was developed when cargo traders needed a way to protect their financial interests against loss, damage or theft while transporting various shipments. Today, freight forwarders and customs brokers like Ascent can help you arrange a contract between you and an insurance company to provide financial coverage to prepare for a loss, should it occur.
Basic cargo insurance can be offered on an ad-hoc basis or a contractual/annual basis. There are also various types of insurance coverage to consider:
- All Risk: This open policy offers the broadest form of coverage available and is recommended for all international shipments. It covers almost every type of physical loss or damage, with limitations for
- Improper packing
- Inherent vice
- Used goods
- Warehouse to Warehouse Coverage: Similar to All Risk, but is limited by the terms of the sales counteract and any transshipping that may occur
- Free of Particular Average (FPA): Good option for used goods, waste materials and scrap metal
- Covers partial and total losses for stranding, sinking, burning or collision of the vessel
- Covers only the losses specifically named
- General average is covered
- With Average (WA): Adds damage caused by exceptionally heavy weather to Free of Particular Average coverage
Insurance coverage should include the invoice value of the goods, the freight charges (ocean or air) and an additional 10 percent, which covers other costs that might be paid but lost in the claim.
Incoterms Cargo Insurance
Incoterms are a set of globally accepted rules regarding import and export responsibility transfer. You can learn more about the newest edition of the Incoterms here: Incoterms 2020 Explained. In terms of cargo insurance, Incoterms helps define when the transfer of risk happens from the seller to the buyer. When the responsibility of risk is in your hands, it is important to have your goods insured.
Only two Incoterms specifically address insurance: CIP and CIF.
- Carriage and Insurance Paid To (CIP): This Incoterm is used for any mode of transport. The seller must contract for insurance coverage against the buyer's risk of loss or damage to the goods from the point of delivery to at least the point of destination.
- Cost Insurance and Freight (CIF): This Incoterm applies to Sea and Inland Waterway Transport only and has the same contractual obligations as the CIP Incoterm.
All other Incoterms require the seller and the buyer to have a separate conversation about who will provide the insurance, based on the terms of sale. Regardless of the Incoterm utilized, insurance should always be discussed and provided by one of the parties to ensure the cargo is covered in the event of a loss, damage or General Average claim.
Individual cargo insurance claims have different timelines depending on the kind of loss or damage. A statute of limitations applies when filing a claim with carriers, and expeditious notification is the key. Please examine the cargo upon reception and notify the insurance provider with pictures and claim amount immediately after the realization of damage.
- Visible Loss / Damage: Immediate notification
- Non-Visible Loss / Damage: three (3) days from the delivery date
- Limitation of Action: Suit filed within one (1) year from the delivery date
Consider cargo insurance as something as important to your business as car insurance is to yourself. Would you drive your car without some type of insurance coverage? While having insurance does not prevent accidents, it lightens the potential financial burden in case of one.
Our team of global logistics experts is here to help.
If you have any questions about arranging cargo insurance for your shipments, please contact us today.