The cargo insurance policy is a specially designed insurance cover for goods in transit. It offers coverage to freight against all types of losses or damages from external causes during transportation, whether by land, sea, or rail.
Usually, cargo insurance policies are freely assignable. However, in the case of insured goods being personal belongings of a person, policies cannot be assigned.
There are different types of cargo policies which provide different types of coverage. The principles and experience of Marine Insurance drive cargo insurance policies, and thus, they are also called marine cargo insurance. Cargo insurance policies for land transportation are slightly different from their ocean/river counterparts.
The cargo insurance policies for land transport are called inland transit insurance policies. The second key difference between inland transit and marine cargo will be the crossing of international borders which is more likely in marine policies. The first difference of course being land and water transport systems covered.
Case on Cargo Insurance
Last year, M.K.S Tools & Company sent a cargo of toolkits from India to Hong Kong. However, upon reaching the destination, the Hong Kong company found that a major portion of the consignment was muddy and wet and they lodged a claim for the damaged cargo to the amount of USD 100,000.
If M.K.S Tools & Company had purchased a cargo insurance, the policy would have helped in dealing with this unforeseen loss. The policy would have provided the coverage the losses incurred to the toolkit consignment due to a cyclone and water entering the packaging.
Without a cargo insurance policy, M.K.S. Tools paid all the losses out of pocket.
Shivram Chand is shifting his household from Hyderabad to Ahmedabad. He has selected Abacus Movers and Packers for the job, and all the household items will be transported by them, while the family travels by air to reach their new home city.
Abacus has provided quotes with a cargo insurance policy for the goods, and Shivram feels that they are pushing for the quotes with insurance instead of transporting the goods without insurance.
Shivram discusses the situation with Ravi Vora, a financial advisor. Ravi asks him to consider buying the insurance separately for the goods, he offers following two reasons for the same:
- The cargo insurance policy available with Movers and Packers usually covers only new items, since the insurer does not go through valuing each item separately.
- The Packers do not have many options when it comes to customizing the policy for the user, since their tie-up may be with only one or two insurers.
Ravi further explains that the benefit of a separate cargo insurance will be that:
- Used goods can be covered after depreciation or for repair cost
- Shivram will know which goods are covered and which are not
Further, Shivram can negotiate with the transporter for the damage caused to the goods due to wrong handling by their staff. Any good transporter shall have insurance for the third-party liability and employee mistakes, suggests Ravi.
If not available with Abacus, which is highly unlikely since they are a renowned national carrier, Shivram can consider switching the transporter.