Cargo Insurance : All importers Need to Know ( 2024 )
No matter how valuable the shipment is, it can be nothing if without safety.
And today we are going to introduce the cargo insurance, one of the most important strategies to make your shipping safety and success.
In this new and complete guide, you’ll learn exactly everything about freight insurance including:
Sample and Template
The necessity
Type and coverage
The cost calculation
Settlement of claims
Lots more
Let’s get started.
What is cargo insurance ?
It is a type of insurance policy that provides with indemnity & compensation protection for loss or damage to your cargo during transit by sea , air or land.
It is ideal for:
• Importers/exporters ( When the shipping term is CIF )
• Freight forwarders on behalf of their customers
• Other parties like middleman engaged in international trade
Is the freight insurance mandatory or optional ?
In most cases, the decision whether or not to insure your cargo is yours to take. So optional it is.
But when the Incoterms is CIF or CIP, then insurance is mandatory.
Who is responsible for insuring the goods ?
The buyer or the seller ? Your supplier, your client or yourself ?
It also depend on the Incoterms you choose. Buyer will take responsibility of the insurance expect when CIF and CIP.
What the insurance company you normally used ？
Regarding freight insurance for shipping from China, we normally used local based freight insurance companies in China, including PICC, Pingan and CPIC.
Is cargo insurance necessary for courier service ?
Cargo insurance is most covered FCL container shipping, LCL shipping and commerical air cargo service.
Despite courier service is suitable for small order, we also recommend get courier shipment insured as long as cargo value is high.
Here is a process to make claims from UPS.
Why cargo insurance needed ?
From loading to unloading, through ports to warehouse,
Cargo will experience a long way when pass from hand to hand.
Despite the safety measures put in place by carriers, forwarders and other operators, cargo is exposed to various risks during transit.
Damages or losses may occur during handling, storage or transport operations.
And this could have a serious impact on your business, sometimes it is fatal.
Bottom line ?
• The shipping service and cost exclude the insurance. You need to buy insurane separately.
• Carrier and forwarder’s liability is limited, and rarely sufficient. It’s a common mistake for importers to lodge claim with carrier and forwarder. In fact, the standard of compensation from carriers and forwarders is no more than $ 2/kg regardless the cargo value.
So we strongly recommend always getting cargo insurance covered for every of your shipment.
What does basic cargo insurance cover?
The cargo insurance is consist of 2 parts, the basic risks and additional risks.
For basic risks, there are 3 different types.
A.Free fromparticular average ( f.p.a.)
The scope of liability mainly includes:
1.The actual total loss or presumed total loss of the insured goods due to natural disasters and accidents of means of transport in the process of transportation.
2.Partial loss of the insured goods caused by means of transport were stranded, hit the reef, sank and collided with other objects, fire, explosion and other accidents.
3.Partial loss of the insured goods caused by natural disasters such as bad weather, lightning, tsunami etc.No matter the accident happened before or after due to the the means of transport has been stranded, hit the reef, sunk, burned and other factors.
4.Total or partial loss of one or more of the insured goods falling into the sea during transshipment.
5.Total or partial loss of the insured goods caused by natural disasters or accidents of the means of transport and unloading at the port of refuge.
6.Special expenses for unloading, loading, storage and transportation of goods, which are caused by natural or disaster or accident, and need to stop at the midway port or at the port of refuge.
7.Sacrifice, contribution and salvage expenses arising from the occurrence of general average.
8.In case of danger within the scope of insurance liability, the insured takes various measures to rescue the goods, prevent and reduce losses, thus resulting in reasonable rescue expenses. However, the limit of expenses borne by the insurance company shall not exceed the insured amount of the rescued goods. The cost of rescue can be borne within the limit of insurance amount beyond the amount of indemnity.
B. with particular average ( w.p.a )
The scope of W.P.A. insurance covers not only the responsibilities of the above “FPA”, but also partial losses of the insured goods caused by natural disasters such as severe weather, lightning, tsunami, earthquake, flood, etc.
c. all risks ( a.r )
The scope of all risks insurance covers not only all the responsibilities of “F.P.A. ” and “W.P.A. ” listed above, but also the loss of the insured goods caused by various external reasons during the transportation of the goods.
No matter the total loss or partial loss, the insurance company will compensate for the loss except for the exemption rate specified in the insurance policy as agreed by the insurance company and the insured.
The “All Risks” are the best known and most widely used cargo insurance conditions in the world.
And the insurance we China freight forwarder cover the shipments is ” All Risks ” .
Besides the basic insurance type, there are 11 addtional risks can be covered, and it is affiliated to all risks.
So here is a summary of what is covered under the all risks insurance contract.
It includes loss or damage caused by:
Fire, explosion
Labelling
Overturn, derailment
Collision
Discharge of cargo at port of distress
General Average
Earthquake, volcanic eruption, lightning, tsunami, flood
Total loss of package overboard
Total lost whilst loading or unloading
Improper stowage by carrier
fresh water rain damage
risk of shortage
risk of intermixture &contamination
risk of leakage
risk of clash & breakage
risk of odour
damage caused by heating & sweating
hookdamage
loss for damage by breakage of packing
risk sofrust
theft,piferageand nondelivery
What does basic cargo insurance not cover?
Despite it was called ” all risks”, it doesn’t mean it will cover everything.
Pay attention to the listed risks are exlcuded in the all risks cargo insurance .
You can’t claim indemnity for the below factors unless you have buy those special additional insurance.
War risk
Strikes risk
Riots or civil unrest
Customs rejections or delays
Failure of customer to pay, or of the seller to collect payment
Hazardous materials
The loss caused by the intentional act or negligence of the insured.
How much does it cost for cargo insurance ?
Well, the insurance fee is depend on the cargo value.
Normally, insurance rate by China insurance company is 0.3 %.
That’s to say, the freight insurance calculator is quite simple.
Insurance Fee = Cargo Vale x 0.003
For example,
If the whole cargo value for your container shipment is USD 20000 , then insurance fee is $ 20000 x 0.003 = $ 60.
Pay attenion that minimum freight insurance fee is $ 15 / Sheet.
The “All Risks” are the best known and most widely used cargo insurance conditions in the world.
And the insurance we China freight forwarder cover the shipments is ” All Risks ” .
How to claim compensation for cargo insurance ?
Having the risk awareness to buy freight insurance in time is not enough,
You should also be familiar with how to effectively cooperate with the insurer to settle claims in time when the goods are in danger, so as to make your own economic interests compensated and reduce the claim cost as much as possible.
Here we will introduces the general claim settlement process of marine cargo insurance, including the following aspects:
3. Cooperate with the insurer in investigation
After receiving the report, the insurance company will promptly arrange its overseas agent to inspect the disaster site.
In international maritime transportation, the overseas agent of the insurance company is usually required to carry out joint inspection on the damage of the goods together with the consignor’s notice and the representative of the ship.
If the disaster occurs on the way to sea, insurance company will send its overseas agent to the first port after the accident.
The on-site investigation is a very important obligation of the insurance company.
The survey or inspection report made by the insurance company is the most important document in the subsequent damage assessment and claim settlement.
5. Claim settlement
After the insured provides the above claim documents to the insurance company, the insurance company will give a claim settlement reply within a few working days as promised.
If the insured is satisfied with the reply, the insurance company will pay the compensation fee to the designated bank account of the insured within several working days.
If you are not satisfied, you can file a civil lawsuit against the insurance company based on the insurance contract to the local court.
1. Notice of accident
Because of the particularity of international shipping, shippers (cargo owners) generally know that the goods have encountered risks from the carrier.
When the cargo owners learns of the situation, he should initially understand the relevant details with the carrier, including the time, place and damage situation of the goods, and timely inform the insurer of the situation.
Generally, the shipper can directly report the case to the special line of the insurance company, or the business unit or relevant claim settlement personnel may also report the case to the overseas agent specified in the insurance policy.
After receiving the report, the insurance company will usually require to provide the original insurance policy, original bill of lading, original invoice and other documents.
Meanwhile, there is a time limit for reporting a case, so it must be reported within the time limit.
2. Rescue in time
If the damage has not been controlled or continues to spread when the cargo owner reports to the insurance company, in order to prevent the expansion and aggravation of the loss degree of the goods, the insurance company will ask the owner to rescue the goods in time.
At this time, the owner of the goods should take emergency measures immediately to minimize the loss.
At the same time, the insurance company claims that the measures taken are necessary, and the insurance company will compensate for the reasonable and necessary expenses incurred.
Therefore, the relevant contracts, invoices and payment slips for the maintenance costs and labor costs incurred in the rescue should be kept in good condition and should be provided to the insurance company for loss assessment and claim settlement.
4. Loss assessment and document collection
After investigation, the insurance company will sort out and determine the loss of the goods.
Ocean freight insurance and air freight insurance includes total loss and partial loss.
Compared with total loss of goods, part of the loss involves many parties, the documents are more complex and the time is longer , so the later claim settlement is relatively more complex.
Timely provision of documents required by the insurance company and timely communication is the key to protect their claim interests.
The insurance company will provide the “Notice of claim” to the insured to inform the insured or the claimant of the claim documents to be provided, mainly including:
• original insurance policy
• original bill of lading
• relevant trade documents (trade contract, original invoice of goods, packing list, etc.)
• claim letter (including claim letter and claim list to the insurer or claim letter to the responsible party and reply letter of the responsible party)
• other documents ( In case of special circumstances when the ship encounters maritime affairs during transportation, the maritime report and log book shall be provided.)
CONCLUSION
Taking out additional cover the shipment make good business sense.
That’s all my guide to cargo insurance today.
I hope it can clear for all the questions you are now meeting.
If you plan to ship from China, now or in the future, please contact me, and I will provide you with a solution subsequently.
