Cargo insurance

Cargo Insurance, also known as Freight or Marine Insurance, provides coverage against different risks of physical loss or damage to freight during the shipment from any external cause during shipping, whether by land, sea or air.

Insurance conditions may follow a variety of patterns that have been agreed between the Assured, represented by the broker, and the Insurer. Nevertheless, it is often better to generally agree to the internationally known set of conditions, namely the Institute Cargo Clauses.

Three main clauses apply to general goods.

1) Institute Cargo Clauses A

These clauses provide coverage for all risks of physical loss or damage to the goods by accidental causes during the ordinary course of transit. The cover is available on a warehouse to warehouse basis. General exclusions are delay, the inherent nature of the goods, insufficient or inadequate packing, ordinary wear and tear, consequential loss or loss of market.

2) Institute Cargo Clauses B

These clauses provide limited cover generally against a major fortuity. They reflect the basic cover available under C clauses but extend cover to include loss of or damage to cargo attributable to earthquake, volcanic eruption, lightning, washing overboard, wet damage from water and accidents in loading and discharging. However there is no coverage for theft, pilferage, shortage and non-delivery.

3) Institute Cargo Clauses C

These clauses offer a restricted form of cover against perils that by their nature, might likely result in a total loss of cargo. The major perils covered are:

  • fire or explosion
  • vessel or craft being stranded, grounded, sunk or capsized
  • overturning or derailment of land conveyance
  • collision or contact of vessel craft or conveyance with any external object other than water
  • discharge of cargo at a port of distress
  • loss or damage caused by general average sacrifice and jettison

All Clauses are extended to include the Institute War Clauses (Cargo) and Institute Strikes Clauses (Cargo) which cover the goods against loss of or damage caused by warlike activities whilst at sea and/or caused by rioters during civil commotions and strikes or terrorist or politically motivated acts.

Value insured is normally calculated according to CIF plus 10% value formula. CIF stands for cost of goods, insurance and freight. 10% is added for any unforeseen costs or charges.

The insurance rates depend on category of cargo, country of origin and destination, and method of shipment (FCL, LCL, breakbulk, groupage).

Deductibles (excess) will vary depending on the category of goods.

There are usually 7 categories of cargo:

Category 1 – Approved Goods & General Merchandise Excess

Category 2 – Branded Goods & Appliances, Electronics / Precision Instruments & Beverages

Category 3 – Computers Excess

Category 4 – Fragiles

Category 5 – Household Goods and Personal Effects Excess

Category 6 – Private Motor Vehicles Excess

Category 7 – Frozen Food in Containers or Trucks below minus 15 degrees Celcius

Marine cargo insurance is optional and it is an extra cost when importing/exporting.

Nevertheless, here are the reasons why we recommend purchasing Cargo insurance to our customers:

  • Cargo theft is on the rise
  • Containers do get lost at sea
  • Catastrophic event happen
  • Cargo damage a common occurrence
  • General average – an internationally accepted principle where if certain types of accidents occur to the vessel all parties share in the loss equally (even if there was no loss or damage to your goods)
  • Contractual requirement
  • Coverage for limited carrier liability – carriers by law are not responsible for many common causes that occur in transit (for example Acts of God, General Average etc).
  • More control over insuring terms

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