What to look out for while purchasing cargo insurance
For SMEs engaged in international trade, import and export, shipping typically forms a large proportion of overall business risk. And if you have ever shipped something internationally, you realize just how many things could go wrong while goods are in transit. That is where cargo insurance comes in.
Cargo insurance is the most common method used to protect the value of your goods from physical damage, theft, or general average. Here are some of the points that you need to consider before purchasing Cargo Insurance.
It is imperative to know the properties of the cargo to be insured including the manner in which it is to be packed. Packaging is vital as it is the packing which protects the cargo during the voyage: it can range from loose packing, drums, containers to crates and boxes. Ensure that the packaging is suitable for the type of cargo in transit and are appropriately marked for identification.
This involves more than just to know from which port to which port the cargo is to be moved. Deciding the voyage route could affect your policy premiums. What climate conditions can be expected to have an influence on the condition of the cargo? Are there any political situations which can affect the safe delivery and/or payment for the cargo? Does the voyage route pass in proximity to any piracy hotspots?
Open Cover: This is a cargo insurance product that covers your shipments for a specific period, typically one year. You can cover all your goods movements under the same policy, making it a more efficient way to manage risk if you ship frequently.
Specific Voyage :This works best for coverage on a particular shipment category or item. Sometimes referred to as ‘voyage policies,’ it’s essential to understand that only specific cargo shipments can benefit from this type of insurance protection due to their defined limitations.
1. All-risk coverage
All-risk coverage protects against extensive damage or loss due to outside circumstances or external forces beyond the control of the shipper. Insurable situations may include:
- Damages caused by improper packing and handling;
- Infestation of insects or vermin; or
- Cargo and shipment abandonment.
2. General average coverage
General average coverage is the standard minimum required insurance policy for shipments that occur by sea. Average is the commonly used shipping term for ‘loss’. Shipping companies contract different cargos to be sent in one voyage to reduce their overall voyage costs. This type of policy stipulates that if some cargo is lost, jettisoned, destroyed, or damaged, due to a problem at sea, owners of all cargo aboard must share the cost of recouping the losses.
3. Warehouse-to-warehouse coverage
Warehouse-to-warehouse coverage is unique in that it protects against the transportation liabilities associated with transferring goods between warehouses. Insurance companies are only willing to protect the holder’s cargo only for the specific instance of warehouse transportation. Coverage begins and ends at the door after unloading.
Now that you have explored what cargo insurance is and the types of coverages available, you must know its importance when shipping goods. At Unison, we have a seasoned team of experts with years of experience in delivering cargo insurance policies tailored to our clients’ needs. Reach out to us to get comprehensive cargo coverage at the best possible price.