Cargo Insurance

In case a consignment is either lost or damaged, cargo insurance helps reimburse the concerned vendor or the customer.

When is cargo insurance necessary?

Moving cargo is risky. While your shipment makes its way towards you, it will pass from one person’s supervision to another. It may be crammed or loaded and unloaded frequently from containers and trucks. It passes through ports and inspection sites. Every step is essential for the goods to reach you. This struggle of passing through various inspection points eventually increases the risk of damage.

If you want to avoid the nuisance of finding an apt replacement for your damaged item, we would urge you to opt for cargo insurance.

What kind of risks does cargo insurance eliminate?

The insurance generally covers harm done by bad weather, unloading or loading, piracy, and various other potential risks.

Local laws may obligate trucking companies to have some form of insurance, but mostly this isn’t adequate security for your goods. Furthermore, other couriers aren’t necessarily required to follow this law. Hence, clients are always advised to get additional insurance for their shipments.

Here are some common reasons that prompt insurance:

  • Natural Catastrophe
  • Vehicular accidents
  • Military Activity
  • Piracy
  • Cargo being abandoned
  • Customs rejection

The insurance covers any damage to the merchandise in such scenarios.

What isn’t covered by the cargo insurer?

Some policies forgo coverage in case of some disaster.

Cargo insurance policies commonly exclude:

  • Ineffective Packing – Entire blame falls on you if, for instance, water seeps inside due to your package not being waterproof.
  • Damages due to defective products – If the logistics company can show a defect in your product, then the responsibility isn’t theirs.
  • Certain kinds of freight – The insurer may label hazardous material, particular electronics, and other cargo as ineligible for transport.
  • Some modes of Carriage – Some insurance packages may not offer shipment through trucking; others may exclude airplanes or trains or even cargo ships.

The absence of a normal cargo insurance form in the industry has led to a considerable variability of the inclusions and exclusions.

Make sure you develop a better understanding of the insurance plan you choose. Take your time when selecting an insurance policy and never hold back on any questions that you might want to ask.

What would freight or cargo insurance typically cost you?

Your insurance will pay you the cost of the goods, up to the coverage limit, whenever the goods are damaged or misplaced.

Mention the cost of each insured product on your shipment or its documentation correctly. This mentioned amount is what will be required for you to replace the item if it has no chance of repair. If, for some reason, you are uncertain about how specific products such as laptops, or TVs may be valued, try to google similar products from the country in question. You can also browse the websites of major retailers such as Amazon, provided they serve the concerned region.

Finally, you can calculate the value of insurance using the formula below:

Insurance Rate*Total price of transported items = Value of Your Insurance

Is cargo insurance worth the money?

The freight insurance compensates for any damage caused to the product during transportation. The goal is to reimburse the owner only if the carrier fails a secure delivery. The coverage and pricing vary according to the selected plan. These policies could be different for land, air, or marine shipment and may well underwrite international or local shipping.

What is the optimal freight insurance?

Most people think of the products’ actual value as the sum insured, but this just means that they’ve got under-insured freight. This sort of action is typical for people who buy insurance plans just for the delivery of used products.

A better approach is for the customer to inform the insurer that his merchandise is old and used.  We recommend that customers check if the total value of insured goods in the new net cost of the used products at its final destination alongside all the cargo, duties, and even the landing charges. Otherwise, the customer might have to bear some loss. This will be caused by the implication of an “average” because the value of the used product in the market would be lower than that of replaced products.

When a consignment is deemed under-insured, it is usually because the net value of products that have arrived is more than that of the insured product. Thus, the insured is forced to pay the loss when a percentage of remuneration is deducted from the under-insured price.

For instance, if a chair has its value declared at $30 but its actual cost happens to be $100, this then would be taken as under-insurance.

Over-insurance is un-welcomed in the same manner as under-insurance, mostly because it makes you pay more money to over-insure your goods.

How is freight insurance calculated?

You can always calculate the amount using the following formula:

Total Cost of Delivered goods*Insurance Rate= Your Insurance Value

What is the total cost of your shipped goods?

Based on your insurance plan- Comprehensive or Basic- the total cost of shipped goods will either be a lump total or just the sum of the price of each product.


Basic– This plan commences only if your entire consignment gets misplaced, i.e. if only a chair is misplaced, but your other products are intact, no claim can be applied. Thus, the individual cost of each item isn’t important, but it is the lump sum that matters.

Comprehensive– Unlike the basic plan, a comprehensive plan takes into account both the damages and a missing item, which means that claims made for each individual item are solid. In other words, if one of the televisions inside your consignment somehow cracks, the insurer is obligated to cover for your damage. Hence, opting for a comprehensive plan is recommended.

High rates of Insurance (3-6%)Comparatively less Insurance Rates (1-3%)
It covers both, damaged and misplaced productsOnly concerned with missing items
Claims can be made for each discrete itemClaims can only be made for entire consignment
Endorsed, more value for moneyIneffective coverage, not recommended


What factors govern the insurance costs? – It is evident that the basic coverage will always be more economical than comprehensive coverage.

You always get what you pay for!

The value of insurance is always the product of the Total Cost of the shipped item and the relevant insurance rate.

Claiming your freight insurance:

Couriers will do anything they can to minimize their exposure to damage, so even if your consignment is damaged or gets misplaced, the responsibility to prove them guilty falls on your shoulders. You will eventually have to prove one or more of the following:

  • The damage was done when the consignment was under the carriers’ care.
  • The carrier was delinquent in handling of your consignment.

Do not waste time if you have to make a claim

You must submit a claim within the allotted time. This stretches from a day to a couple of months. Make sure you look for this timeframe on the certificate provided by the insurer.

Salient details are worth pursuing…

Other than what is common knowledge like contact info, it’s important to remember specific details, like who packed or unpacked the consignment, or where and when was it stored. You can always pin the e-mail or keep a hard copy; it comes in handy when you need it.

To put the often misunderstood details in context, here are some details:

  • Inventory Number: This is significant because each item has its own unique inventory number. Every carrier provides you with a list containing these for each product which is a part of your shipment.
  • Item’s Room: This cites the room the product was kept in before packing. For example, a bedroom or a kitchen.
  • Item Description: This is a descriptive copy of the item. E.g. Book Shelf, brown, white stain, four rooted shelves, etc.
  • Damage: Describes the condition – Missing or cracked/damaged. Tells where the damage is. (For instance: top right corner of screen)
  • Manufacture date and the date of purchase- Make sure you write down the date the item was purchased on; a used item would have a different date for when it was bought and when it was manufactured.
  • Original Price and Renewal price – Write down the amount you bought it for in the retail price section. Also, lookup for a similar item online, and then put down the renewal cost same as the item you found online.
  • Claim for Coverage -If the product is damaged, you should only enter the cost needed to repair it. Otherwise, if the product has been misplaced, make sure to input the amount the product is valued at. The underwriter has all the rights to ask you for any evidence of ownership or the valued amount of the product you’re claiming to be damaged or missing.

Since carriers almost always limit accountability in one form or another, it is highly unlikely that you’ll be compensated for the full value of your damage.

It’s usually a good idea to check out the back of a bill or payload, it’ll give you a better idea of what damages can the courier cover.

Few suggestions for traders

Here are some important tips to remember before you get cargo insurance.

Question the carrier: Steer clear of coverage gaps

“It’s in your best interest to work with an experienced insurance guy, get the courier to answer the following question:

  • Who carries the responsibility of insuring the freight – the vendor or the buyer?
  • At what point does the item change ownership – from merchant to customer?
  • What are the rules and regulations of the insurance?
  • Where is the insurer’s base of operations? If a product is being imported, and the buyer buys insurance from the vendor, the claiming process can become significantly complicated.”

In-case a product has been misplaced or has been damaged, all these questions will be of massive help when you make your claim.

Choose an agent that has prior experience in the cargo insurance industry

Just like any other field, it is in your best interest to work with people who have a good amount of experience in the concerned field of work. Insurers who have vast experience in multiple modes of delivery are better suited for such jobs as they have better know-how of how other people and companies operate.

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