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Do You Need Cargo Insurance? Protect Your Investment

December 28, 2022
 By Freight Insurance Coverage
Do You Need Cargo Insurance? Protect Your Investment
Last Modified: October 5, 2023
Protecting your assets is priority one. Cargo insurance is not something you want to go without. Accidents can happen at any time, so be smart and protect yourself from a total loss.

Do you need cargo insurance even though carriers are legally required to carry their own? In the worldwide cargo transportation business, accidents can and do happen every day, some more impactful than others. Having cargo insurance means you have peace of mind. The information in this article offers insight into why cargo insurance is a winner.

Yes, the coverage provided via limited carrier liability does not compare to examples like Marine Cargo Insurance outlined by the Institute of Cargo Clauses (ICC) for types A, B, and C. The options of all-risk, general average, and free from particular standards provide an extra layer of protection.

Want to know more about the extra layer of protection that is cargo insurance? Learn more about coverage and gain a keen insight into why you need cargo insurance.

Do You Need Cargo Insurance?

When shipping cargo to various destinations worldwide, your priority is to ensure its safe arrival. During shipping, a lot can go wrong in a short amount of time. Any number of incidents can occur, many of them beyond your control

Examples like this are where cargo insurance comes into play. Cargo insurance may not be a physical shield, but it is a financial one protecting you from the pitfalls of total loss. Think of cargo insurance as coverage that protects your investment in goods and inventory.

The coverage provided by cargo insurance effectively protects

  • The value of the shipper’s cargo in the event of loss or damage
  • Shippers from relying on carrier limited liability coverage.

It helps if you have a more substantial guarantee than just a carrier’s solid reputation keeping your investment secure. While not required, cargo insurance is an extra measure to give you complete peace of mind when shipping.

Unfortunately, too many shippers believe that limited carrier liability is all they need when transporting cargo. Unfortunately, its ability to fully cover a loss is a farce. By obtaining cargo insurance you can enjoy the benefits like peace of mind among other advantages.

Any payouts from carrier liability depend on approval and whether or not the carrier agrees they are liable. It’s not impossible to prove, but it does make a shipper jump through several more hoops. In other words, it’s more hassle to prove, more investment time, and less money, in the end, no matter the outcome.

Lastly, the amount covered by the carrier liability is far less than cargo insurance and typically only covers the cost of the shipment and not the cargo itself. Asking the question, “do you need cargo insurance?” isn’t really a question at all, it’s an obvious no brainer.

Business cargo insurance is essential when you’re running your own company. Read our article to find out more.

What is a Cargo Insurance Policy?

A cargo insurance policy details the coverage associated with shipping cargo. It’s best to get a complete explanation of the coverage options and familiarize yourself with the policy if you need to file a claim.

Information required on a cargo insurance policy is as follows:

  • Insured goods information
  • Insurer’s information
  • Desired coverage
  • Type of policy required
  • Underwriting information

The policy outlines the critical information associated with the selected coverage and the goods being transported. The accuracy of the policy depends the quality of the information initially provided to the company.

It is always best to discuss your desired options with a cargo insurance specialist before finalizing your coverage. You should be prepared with all the relevant information surrounding your shipment; this way, a cargo insurance agent can equip you with a fail-safe solution.

What is the Purpose of Cargo Insurance?

The purpose of cargo insurance is to protect you in the event of something going wrong. This protection helps to ensure that your tied-up financial capital doesn’t drown along with your shipment.

Unlike personal insurance coverages like automobile insurance, cargo insurance is far more detailed and specific to each individual shipment. Whether you are shipping cargo inland, overseas, or in the air, cargo insurance is in place to protect against various situations that cause loss.

Depending on the value of your cargo, it’s important to ensure that your coverage options are sufficient. Remember, the limited liability coverage used by carriers is not meant to offer full financial protection. It will pay you back by weight rather than by value. 

Carrier Limited Liability Outlook

Mode of TransportationCarrier Limited Liability Coverage
Truckload$0.50 per pound
Ocean Vessel$500 per shipment unit
Air FreightUp to $12 per pound

With numbers like those, limited carrier liability is not something to pin all your hopes and dreams on.   It would be best if you had your investment protected by real cargo insurance to have a complete and total defense against any threat.

If you are stuck with only the carrier’s limited liability, there is no telling if your claim will even be approved. Let us say for argument’s sake that your claim was approved, and you have three containers of computer equipment. If approved, you’re looking at $500 per container from the carrier in the event of damage or loss.

Do you think $1,500 will cover the cost of your goods? No, that amount is nowhere near enough to cover your commodities. It likely wouldn’t even recover the costs of shipping. That is why it is critical to protect your investment with cargo insurance that covers value, so you don’t find yourself in a catastrophic financial situation.

types of cargo insurance palatized freight

Are There Different Types of Cargo Insurance?

Yes, there are various types of cargo insurance available to you as a shipper. In the world of shipping cargo, everyone’s shipment type and size vary from order to order, so there is a need for different types of insurance coverage. 

The following three forms of cargo insurance refer to the type of insurance offered to these modes of transportation.

  1. Truckload Cargo Insurance
  2. Air Cargo Insurance
  3. Marine Cargo Insurance

Examples of insurance levels, as outlined by the (ICC), into three insurance categories are summarized here.

  • Type-A Insurance: A complete form of all-risk insurance. Restrictions on the newness of goods along with proper packaging are required.
  • Type-B Insurance: This category is somewhat restrictive under general average insurance. When damages occur on a mode of transport, a pool of shippers is responsible.
  • Type-C Insurance: This category is very restrictive and is free of particular average insurance. When a significant loss occurs during transport, in some instances, a partial loss does apply.

Other types of insurance are outside the three main categories recognized by the ICC, like open and contingency coverages. Open coverage is a long-term insurance type that offers protection for even bulk shipping, while contingency covers the shipper.

Other policy options are available for both single one-way shipments and time-gated shipments. The permanent and renewable policies are a cargo insurance strategy allowing continuous shipment coverage.

The main parts of these policies are the following:

  • Permanent Policy: This policy can cover multiple shipments over a period of time.
  • Renewable Policy: This policy can be renewed once the current policy expires to cover additional shipments.
  • Single Coverage: This is one-time shipment coverage designed for less frequent shipments.
  • Contingency Coverage: This is seller-to-buyer coverage that protects the seller in the case of delivery rejection.
  • Open Coverage: Longer duration bulk shipping coverage under one policy.

When shipping cargo, what’s being sent, its volume, and transport method all play a critical role in determining the type of cargo insurance you require. It’s best to speak with a specialist before seeking any type of cargo insurance.

what does cargo insurance cover truck rollover

What Does Cargo Insurance Cover?

Cargo insurance is in place to offer what carrier limited liability cannot, and that’s peace of mind on your shipped investments. Sometimes cargo has unfortunate obstacles or a series of tragic events that plague them along the way.

As we’ve reviewed, the carrier limited liability is often a basic form of coverage that only partially covers your cargo when damage or loss occurs. Many claims are denied because of fine print or loopholes.

This explanation is all the justification you need for better protection when shipping cargo. 

Cargo insurance protects you against issues such as

  1. Damages: Damage to cargo that is part of a larger shipment.
  2. Total Loss: When the total cost related to damage exceeds the commodities value.
  3. Theft & Mishandling: Whenever goods are unaccounted for due to theft or mishandling.
  4. Abandonment: When goods are not delivered and are considered lost or damaged.

Finding cargo insurance that can be applied to your shipment without the help of a specialist is challenging. You’ll face a similar difficulty just searching for a reputable cargo insurance provider.

Cargo insurance may not be legally required, but you should always outfit your shipment with the backing of a reputable cargo insurance company. In the long run, it’s the best way to prevent any, and all financial losses you may face should an incident occur.

The Best Peace of Mind Every Time With Freight Insurance Coverage!

Whether domestic or international, cargo transportation shares the same risks. Being prepared for any event that may derail your shipments is always good. Don’t ignore the possibility of catastrophe. Let Freight Insurance Coverage protect your investments.

Our staff of friendly and knowledgeable experts will treat your shipments as if they were their own and walk you through the process so that we can ensure you have the absolute best coverage available to protect your shipments.

Get assistance with 

  • All Risk Insurance
  • International Coverage Options
  • And more!

So what are you waiting for? Stop asking, “do you need cargo insurance?” and call us at (866) 975-0749 or click here to complete an online form for more information so that you can stop worrying and start breathing easy. Be smart, be safe, and get the protection you need and deserve.

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