What is Cargo Insurance and how to claim for it?

marine cargo insurance

Ever since the advent of globalization, it has been easier to pass through the problem of geographical boundaries. The practice of imports exports has become necessary for world trade, thus making the transportation of cargo from one place to another essential for all businesses. Cargo insurance is a precaution practiced by shippers and customers in order to protect themselves from huge financial losses that can occur due to any mishaps while the goods are being transported.

Although the practice of transportation of goods has helped in the expansion of the market and eventually resulted in facilitating world trade, there are certain risks that accompany this process that cannot be ignored. If the cargo is damaged in transit due to any reason, it makes for losses for the businesses involved.

In order to ensure safety against these mishaps, there are certain cargo insurance policies available for businesses that provide storage container solutions. These policies cover any losses that are faced by businesses while transporting goods from one location to another.

What is Cargo Insurance?

Ever since the movement of goods all over the world became so easy, it started coming with certain risks. These risks could be anything that could damage the goods while being transported and result in huge losses for the business.

Cargo insurance is a kind of maritime insurance policy that is used to protect your cargo from physical theft, damages, or any other risks. It usually covers the goods from the place of their departure to their destination. Insuring the cargo safeguards the value of goods by protecting them from any potential losses which may occur while transportation.

Cargo insurance protects companies from any financial losses due to damaged or lost goods. It pays back any amount that you have gotten insurance for if anything happens to your consignment. The events that cargo is usually covered for are natural disasters, custom rejections, accidents, acts of war, etc.

When is Cargo Insurance required?

It is advisable to get your cargo insured for any shipment especially the ones where a longer time is required for cargo to stay in transit. Whenever one decides to transport cargo, it is exposed to a lot of peril as it is carried among many hands, various means of transportation via several ports and shipping container depots. There are also many factors including weather conditions and traffic, like at the busiest seaports of the world, so there are many chances for the goods to be damaged, lost, or stolen.

As a result, cargo should be insured by businesses to prevent huge monetary losses for the partners involved.

What are the various types of Cargo Insurance?

Goods can be insured for both international as well as domestic shipments. Insurance can be majorly classified into land and marine insurance, each having its own coverage and limitations.

Land Insurance

This type of cargo insurance is for cargo that is moved by land transportation, including trucks and other small utility vehicles. The coverage provided by land insurance includes protection from theft, collision damages, and many other risks that are associated with land transportation of cargo. It is also majorly focused only on domestic cargo within a country’s boundaries.

Marine Insurance

This type of insurance includes freight that is transported via sea with the help of large size shipping containers. It covers damage from loading-unloading, getting stolen, harsh weather conditions, and other relevant risk factors. Opposing to land insurance, marine insurance applies to domestic as well as international boundaries.

There are many insurance policies that cover your cargo from many kinds of damages.

1. Open coverage

This policy covers cargo for a particular period and a large number of shipments can be covered under a single policy. This can be broadly divided into two categories:

Renewable: The policy can be repeated after one shipment has been delivered, making it an ideal choice for single-trip shipments.

Permanent:
This policy can be applied for a certain period of time and thus allows for an unlimited number of shipments in a single policy.

2. Single coverage

The single coverage policy is for those people who ship cargo occasionally and insures goods on a per shipment basis.

3. Contingency

There are some instances where instead of the seller; the client is answerable for the insurance. It happens sometimes that when a customer receives damaged cargo, they tend to avoid being accountable for it. In a contingency policy, a seller insures the goods and they do not have to be answerable to the client about any verifications and tests.

4. All Risk

This insurance covers almost all the cases in which goods can be damaged by spoiling, damages, etc. However, it is applicable only for the goods that are approved to be new and are not vulnerable to any damages. The causes that are not included in all-risk insurance are:

  • Damage causes due to act of God ( Natural Disasters)
  • Losses due to the striking of war, riots, etc.
  • Negligence caused by the importer or the exporter
  • Custom rejections or delays of cargo (It can happen due to port congestion)


5. Free from particular average

This insurance covers major damages or losses that happen to the cargo. The only causes not covered by this policy are stranding, collision, burning, and sinking. The shipper is responsible for a substantial portion of his cargo in case of any damages caused. The risks not covered in an all-risk policy like acts of God, harsh weather, derailment, theft, etc. are also covered in this insurance policy.

6. General average

This particular insurance is a prerequisite for marine cargo and covers all losses caused due to an unanticipated mishap at sea. It is based on the ideology that the owners of the cargo on a ship are liable for the goods if they are lost, damaged, or destroyed at sea. This means that every individual cargo is responsible to provide financial damages to any other cargo that is destroyed even if it is not their cargo or irrespective of their cargo being destroyed.

Importance of Cargo Insurance


Cargo containers lost at Sea:
There is a large number of shipping container boxes that are lost at sea each year. In the part of being lost, it also covers the cargo that was damaged due to any mishaps that occurred.

Cargo Damage: There are high chances of cargo being damaged. Adequate steps should be taken to ensure that there are not huge financial losses for your cargo.

Limited Carrier Liability: The incidents where carriers are not responsible for losses that occur in transit. In most cases, shippers are only able to recover a small percentage of money from the carrier for their losses. Thus they should never count on the carrier to cover any losses or damages that may occur in times of transit.

How to make a claim for your insurance?


The carriers are not legally responsible for any damages or losses that occurred to your cargo until proven otherwise. Therefore, it is the shipper’s responsibility to insure their cargo was damaged while it was in transit under their safekeeping. If your claim is accepted, only then are you paid by the insurance company.

There is certain information about your cargo shipment that you should reclaim when you make a claim, like:

1. Inventory number:
This is the number as stated in the inventory list provided by the insurance provider. An inventory list can be requested if it was not earlier arranged.

2. Item’s room: This refers to the location of your cargo before it was packed and sent for shipment.

3. Item description:
It indicates all the details that the shipper can recollect about the cargo, in high detail like dimensions, weight, accessories, appearance, etc.

4. Date of purchase of item: If you don’t have any manufacturing records to show, take an estimate of how old the item is and take a guess at what date it was bought.

5. Original and replacement cost: The original costs are to be noted accurately and the price should be found out to determine any replacement costs.

6. Claim amount: If your insurance claim is for damages, then you should only mention the cost of repairs for your cargo. If the claim is for losses, then you should specify the cost of the item mentioned in the inventory.

What are the documents required when you make a claim for your cargo?

The most important documents that should be in possession of the shipper to make a claim for their damaged cargo are as follows:

Transportation documentation

These documents have the main details of the movement of cargo like shipper and carrier details, quantity, etc. These will most often be either the bill of lading, truck bill, ocean bill of lading, or airway bill.

Delivery documentation

These are used as proof of delivery to the final recipient. The consignee has to sign the document to show that the cargo was received in the expected condition. If otherwise, the receiver should mention it on the delivery documents. If this information is not properly noted, it could endanger to cover the amount of cargo that is to be paid.

Delivery documents can be a signed delivery receipt, drop trailer receipt, etc.

Statement of Claim

This statement clearly defines details of the losses, like the goods damaged, value, and extent of it. This statement should include complete information about the items and circumstances of the claim.

Value Verification

This document is supporting proof of damaged goods to make a claim. The information in this claim has the commercial invoice, bill of sale, etc. There can also be many more documents that could be asked for while making an insurance claim for your damaged cargo.