Here’s a brief introduction to the importance of cargo insurance and the different risks associated with freight management:
(Originally published by Pierre Kitts in skyferlogistics.com)
Whether you ship your freight by land, air or sea, obtaining comprehensive cargo insurance coverage is a crucial aspect of global freight management.
The primary benefit of purchasing cargo insurance for global freight is to protect the value of your goods. Your cargo may be exposed to a variety of risks while in transit, with damages or losses occurring during storage, handling or transport, which can seriously impact your company’s profitability.
Comprehensive cargo insurance coverage is essential, particularly for companies who engage in international trade. If an exporter hasn’t been paid for goods before shipment or an importer has made a partial or full payment on goods before receipt of them, they may risk financial loss if their freight is lost or damaged during transit.
In the event of an emergency, a cargo ship may voluntarily sacrifice part of its cargo. This is a principle of maritime law termed ‘General Average’, according to which all parties in a sea venture proportionally share any losses resulting from a voluntary sacrifice of part of the ship or cargo to save the whole.
In the above example, the carrier will not be responsible for your share of General Average, only being responsible for any loss or damage to goods due to their own negligence while the goods are in their custody.
The monetary liability of carriers is also limited according to international convention, under which they are exempt from specific losses or damage to freight.
The most comprehensive type of cargo insurance is called ICC A (Marine Institute Cargo Clause A). This is the most widely used international ‘All Risk’ cargo insurance for global freight shipping.
You should ensure that your maritime cargo is covered for a ‘general average’ or your firm, if its of small to medium size, could face a paralyzing debt which could be in the amounts of hundreds of thousands of dollars, which would have to be prepaid in order to release your cargo once landed.
In the case of land shipments, carriers offer limited liability coverage that typically amounts to pennies on the dollar.