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Common cargo and freight insurance questions
Your goods are traveling across the globe in uncertain conditions, by a myriad of parties, and on multiple modes of transit. These factors create risks that your cargo may be lost or damaged in transit. If this happens, then it is likely that you won’t be able to recover the full value of your goods.
Between 2020-21, there were 3,113 containers lost at sea*. At Flexport alone, we observed an incident rate of 0.3% for every shipment we insured**. This means that 1 in every 290 shipments experienced an unpredicted loss event.
*Source: World Shipping Council, Containers Lost at Sea - 2022 Update **Based on all Flexport shipments where the individual shipments are covered by an insurance offering.
While you most likely already have a business owner’s policy or umbrella coverage that covers your cargo, the fine print may reveal exclusions and low coverage limits that leave you underinsured. Check the limits in your policy to see if they are high enough to cover the actual value of all the cargo that you ship. Also, determine if it covers cargo when it is stopped (like at a warehouse) or when moving by all modes of transit (ocean, air rail, and truck), and/or in all countries to, from and through which it will be moving.
Cargo insurance is an important topic to get right since an uninsured or underinsured cargo loss could have massive financial implications for a business. We recognize that it’s important to have a helping hand and advisor when making this important decision so reach out to us any time for a free consultation on your coverage needs. Our team of professionals has extensive logistics and insurance industry experience so feel free to utilize us to make sure you’re covered.
Cargo insurance is a type of insurance coverage that a cargo owner purchases to protect against loss or damage to goods being transported by land, air, or sea. It is a specialized kind of insurance that is tailored to the risks involved in transportation.
Cargo insurance covers the value of the goods being transported, as well as other specified expenses associated with the cargo.
Cargo and freight insurance are types of insurance that can be purchased to protect against losses related to the transportation of goods, but there are some important differences between the two.
Cargo insurance is designed to protect the physical goods being transported from loss or damage due to a variety of causes, including accidents, theft, and natural disasters. This type of insurance is typically purchased by the owner of the goods, and it covers the cost of repairing or replacing the cargo in the event of damage or loss.
Freight insurance, on the other hand, is designed to protect the financial interests of the party responsible for the shipment, typically the carrier or shipping company. This type of insurance covers the cost of lost or damaged goods, as well as any other expenses or liabilities associated with the shipment, such as delays or legal claims.
In general, cargo insurance is focused on protecting the physical goods being transported, while freight insurance is focused on protecting the financial interests of the parties involved in the shipment. However, the specific terms and coverage of each type of insurance can vary depending on the provider and the nature of the shipment.
The premium for cargo insurance is typically calculated based on several factors that are specific to the type of coverage offering. Some key factors that may be considered during the underwriting process to calculate the premium could include:
- Value of the cargo: The higher the value of the cargo, the higher the premium will typically be.
- Type of cargo: The type of cargo being transported can also affect the premium. Certain types of cargo may be considered higher risk and may require a higher premium.
- Mode of transportation: The mode of transportation, such as by air, sea, or land, can also affect the premium.
- Distance: The distance of the shipment can also affect the premium, as longer distances may require higher premiums.
- Deductibles: The amount of the deductible, or the amount the policyholder is responsible for paying before the insurance coverage kicks in, can also affect the premium. Higher deductibles typically result in lower premiums.
- Coverage limits: The amount of coverage needed can also affect the premium. Higher coverage limits will typically result in higher premiums.
Insurance providers will typically use these and other factors as part of their calculation of the premium for any cargo insurance policy. It is important to note that different insurance providers may have different methods for calculating premiums, so it’s important to shop around and compare quotes from different providers to find the best coverage at the most affordable price.