Have you ever considered the fact that a small cost for insuring your cargo can save you a fortune if the unexpected happens?
One day we were approached by an extremely worried Canadian exporter, who had been notified by the ocean carrier that moved his shipments that their vessel had an accident near one of the Indian Sub-Continent ports and that there was a possibility that they were going to declare General Average. Not familiar with the term, I explained to this exporter that if a vessel transporting your goods is damaged at sea or goods must be jettisoned to save the ship, you are responsible as one of the ship’s customers in sharing and covering the losses. This legal principle which has been around since the late 1800s is still used regularly by ocean carriers.
The next question I asked him was “is your cargo insured???? to which he anxiously replied “No???. I then inquired about the value of the shipment, and he said about $35,000 per containers, 11 containers on this vessel with an approximate total value of $385,000. When I told him that had he spent a small fraction of a percent of the total value of the goods in “All Risk??? cargo insurance, he would have been completely covered, I immediately saw in his eyes that forgoing cargo insurance was a mistake that he would not make in the future. After all, we can never predict what is going to happen between origin and destination. Even if your goods are less susceptible loss or damage, there is always the risk of catastrophic events like planes crashing, boats sinking, and truck accidents. At the end of the day, carriers are not obligated to cover your losses that take place beyond their control.
Top questions to ask when considering whether or not to get cargo insurance:
Who is responsible for insuring the cargo?
The first step is to determine who is responsible for getting the cargo insured. Depending on the agreement, it can be the responsibility of the manufacturer or exporter to insure the cargo until it is delivered to the importer or buyer, or vice versa. For example, if the terms of sale are “EXW”, the buyer is responsible for insuring the goods from origin. If the terms of sale are “CIF???, the seller is responsible.
When should I insure my cargo?
Depending on the terms of the shipment, cargo must be immediately insured as soon as it is handed over to the trucking company or ocean or air carrier. Delay in insuring the cargo can result in the insurance company refusing to cover the shipment.
What is the cost for insuring my cargo?
Cost of insuring the cargo can be anywhere between $0.15 to $0.35 per $100 value of your shipment. Considering the example given previously in this article, insurance premium would have been about 0.3% which is a small amount to pay compared to the overall value of the shipment and all the monetary losses which the responsible parties will have to bear out of pocket as a result of his lack of insurance. Invest a small amount in “All Risk” cargo insurance for complete ‘peace of mind’ covering unexpected events. Should there be damage in the event of any accident on any mode of transport you are assured that the full value of your shipment is protected from origin to destination.
Where do I go for insurance?
A manufacturer or an exporter can insure their shipment directly with an insurance company or through a freight forwarder. Many very large organizations have their global agreement with insurance companies directly. However, others prefer getting this done through a freight forwarder so that coordination of their freight and insurance is handled under one roof. Working through a freight forwarder can save you time and money since they often have preferential rates and special agreements due to their buying power with the insurance companies. Moreover a freight forwarder can provide domestic support during a claim.
In a nutshell, investing a relatively small amount in “All Risk” Cargo Insurance can save you and your company potentially devastating losses when it comes to the cargo that you move around the world. It is worthwhile considering this insurance and reviewing your terms of sale for every shipment to ensure that your cargo is covered throughout the transit from origin to destination.
We, at Mantoria, offer our clients the option of low cost “All Risk??? cargo insurance, which provides your company with complete coverage throughout the whole transit. Contact us today for rates and more details. Certain limitations may apply.
