What is Cargo Insurance? Few Basics Things You Need to Know

CitizenShipper CitizenShipper · Updated February 23, 2024

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You want your cargo to have as much insured as possible. You don’t want to end up receiving your goods damaged and not being able to get the money in an amount that would actually cover the occurred damages. Every carrier has carrier liability coverage. Yet, carrier liability coverage is very limited. Typically, it is less than the total value of the goods you are shipping. This implies that if the damage to the goods is greater than the amount of money your cargo is protected for, the carrier will not cover the difference.

This is why it is important to know what the carrier liability does not cover. Carrier liability does not cover the acts from the shipper that can cause damage to the packages, such as if the cargo isn’t loaded up properly. Furthermore, if the cargo you are shipping is not adequately protected from possible fractures (think of packaging foam and bubble bags), the carrier liability coverage will not insure the damages. Also, the carrier is not liable for natural disasters such as hurricanes or hail. As each carrier decides for themselves what their liability limit will be, the best thing would be to inquire about this with the specific carrier before contracting them. Proving that the carrier exclusively is liable for the damage of the goods being shipped and, hence, getting a full cover for it would be a very difficult thing to do, and for this reason, you should consider cargo insurance.

Here is a quick explanation of the basics of cargo insurance.

What is Cargo Insurance?

Cargo insurance protects your goods from being damaged or lost while being shipped. Unlike carrier liability, it is based on the value of the goods you are shipping. You will pay additionally for it. Even though there is no requirement for you to purchase cargo insurance, it is very recommended to do so.

Land Cargo Insurance and Marine Cargo Insurance

Land Cargo Insurance will cover all the transportation by land, such as via trucks or utility vehicles. This kind of insurance will protect your goods from theft and damages within the United States. Hence, bear in mind that land cargo insurance does not cover international claims.

Marine Cargo Insurance is used both for sea and air shipping. Unlike land cargo insurance, marine cargo insurance applies to international exports and imports. It also covers possible damages from bad weather and piracy (arrr!). Marine cargo insurance can be renewable or permanent. You should opt for renewable insurance if you do not ship regularly and a permanent one if you are a frequent shipper. Permanent marine cargo insurance comes at a greater price, but you will not need to think about it anymore once you buy it.

Types of Cargo Insurance Policies

No matter which type of cargo insurance you opt for, chances are that you will not be 100% covered. Nonetheless, don’t let that stop you from making the best choice for insuring your goods. Think about any possible ways your cargo can be damaged, and get a policy accordingly. Before making your decision, be sure to check all the details (small letters!) of the policy that is offered to you, and discuss any concerns you have with your policy provider. Ask all the questions. Clear all the doubts.
There are different types of cargo insurance policies that you should consider in regards to what you need.

1. All Risk

This is the most diverse insurance, and as such, it will come at a high price. You will have greater peace of mind, as your goods will be protected from damages of an external cause and from physical loss. The cargo is insured based on its value. Still, there’s a variety of situations that this type of insurance does not cover. This ranges from damage to cargo as a result of negligence, inherent vice, customs rejection, cargo abandonment, war (strikes, riots), to earthquakes, pollution, and infestation.

2. Named Perils Policy

This type of policy is your best choice if you are an experienced shipper, and know from which particular situation your goods can be damaged. This implies that your cargo will be covered only from the perils that are explicitly named in your policy. Hence, this type of policy is more limited. Named perils policy can include coverage of such events as theft, vessel sinking or collision, fire, bad weather conditions, earthquake, and such.

3. General Average

Your cargo can be shipped with other cargo on a vessel. If unforeseen issues cause losses at the sea, and your cargo does not suffer any loss, you will still need to cover a piece of loss the other cargo owners have suffered. This is called the general average. Since the general average is not covered by the other mentioned policies, you should consider specifically getting this one. Even though this insurance will cost you more, this way you will prevent losing a lot of time, and even more money trying to resolve a general average without having coverage. Save yourself from unnecessary headaches.

Should you get Cargo Insurance?

You will not be compensated with carrier liability if your cargo sinks with the carrier ship or if a theft happens. Cargo insurance is a wise preventative measure that keeps you from suffering loss due to the cargo catching fire or it getting lost. Think about the policy that suits your needs, and chose wisely. Yes, you should get cargo insurance.