What is cargo insurance and when do you need it?

What is cargo insurance and when do you need it?

As with everything in life, even the most carefully prepared plans can encounter problems. With transporting cargo, this is no different.

Although shipments are treated with the utmost care and security, unforeseen circumstances can sometimes cause issues. It’s vital to bear in mind that third-party carriers have limited liability. Therefore, there are cases when it’s crucial to ensure that your cargo is fully insured.

Familiarising yourself with the rules and regulations surrounding cargo shipment, including cargo insurance information, can help protect you should any unfortunate incidences of cargo loss or damage occur during transit.

We’ve put together this guide to the ins and outs of cargo insurance to ensure you are well informed on when it’s necessary to arrange the appropriate protection measures.

What is meant by cargo insurance?

Cargo insurance is acquired in order to help mitigate financial losses when goods are lost or damaged. Reimbursements are provided if consignments don’t reach their destination in the right condition or if they are lost during the journey. Additionally, delays in shipments can also be reimbursed in some circumstances.

While most air freight companies will offer an insurance policy – known as carrier liability – the coverage is minimal. Carrier liability often excludes natural disasters – such as floods and earthquakes – and often doesn’t include protection for delicate or expensive goods. Therefore, those shipping with a third-party air freight company will want to ensure they seek adequate additional protection.

The cost of insurance will depend on several variables, including the value of the items being shipped, their destination, and the route they will take to get there.

What is marine and cargo insurance?

There are three main types of cargo insurance:

  • Land cargo insurance: Also known as haulier insurance, this covers the shipment when it’s transported by a vehicle on land. It tends to cover risks such as collisions, damage, theft, and other various factors. This type of insurance is domestic only.
  • Marine cargo insurance: This covers cargo that’s transported on the sea or by air and includes risks such as piracy, damage caused during loading and unloading, bad weather, and other risks associated with marine or air transportation. Unlike haulier insurance, it covers international transportation.
  • Air cargo insurance: This insurance type covers shipments that are transported in an aircraft. It covers risks associated with air travel, such as damage that occurred during loading or unloading, air turbulence, bad weather, and other relevant risks. Depending on what you’re shipping, you may need to purchase increased cover for dangerous, delicate, or perishable goods.

What is the difference between hull and cargo insurance?

You may hear the terms cargo insurance and hull insurance. The first covers the loss or damage of goods carried by a marine vessel or aircraft. The latter refers to the loss or damage of the vessel or aircraft itself.

What does cargo insurance not cover?

While most policies will offer a pretty comprehensive cover, there are some things that they will not cover. These are things that the shipper has control over, such as:

  • Inadequate packaging: If damage is caused by a failure of the shipper to adequately package the cargo, your insurance company will not offer any reimbursement or compensation.
  • Faulty items: Similarly, if the items you are shipping are faulty and this caused damage to your cargo, your insurance will be null and void.
  • Particular specific goods: Some insurance policies won’t cover dangerous or hazardous goods, so this is something that you need to pay attention to when organising cover.
  • Transportation methods: As explored above, there are different insurance policies for different types of transportation. It’s important to ensure that your cover is relevant to the way in which your cargo is being shipped.


How is cargo insured?

Although air cargo insurance isn’t a legal requirement, it’s smart to ensure you invest in an insurance package to protect your shipments.

Take into consideration risk factors such as weather, route, destination, the value of your goods, and how often your shipment will change hands. The more variables there are, the greater the risks will be. Additionally, the longer your shipment is exposed to any particular risk, the greater the chances are of it being lost or damaged.

Carrier liability cover is often lower than the value of the shipments an aircraft is transporting. If you don’t invest in your own insurance policy, you’re putting yourself at risk of suffering substantial financial losses.

To ascertain what level of insurance is required, it’s advisable to properly review your contracts and see where and when insurance might be necessary. A proper analysis can help you to save money where possible and ensure that you have the information needed to acquire adequate protection.

If you need more information about air cargo insurance and require the advice of a specialist, please don’t hesitate to contact Airmacs Aviation.

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