Insurance in general and cargo insurance in particular, are full extensive subjects on their own. Knowing the insurance “basics” is critical for all parties involved in international and domestic shipping of goods.
It’s called a “Maritime Insurance policy” however it covers air and land shipping as well. A proper definition of such a policy will be “A document containing the insurance company’s obligations terms to compensate the insured party for losses and damages caused due to the risks mentioned in the policy.”
Basically, it mentions under which conditions will you get compensated by the insurance company, and for how much – in case something happens the cargo.
There are two common policies in common use in most of the times.
The first kind is a “Voyage policy” – this is a policy that’s being issued for a single shipment, and for a duration known in advance. You could call it a “one-time” policy as its used by people who rarely deal with import / export. Or, companies who plan to import as a single event.
The second kind of policy is called an “Open policy“. It’s being used by companies who have at least a few shipments in a year. Its purpose is to cover all the import / export shipments of the insured party. Its main advantage is that even if the importer, unintentionally, forgot to declare on a certain shipment to the insurance company – it will still be covered by the policy.
Generally, for a very low amount of yearly shipments, a Voyage policy will be more economic. For companies dealing with international and domestic trading of goods on a regular basis – the open policy is the recommended solution.
Another important thing to understand about international cargo insurance is that; it will always be synced with the incoterm of the deal.
For example, in case both sides have agreed that a sale will go through under F.O.B terms, the Insurance affinity will go from the seller to the buyer only after the cargo have physically passed the ship´s sidewall.
When it comes to insurance, make sure to always provide the most current and correct data you can. If you decide to “change” some of the numbers OR withhold certain information for a better price from the insurance company… be prepared that if something happens to the cargo and the insurance company finds out that you did not act in good faith – you will not be compensated and could even face criminal charges.
Ocean insurance policies are divided into three different levels:
Insurance by Clauses A, B and C.
The Clauses C is the most limited out of the three. It’s the most basic coverage you can get as it covers only very specific incidents.
Clauses B insurance provides a more extensive coverage while Clauses A is the most complete insurance type available. Logically, the more insurance coverage your cargo gets, the higher the price of the policy will be.
There are some risks which are not included in neither of the Clauses policies.
If you decide to acquire them – they will always be attached to the A, B or C clauses policy.
The main two are “War risk” and a “Strike” coverage.
A cargo insurance policy will only cover the agreed length of the journey.
For example, if the deal is under EXW terms, the policy will cover the cargo from the point our freight forwarder has picked up the goods and all the way up to your warehouse.
In case the cargo will be damaged by a forklift at YOUR warehouse, most policies will NOT cover it as the “journey” has come to an end once it arrived at your location.
Cargo insurance in the international market is a necessity and we at PDC are here to provide guidance, escort and if required, to manage the cargo insurance field for you. We also offer a service in which we check the current packaging & shipping procedures at your company in order to reduce the number of lost/damaged shipments. Its always good to have someone that makes sure you will receive what is rightfully yours.
PDC – YOUR HOME PORT.