Cargo insurance provides coverage for physical loss or damage to goods during transit by land, sea, or air. It is important for shippers to purchase cargo insurance since carrier liability provides limited coverage. There are several types of cargo insurance policies including open cover policies for multiple shipments and specific policies for single voyages. Cargo insurance offers all-risk coverage and covers losses from events like damage during loading/unloading, weather, and theft. Shippers can ensure both goods and shipping costs are covered.

1. CARGO
INSURANCE
By
DON PAUL

2. What Is Cargo Insurance?
• Put simply, cargo insurance provides a cost effective way of
covering your customer, as well as yourself for physical loss or
damage to goods in transit. It provides added value to your
customers and helps differentiate you from your competition.
• Cargo Insurance provides coverage against all risks of physical loss
or damage to freight during the shipment from any external cause
during shipping, whether by land, sea or air.
• Also, known as Freight Insurance, it covers transits carried out in
water, air, road, rail, registered post parcel, and courier.
• Cargo insurance is important in international trade.

3. What Is Cargo Insurance? (cntd…)
• Legally, all carriers must carry a minimum amount of insurance,
known as carrier liability. However, carrier liability provides very
limited coverage, and anything from natural disasters to vehicle
accidents or even acts of war could damage your cargo.
• Therefore, shippers can request cargo insurance to protect their
goods from loss, damage, or theft while in transit. Generally, goods
are insured while being stored and while in transit, until they reach
the buyer.

4. Types of Cargo Insurance
• Cargo insurance can be taken for international as well as domestic
transportation. At the same time, this is really difficult to
standardize and control without the proper cooperation from
countries and states due to the varying nature of this insurance.
• Under these variations, this insurance can be categorized into
following classifications:-
– Land Cargo insurance
– Marine Cargo insurance

5. Cargo Insurance types
Land Cargo Insurance :
• This insurance provides coverage
for all the land transportations
covering trucks and other small
utility vehicles.
• The coverage aspects are theft,
collusion damages and other
related risks.
• This insurance is domestic in
nature and normally, operates
within the boundaries of the
nation.
Marine Cargo Insurance :
• This insurance covers transportation
carried our either in sea or by air.
• Here, means of transportation and
goods are covered from damage due
to cargo loading/unloading, weather
contingencies, piracies and other
relevant issues.
• Mostly, this insurance covers
international transportation.
• Under these insurances, there are
some policies which can help you in
understanding the concept of cargo
insurance in a profound manner.

6. Marine Cargo Insurance policies
• Open Cover Cargo Policies : When insurance holder opts for
coverage against various consignments, then open cover cargo
policies get activated. These policies are segmented in two
categories namely renewable policy and permanent policy.
Renewable policy is required for a particular value requiring
renewal after policy expiration. Most of the single trip or voyages
fall under this category. Permanent policy can be drawn up for a
decided time period permitting countless shipments in that period.
• Specific Cargo Policies : When a company approaches an insurance
company or broker for insuring a particular consignment, then it
can fall under the category of specific cargo policies. These policies
are also termed as voyage policies because only shipments are
covered under them.

7. Marine Cargo Insurance policies (cntd…)
• Contingency Insurance Policy : There are certain cases where
customer, not the seller is responsible for insuring the goods against
loss or damage. There are perils associated with it if goods get
damaged during transit and customer refuses to accept them. In
few cases, some customers do not insure the goods and tend to
avoid the liability. Under such circumstances, affected sellers can
seek rectification with the help of the legal system. This can be very
costly for them and sometimes, they may lose the case. Therefore,
sellers are advised to go for contingency insurance which have a
very less premium rate. For testing and verification, sellers need not
tell about it to their customers.

8. Benefits of Cargo Insurance
Cargo insurance covers transits carried out in water, air, road, rail,
registered post parcel and courier. Following aspects are covered
under the benefits of this insurance:
• All Risk Coverage
This coverage provides extensive protection against damage or
loss due to external factors. Though, this is called all risk coverage but
still, people should know the aspects included and excluded in the
policy. Under all risk coverage, included aspects are:
– Damages due to inappropriate packing
– Infestation
– Cargo abandonment
– Customs rejection
– Employee’s dishonesty

9. Benefits of Cargo Insurance (cntd…)
• Free From Particular Average Coverage (maritime insurance related)
“Free of particular average” coverage clause excludes coverage partial
losses to the cargo or to the hull except those resulting from stranding,
sinking, burning, or collision. Another important aspect of this clause is
that the shipper does not pay for minor losses (pre-decided percentage)
and is only held liable in case of significant losses to the cargo. This
insurance coverage belongs to special category and covers particular
perils only. There is difference in coverage depending upon the storage
location of the cargo. In this policy, following perils are included:-
Collision Heavy weather
Sinking Derailment
Non-delivery Theft
Fire Earthquake

10. Benefits of Cargo Insurance (cntd…)
• General Average Coverage
This coverage is basic requirement in the marine cargo transits. More
specifically, it covers only partial loss occurred to the shipment. It
requires all the other cargo holding owners on the ship to pay
compensation to the periled cargo owner.
• Warehouse to Warehouse Coverage
This coverage is applicable when shipment is unloaded from the ship
and it gets transported to the customer’s warehouse. Insurance
companies are very particular about compensating only the insurance
holder’s cargo, not other owners’ cargos.

11. Types of Cargo Insurance Policies
• Open Cover Cargo Policies
– When insurance holder opts for coverage against various
consignments, they open cover cargo policies get activated.
– It has 2 segments, renewable policy, and permanent policy.
– The renewable policy is required for a particular value requiring
renewal after policy expiration. Most of the single trip or
voyages fall under this category.
– Permanent policy can be drawn up for a decided time period
permitting countless shipments in that period.

12. Types of Cargo Insurance Policies (cntd…)
• Specific Cargo Policies
– When a company approaches an insurance company or broker
for insuring a particular consignment, then it can fall under the
category of specific cargo policies.
– Also, known as voyage policies because only shipments are
covered under them.

13. Types of Cargo Insurance Policies (cntd…)
• Contingency Insurance Policy
– There are certain cases where the customer, not the seller is
responsible for insuring the goods against loss or damage.
– There are perils associated with it if goods get damaged during
transit and customer refuses to accept them. In few cases, some
customers do not insure the goods and tend to avoid the
liability.
– Under such circumstances, affected sellers can seek rectification
with the help of the legal system.
– This can be very costly for them and sometimes, they may lose
the case. Therefore, sellers are advised to go for contingency
insurance which has a very less premium rate. For testing and
verification, sellers need not tell about it to their customers.

14. Cargo Insurance Guidelines
• The decision of whether or not to insure your freight is not always a
clear-cut, simple choice.
• There are many factors to consider, such as the total value of the
goods shipped, the shipping origin and destination, the mode of
transportation, etcetera.
• Once the determination is made, the next question is how to insure
the shipment.
• To assist you in your evaluation, the options below outline the types
of coverage available.

15. LEGAL LIABILITY
• If you choose not to pay to insure your shipment, the goods
shipped are automatically covered under legal liability standard to
the transportation industry.
• For domestic shipments the coverage is equal to $0.50/LB with a
$100.00 minimum provided the cost of the goods is greater than
$100.00.
• In the case of partial loss/damage, only the lost or damaged portion
of the freight is subject to the claim settlement amount of $0.50/lb.
• For international shipments the legal liability set forth by the
Warsaw convention is $20.00/kg or the actual value of goods if less
than $20/kg.
• For international sea freight shipments the legal liability limit is
$500 per customary shipping unit. (FCL: 1 container = 1 shipping
unit, LCL: shipping units = piece count on the Ocean Bill of Lading)

16. INSURANCE OF GOODS ONLY
To ensure your shipment for the replacement of the goods shipped in
case of total or partial loss or damage, request insurance for the
replacement value of the goods=commercial invoice value.
PWS sells insurance for $0.60/$100.00 insured value with a $12.00
minimum.
Sample Insurance Calculation:
Commercial Invoice Value = $10,000.00
Insurance Cost: $60.00

17. INSURANCE OF GOODS + SHIPPING CHARGES
• To ensure your shipment for the replacement of the goods shipped
in case of total or partial loss or damage plus the cost of shipping
the freight, request insurance for the CIF value of the shipment.
CIF + 10% Terms (Commercial invoice value + insurance costs +
freight= CIF value x 110% (10% for any unforeseen costs or charges)
This type of insurance covers your shipping costs too in the case of
damage or loss where the repair or replacement must be done
somewhere other than the consignee’s location. Recoverable
freight charges may be prorated based on the portion of the
shipment damaged in the case of partial loss/damage.
If there is damage and the repair occurs at the final destination of
the goods (consignee’s facility), no freight charges are refundable.

18. INSURANCE OF GOODS + SHIPPING CHARGES (cntd…)
For most destinations and commodities PWS sells insurance for
$0.60/$100.00 insured value with a $12.00 minimum.
Sample insurance of goods + freight charges:
Commercial Invoice value = $10,000.00
Insurance Cost = $60.00
Freight Cost: $500.00
Total CIF Value = $10,560.00 x 110% = $11,616.00 = Amount to Insure
Insurance Cost = $69.70

19. UNDER/OVER INSURANCE
It is important to insure goods for the proper value. If a shipment is
underinsured then the claim will only be paid to the percentage that
the shipment was insured.
• Sample:
Goods Value: $10,000
Insurance Value: $5,000
Damaged repair cost: $4,000
The insurance was purchased at 50% of the goods value; therefore,
50% of the claim amount will be paid.
Claim Payment: $4,000 x 50% = $2,000 payment
• If a shipment is over insured you are not able to get coverage
beyond the repair/replacement costs. The result is an overpayment
of premium.

20. CMA-CGM launches Serenity
• An insurance beyond any insurance provided.
http://www.cma-cgm.com/products-services/serenity

21. References
• https://iedunote.com/cargo-insurance
• https://cerasis.com/2016/08/25/cargo-insurance/
• https://www.cargocover.com/PreLogon/cargo-insurance.aspx
• http://www.priorityworldwide.com/resources/cargo_insurance_gui
delines.aspx
• http://www.cma-cgm.com