Contingent cargo insurance is a specialised type of insurance that protects shippers and logistics companies from financial losses due to unforeseen events during cargo transportation. Addressing exclusions and limitations enhances conventional cargo insurance and guarantees thorough risk management.
What is Contingent Cargo Insurance?
Cargo insurance meaning covers losses or damages to cargo not insured by standard cargo insurance policies. It is intended to close the security holes caused by more conventional rules, giving shippers and goods forwarders more protection.
The contingency component kicks in when the primary insurance coverage cannot completely cover the loss or damage. It is beneficial to ensure the cargo owner or shipper has a backup layer of protection when the primary insurance policy has restrictions or exclusions.
Who needs the Insurance?
- Freight brokers
- Shippers
- Logistics companies
- Cargo owners
- Importers/Exporters
- Transportation companies
These parties can benefit from the insurance to protect themselves against financial losses due to unforeseen events during cargo transportation.
How It Works?
The insurance policy kicks in to make up for any coverage gaps left by the primary insurer in the event of a covered loss. The cargo owner must use the original insurance policy’s coverage before activating contingent cargo insurance. Contingent coverage kicks in and provides additional protection up to the set limits of the contingent policy once the limitations of the primary insurer are reached.
Coverage Policies of Contingent Cargo Insurance
Contingent cargo insurance provides coverage for a wide range of losses, damages, and risks that may occur during transportation, including:
- Physical loss or damage to cargo
- Theft
- General average sacrifices
- Customs fines and penalties
- Storage and handling charges
This type of insurance can cover various types of cargo, including:
- Goods in transit by land, sea, or air
- Import and export shipments
- Warehoused goods
- Project cargo
- High-value or sensitive goods
Policyholders must be aware of specific exclusions and limitations regarding the coverage. Standard exclusions include loss from insufficient packaging, innate vice, or delays not originating from insured dangers.
Policies may also impose restrictions on particular high-risk cargo categories or transportation routes. With its contingent cargo insurance, Securenow hopes to give companies looking for dependable security in the convoluted world of goods transit a strong option.
Cost of Insurance
Several variables affect how much contingent cargo insurance costs. The kind and value of the goods, the form of transportation, the route, and the length of the transit all factor into the price of insurance.
Compared to regular cargo insurance, which could be a broader policy, contingent cargo insurance typically provides more specialised coverage.
Because of its specialised coverage, the cost comparison frequently favours contingent cargo insurance as more affordable. The premium, expressed as a percentage of the cargo’s value, usually lies between 0.1% and 0.5%. In contrast, traditional cargo insurance often costs between 0.25 and 1.5% of the total value of the shipment.
Let’s look on a Example
When a strong storm damaged a shipment of expensive machinery, the Logistics company suffered a significant setback and lost INR 20 million. They had standard cargo insurance, but it only covered a portion of the damage.
Nevertheless, their contingent insurance coverage covered the remaining INR 10 million. This guaranteed business continuity and prevented the company from suffering severe financial hardship.
Reasons to have Contingent Cargo Insurance
- Redundancy and Risk Mitigation: Redundancy is essential in the volatile shipping industry. Cargo insurance lowers the total risk exposure for companies involved in the transportation of products by providing an additional layer of protection.
- Scenarios of Claims Denial: In some cases, a primary insurer may reject a claim, denying coverage to the shipper. The insurance protects the cargo owner from monetary damages even under these circumstances.
Conclusion
In summary, contingent cargo insurance is an essential safeguard for companies and individuals in the transportation sector. Beyond standard cargo insurance, it protects against unanticipated losses and financial hazards.
Individuals and organisations can reduce risks and guarantee smooth operations by making educated decisions based on their awareness of the advantages and restrictions of insurance.
References
https://securenow.in/insuropedia/covered-freight-forwarder-insurance-policy/
