5 Reasons You Need Cargo Insurance for Your Import or Export Goods

 In export, import, International Shipping, ocean shipping

Businesses make money by selling products. If your business imports or exports its products, you’re investing in your company every time you ship cargo. It’s surprising how many businesses don’t protect that investment with cargo insurance and pay heavily for it in the end.

Whether importing or exporting, using air freight or ocean freight for your international shipping, marine cargo insurance covers loss and/or damage of cargo while it is in transit between the points of origin and final destination.

Many try to save a little money up front by not insuring their cargo, but here’s just five of the many reasons why that’s a bad idea.

1 – Reduce exposure to financial loss.

If you’re an exporter who has not been paid for the goods at the time of shipment, or an importer who has paid for all or part of the goods prior to receiving them, you run the risk of suffering a financial loss if the goods are lost or damaged during transit.

2 – General Average – Expedite the release of your cargo.

You may be required to post a bond and/or cash deposit in order to obtain release of your cargo following a general average – even though there was no loss or damage to your goods. By purchasing insurance, your insurance company assumes the responsibility and expedites the release of your cargo. General Average is an internationally accepted principle where if certain types of accidents occur to the vessel, all parties share in the loss equally.

3 – Contractual Requirement

Your sales contract may obligate you to provide ocean cargo insurance to protect the buyer’s interest or their bank’s interest. This is especially true when selling goods CIP or CIF. Failure to do so cannot only subject you to financial loss if there is loss or damage to the goods, but non-compliance with the terms of your contract with the buyer can lead to loss of sales and legal problems.

4 – Coverage for limited carrier liability

The carriers, by law, are not responsible for many common causes of loss that occur in transit (for example, acts of God, general average, etc.). And, even if they are liable, carriers’ liability in the event of a loss is limited – either by contract in the bill of lading or by law. In most cases, you will only recover cents on the dollar from the carrier.

5 – Have more control over insuring terms

Relying on the buyer’s or seller’s insurance may be a viable option, but you must be satisfied that the insurance has in fact been purchased and that the insuring terms, valuation, and limits provided by each insurer on each shipment are adequate to meet your needs. And, if there is a claim dealing with a foreign insurance company, perhaps in a different language, it can be time consuming and frustrating. If there’s a claims issue, you’re often dealing with courts in a foreign country.

 

Showing 2 comments
  • Tina
    Reply

    Helpful information

  • Tom O'Malley
    Reply

    Excellent article Jared, you hit the target with your effort. There is one more reason importers and exporters should have cargo insurance. Even if your cargo holds limited actual value, the whole of your expenses add up.

    There are quite a few instances cargo is not highly valued in itself. Some scrap, raw materials, and earthen products such as minerals or clay, among others, are just not worth a large amount of money. It is also a fact total transport costs can add up to a dollar figure that will get your attention. Depending on the transportation origin and destination the cost of getting your export shipment to the buyer’s port can be a larger amount of money than the cost of the actual freight. When the transport costs and the freight value are added up, it’s not an insignificant number anymore. For this reason it is most often suggested CIF (Cost, Insurance, Freight) + 10% as the formula to use when insuring your shipment. It’s the industry standard for a good reason. If you ship a container to your buyer and it is lost in route while you still own it, you will likely have to ship another container to make good on the shipment that was lost.

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