Understanding Cargo Insurance: Protecting Your Shipments in the Unpredictable World of Maritime Transport

The Unpredictable Nature of Ocean Freight

In the world of international shipping, we all know that things can take an unexpected turn in the midst of the ocean. That's why many freight forwarders emphasize the importance of secure packaging and loading of goods. However, given the unpredictable nature of the sea, no shipment is ever completely safe.

Picture this: You've meticulously packed your boxes, harmoniously stacked your pallets, and perfectly distributed the weight. You've followed every recommendation from your freight forwarder to the letter, feeling confident enough to write a manual on safe cargo preparation. The container doors close, and your shipment begins its maritime adventure. You can breathe easy now, right? Well, not quite.

The Crucial Role of Marine Cargo Insurance

Taking all possible preventive measures to protect your cargo from damage is highly recommended. However, it's essential to remember that there are factors beyond your control. Two quick examples:

• Unpredictable weather conditions can easily result in damage
• In the case of groupage shipments, poor packaging of other shippers' goods can affect the safety of your cargo

The fire that broke out aboard the Maersk Honam earlier this year serves as a stark reminder that in international maritime transport, it's always better to be overly cautious than underprepared. This is where marine cargo insurance comes into play.

Marine cargo insurance is not unlike life or health insurance. There's a wide variety of insurance options for your cargo, each with its own limitations and coverage. In this article, we'll provide an overview of the most common types of marine cargo insurance.

Types of Cargo Insurance

Land Cargo Insurance

As the name suggests, land cargo insurance covers contingencies that may occur while the cargo is being transported by land. This means it covers what may happen when the cargo is on board a truck, but also when it's transported or handled by other types of specialized vehicles.

Coverage: Theft, collision damage, and other risks.

Marine Cargo Insurance

Marine cargo insurance covers the part of the journey that takes place at sea (or in the air in the case of air transport). In contrast to land transport insurance, its application is international.

Coverage: Damage caused by loading or unloading the container, bad weather, piracy, and other risks.

Marine cargo insurance can be renewable or permanent. For infrequent shippers, it's better to choose insurance with renewal policies applicable to a single trip. This type of insurance is usually quite economical and can save considerable sums of money. As for frequent shippers, there are insurance policies with permanent coverage that cover a specific period, regardless of the number of shipments made.

Types of Marine Cargo Insurance Coverage

Cargo insurance coverage can include transport by land, sea, air, or rail. But the extent of your coverage depends on the type of policy you choose. In general, insurance is governed by ICC clauses, and within these clauses, there are different types of coverage classified into levels A, B, and C, with A policies having the highest coverage.

All-Risk Insurance

All-risk coverage offers one of the highest levels of protection and guards against a wide range of external factors. In general, this type of insurance covers most physical damage and loss that occurs as a result of various external incidents that cargo may encounter. This type of coverage is typically applied to general goods or those pre-approved by insurers, which are new goods that are not easily damaged.

What's excluded:

• Damage caused by poor stowage
• Damage to cargo as a result of negligence
• Inherent defect
• Customs rejection
• Abandonment of cargo
• WSRCC (War, Strikes, Riots, and Civil Commotions)
• Loss of profits
• Losses due to non-payment
• Other external factors such as earthquakes, pollution, infections, etc.
• Intentional damage

Named Perils Policy

Unlike all-risk policies, named perils policies only cover losses caused by specific causes named in the policy. Here are some examples of causes that could be included in this type of policy:

• Collision between two ships
• Sinking of the ship
• Derailment
• Adverse weather conditions
• Failure to deliver the cargo
• Fires
• Earthquakes
• Thefts

General Average: A Crucial Concept in Maritime Insurance

General average is a maritime concept that applies when a major accident occurs. Legally, Article 347 of the LNM defines general average as:

"An act in which, intentionally and reasonably, extraordinary damage or expense is caused for the common salvation of the goods involved in a maritime voyage on the occasion of all of them being threatened by a danger."

In a general average situation, all losses caused during an extraordinary problem at sea must be divided among the owners of the cargoes on board the ship that have survived the accident. This means that, as the owner of undamaged cargo, you would be responsible for funding compensation to the owners of damaged cargoes and/or ship damage suffered by the shipping company.

The Importance of Insurance with General Average Coverage

Generally, general average is not covered by any of the types of marine cargo insurance mentioned earlier but needs to be specifically included.

If you're thinking you can skip this part because these things never happen, think again. According to statistics, general average claims occur every 8 years. It may seem infrequent, but the last thing you'd want is to find yourself in a general average situation without coverage, especially considering that general average cases take years to resolve and can cost hundreds of thousands of euros.

As the owner of undamaged goods, you would be required to contribute your share of the compensation before you could release your cargo, and if you refused, the shipping company would have the right to keep part of the cargo as payment.

With general average coverage, your insurance provider would be responsible for paying the compensatory amount. Without this coverage, you would be legally responsible and would have to contribute your share of the compensation.

Key Considerations When Purchasing Marine Cargo Insurance

To avoid misunderstandings and unpleasant surprises, pay attention to all the details of the policy, check if it has deductibles, and clarify any doubts you may have with the insurance provider before signing the document.

Another fundamental aspect to keep in mind is that you should always insure the cargo for its real value. Remember that if damage occurs, the value of the cargo must always be justified when making a claim to the insurance.

How FreightAmigo Can Help Navigate Cargo Insurance Complexities

At FreightAmigo, we understand the intricacies of cargo insurance and its critical role in international shipping. As a full-service, one-stop digital supply chain finance platform, we're here to help organizations, enterprises, and individuals transform and redefine their logistics experience. Here's how our Digital Logistics Platform can assist you with cargo insurance:

1. Expert Guidance

Our 24/7 logistics expert support can provide valuable insights into the types of insurance coverage best suited for your specific shipments. We can help you understand the nuances of different policies and ensure you're adequately protected.

2. Streamlined Process

Through our Digital Platform, we've simplified the process of arranging cargo insurance. Along with comparing freight quotes and booking online, you can easily add insurance to your shipment with just a few clicks.

3. Comprehensive Solutions

Our platform integrates FreighTech, FinTech, and InsurTech, allowing us to offer comprehensive solutions that include not just shipping, but also cargo insurance and other related services. This integration ensures a seamless experience from quote to delivery.

4. Risk Assessment

Leveraging our artificial intelligence and big data capabilities, we can help assess potential risks associated with different shipping routes and methods. This information can be crucial in determining the appropriate level of insurance coverage.

5. Claims Assistance

In the unfortunate event of cargo damage or loss, our team can assist you in navigating the claims process, ensuring you have all the necessary documentation and support to file your claim efficiently.

6. Cost-Effective Options

By leveraging our extensive network and partnerships, we can often secure competitive rates for cargo insurance, helping you protect your shipments without breaking the bank.

7. Customized Coverage

We understand that every shipment is unique. Our Digital Logistics Solution allows for customized insurance options that cater to your specific needs, whether you're shipping delicate electronics or bulk commodities.

8. Transparency

Our platform provides clear, upfront information about insurance costs and coverage, ensuring you understand exactly what you're paying for and what protection you're receiving.

9. Global Reach

With our presence in Hong Kong, Mainland China, and Singapore, and plans for further expansion, we can provide insurance solutions for shipments across various international routes.

10. Continuous Updates

The shipping industry and insurance landscape are constantly evolving. We keep our clients informed about changes in regulations, new insurance products, and emerging risks that could affect their shipments.

Conclusion: Protecting Your Cargo in a Complex World

In the unpredictable world of international shipping, cargo insurance is not just an option—it's a necessity. While careful packaging and handling are crucial, they can't protect against all the risks inherent in ocean freight. From adverse weather conditions to general average situations, the potential for loss or damage is ever-present.

Understanding the different types of cargo insurance—from land cargo insurance to marine cargo insurance, all-risk policies to named perils coverage—is crucial for making informed decisions about protecting your shipments. Moreover, being aware of concepts like general average can save you from significant financial losses in case of major maritime incidents.

At FreightAmigo, we're committed to making your logistics experience as smooth and secure as possible. Our Digital Logistics Platform combines cutting-edge technology with industry expertise to offer comprehensive solutions, including guidance on cargo insurance. By leveraging our services, you can navigate the complexities of international shipping with confidence, knowing that your cargo is protected against a wide range of potential risks.

Remember, in the world of shipping, it's always better to be overprepared than underprepared. Invest in appropriate cargo insurance today to safeguard your goods and your peace of mind for tomorrow. With FreightAmigo by your side, you can focus on growing your business while we take care of the intricacies of logistics and risk management.