To establish your name in the shipping business, you need to ensure safe and timely delivery of your freight. Why? Because doing so will introduce your competency in the industry especially to the customers that patronize your products. However, one may never know when a problem would arise while your goods are in transit.
In this case, you need something that will protect you from unexpected loss. Damages and losses incurred would impact your business, not only by the costs but also the clients’ trust that you built with them. In this regard, you must safeguard your business with cargo insurance. Keep reading to learn more about this insurance.
What is Cargo Insurance?
Cargo insurance is a policy that covers your cargo and protects you from financial turmoil if your cargo is damaged or stolen. You'll be reimbursed up to your insurance policy limit if your freight is damaged due to a covered event.
What does it cover?
- Natural disasters
- Piracy
- Transportation accidents
- Acts of war
- Freight abandonment
- Customs disapproval
- Damage due to faulty products
- Damage due to unsafe packaging
- Hazardous items
- Other fragile merchandise
An added note: FBABEE advises purchasing insurance for Amazon FBA sellers to safeguard their best interests upon shipping their goods.
Advantages
Safeguarding your freight with cargo insurance comes with benefits that define how helpful insurance is to your business.
- It secures you from financial loss.
- It gives you peace of mind as your shipment is transported.
- It protects your income stream from unexpected interruptions.
- It still generates revenue based on coverage.
- It ensures a smooth claim procedure.
- It simplifies the process of disclosing losses.
Two Types
There are two types of cargo insurance, Land and Air & Marine Insurance. Listed below are the coverages under each category.Land
Land cargo insurance covers freight that is shipped by land, such as trucks and small utility vehicles (SUVs). Other risks associated with land freight shipping are theft and collision damages. Due to its limited reach, it is commonly used for domestic cargo only.
Air & Marine
Air and Marine Cargo Insurance cover your business from risks for both ocean and air freight for international shipments. These risks may include loading and unloading, piracy, disasters, and other risks on the plane and ships. Below are its categories.Single Coverage
This type of policy, also known as a specific coverage policy, provides coverage for freight on a per delivery basis and is particularly suitable for enterprises that ship occasionally.Open Coverage
Typically, this policy covers freight for a set length of time (typically a year), and numerous shipments can be covered under a single policy. If you ship regularly, this is an effective risk management tool. There are two kinds - Renewable and Permanent.The renewable policy is suitable for single trips as it can be extended after the cargo has been shipped. Permanent allows unlimited shipping as long as the policy is in effect and applied during that period.
All Risk
It covers damages and losses as long as the goods are not prone to damage, loss, or spoilage. It doesn’t cover them if the causes include war, importer or exporter’s negligence, delays/rejections from customs, unpaid goods, and natural disasters.Contingency
This type of policy covers the seller even if the client didn’t insure the shipment to avoid financial loss. In some cases, the consumer is the one who must bear the cost of the insurance, not the vendor. If a consumer receives defective goods, they will often refuse to take them to escape liability. However, the seller can turn to the judicial process for assistance, but this is a time-consuming and potentially costly process.Warehouse to Warehouse
Upon unloading the ship, it safeguards the cargo as it makes its way to the customer's warehouse. It doesn't matter if your cargo is being transported in the same truck as other cargo; this rule only applies to your own stuff.
