Cargo Insurance – A Simple Guide

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By Louis Perrin

When you export cargo, careful packing might not be enough to keep it safe and carriers’ insurance may not be enough to cover its damage or loss. HGL explains the need for cargo insurance.

All sorts of things – manufactured goods, produce, components and more – need to travel to get to market, and some need to travel a long way. Cargo insurance means that if your freight doesn’t make it to its destination, you won’t lose out.

Cargo insurance is usually known as “marine cargo insurance”, but it doesn’t just cover goods transported by sea. Policies cover goods moved by road, rail and air as well.

While you’ll no doubt pack goods carefully for their journey, many things are beyond your control. The weather, mechanical breakdown, extreme temperatures, fire and more can impact the safety of your goods in transit. While your freight carrier should provide some insurance (check, to be sure) protection is often scant, and so it’s prudent to buy additional cover.

Types of insurance

The different types of insurance available include marine cargo and land cargo.

Marine cargo insurance covers the international leg of the journey taken by your export shipment, whether that is by sea or air. It protects you from losses in the event goods are damaged during loading or unloading, or in transit.

Land cargo insurance covers goods for the journey by rail or road. It’s only valid within the country in which it is taken out.

Types of policy

Open cover policies cover various consignments, and may be either renewable or permanent.

Specific cargo policies cover individual consignments.

Contingency insurance policies cover you, as the exporter/seller, in the event the buyer is responsible for insuring the shipment, fails to do so, and then refuses to accept damaged goods should something happen en route.

Types of cover

As with other types of insurance, there is a choice as to what type of cover to take.

All risk is a broad type of insurance that protects against most types of physical cargo loss or damage.

Unlike all risk, a named perils policy protects only against those risks specifically named. These generally include threats like weather, collision, fire, and theft.

Free from particular average coverage excludes liabilities for partial losses (the percentage will be stated in the policy) unless they are caused by any of the types of things covered by a named perils policy.

General average is aimed to compensate the owner if a vessel is damaged or lost while transporting your goods. The intention is that if losses are incurred as the result of damages suffered during an emergency, all parties accept an equal share of that loss. Even if your cargo is unharmed, you are liable to pay, and so insurance is a prudent step.

Buying cargo insurance

Insurance may be purchased in a number of ways. These include shipment by shipment which, as the name suggests, involves buying insurance only when needed. Per shipment, it is likely to be more expensive than other types of insurance, but for those who export infrequently savings may be made.

For regular exporters, annual cover is likely to prove most cost-effective. With this, you take out insurance for a period of time, typically one year, during which you may export goods without contacting your insurance company about each shipment.

Cost, insurance and freight insurance may be included in the price of the goods as supplied by the seller/manufacturer. Ownership passes to the buyer at the destination port. A caveat here is that the insurance may prove insufficient and/or difficult to claim.

Some companies self-insure, meaning that – having weighed up the risks and the costs – they are prepared to accept any losses that may occur.

How HGL can help

HGL offers a range of freight services to suit your needs. Our expert team is able to offer information and advice to help you ensure your cargo is fully protected. Get in touch today to discuss your options.