The shipping industry is exposed to numerous types of risks that can put a business in financial distress. Transporting goods from one place to another involves various potential risks during transit such as accidents, theft, damage, mishandling of cargo natural calamities, etc. Losses can have huge financial consequences. Thus, it is crucial for businesses in the shipping industry to have freight cargo insurance to protect the goods from these potential risks. To navigate international freight cargo insurance, it is first important to understand the freight insurance details. This article also provides some important tips and key considerations for availing the freight insurance.
Understanding freight cargo insurance
In a broader concept of marine insurance, freight insurance, and cargo insurance are interchangeably used. Freight in marine insurance refers to goods that are being shipped in bulk quality. Freight insurance provides financial protection for the goods against loss and damage arising from unforeseen events during transit. The following are the key aspects of freight cargo insurance:
- Type of coverage: There are various types of freight cargo insurance available which can be chosen based on the coverage needs.
- All-risk cargo insurance – This policy gives coverage against a wide variety of risks excluding the ones that are specifically included in the policy exclusions. As it covers most of the risks, these policies are relatively expensive in nature.
- Total loss cargo insurance – This policy gives coverage for complete loss of cargo including partial damages and losses.
- Named peril cargo insurance – This policy covers the risks that are explicitly listed in the policy document. Though the coverage is not comprehensive in nature, it can be a cost-efficient coverage option.
- Coverage limits and exclusions: Before opting for international freight cargo insurance, it is important to understand the coverage limits under the policy, what it covers, and the extent of coverage. Along with the coverage limits, it is also vital to be aware of the exclusions under the policy to avoid claim denial situations in the future.
Key Considerations
Here are some important things to consider while buying international freight cargo insurance:
- Insurers: Consider various reputed insurance companies offering freight cargo insurance. It is always important to look for insurance providers that have good client servicing, and product features in a shipping space, customisation, and a quick claim process. This can help in reaping the policy benefits in times of need.
- Need-based evaluation: Assess the risk based on the nature of the cargo, potential risks involved, and the value of the cargo. Assessing the risk helps to evaluate the insurance need and to arrive at the extent of coverage needed.
- Knowledge of incoterms: It is important to have a clear picture of incoterms such as cost insurance and freight (CIF) to make the right freight insurance decision. Incoterms are the set rules in the trade that typically define the responsibilities of buyers and sellers related to insurance cost, shipping cost, etc. while shipping the goods.
- Documentation: It is important to ensure proper documentation while shipping goods. This includes the description of goods, their value, packaging list, and invoices.
Important tips to navigate freight cargo insurance
Here are some of the important tips to keep in mind:
- Comparison shopping is the key
Comparing the freight cargo insurance policies offered by various insurance providers can give clarity on the features and cost. Comparison of benefits and costs helps one to make a need-based choice that fits the budget.
- Seek expert advice
Taking a piece of professional advice for the customisation of coverage from experts can help you make rational buying decision. Based on the insights, you can get the policy tailored to your specific needs.
- Periodic reviews are crucial
It is important to review the existing freight insurance policy to understand its relevance for changing needs. As the insurance needs to change, furthermore, it is important to tweak the freight insurance as well.
Along with these important tips, it is crucial to ensure everyone involved in the shipping process is aware of their responsibilities and insurance coverage.
Conclusion
To sum up, it is important to understand freight cargo insurance in detail to navigate. Having a safety net can save a business and boost its growth. Considering the insurance provider, evaluation of risk and need along with complete knowledge of incoterms can help in the process. Moreover, right consultation, regular review, and thorough comparison can help one successfully navigate the process of buying freight cargo insurance.
