Importance of Cargo Insurance

Anything can go wrong at any time.

It is better to be prepared to cover the loss rather than repenting on it later. Freight forwarding is a complex process that involves multiple parties. Damage, spoilage, and loss can occur as a result of adverse weather, geopolitical complications, theft, and other factors.

Freight insurance is the best way to remain cool without the concerns stated above. Proper coverage would help you recover the financial loss. It is also vital to maintain the faith the clients have in you.

What is cargo insurance?

Cargo insurance is the provision to recover the value of the cargo in case of any unforeseen eventualities.  You can pay a specific percentage of the value of the goods and buy the policy. The cargo insurance would help you get the money back in case of theft, damage, loss, fire, or spoilage of the goods.

Many have the misconception that cargo insurance is automatically included in the package. It is not like that. Either the shipping company or the consignee can purchase the cargo insurance by paying the premium amount. The process has minor differences depending on the region. You cannot expect everything to go fine all the time. Hence, it is best to buy cargo insurance for the freight.

Importance of cargo insurance

Let’s look at some of the importance of  freight insurance.

• No financial loss even if the cargo is lost or damaged.
• The consignee can have peace of mind.
• It improves the credibility of your firm.
• Clients can be paid the value of their property in the event of an unfortunate event.

When do you need cargo insurance?

You must opt for cargo insurance every time you forward a shipment. Accidents or mishaps can occur at anytime. They do not occur after giving you prior notice. Nonetheless, it solely depends on you when to opt for cargo insurance.

Freight insurance may not be necessary if the value of the cargo is negligible. Otherwise, it is best to buy freight insurance even if you are hiring the top freight forwarder in the world. Although the freight forwarding services are trustworthy, weather scenarios or any other unexpected situations can destroy the plan. Eventually, causing loss of cargo

We suggest you buy cargo insurance whenever you export or import goods. Paying a small percentage of the value of the cargo is better than a complete loss of money due to theft, damage, or accident.

Types of Cargo/Freight Insurance

Freight insurance is of two types mainly, viz., land cargo insurance and marine cargo insurance.

Land Cargo Insurance: 

Land cargo insurance is for goods transported via road or rail. The value of the goods would be covered by this insurance. Normally, land cargo insurance is for domestic freight forwarding.

Marine Cargo Insurance: 

Even though the term "marine" indicates shipping via sea, Marine Cargo Insurance covers transportation by both water and air. Marine cargo insurance is an essential thing whenever you ship by sea or air. An increasing number of piracy incidents and unpredictable climatic conditions are the two concerns that amplify the importance of cargo insurance.

Types of Insurance Coverage

Clients can choose the type of freight insurance depending on their requirements. The different types of insurance coverage are:

• All Risk Insurance Policy: –All risk policy is comprehensive freight insurance that will cover the loss or damage of the cargo. Nonetheless, the policy will not cover the spoilage or damage of the products, which are inherently prone to damage. The loss of cargo due to the following will not be considered for compensation:
• Damages due to natural causes like storms, floods etc
• Loss, damage, or spoilage caused by geopolitical situations, war, riots, etc.
• Negligence of the consignee
• Defects or damage due to custom-related formalities
• Delays in payment and consequent damages to the product

• Named Perils Policy / Free of Particular Average Coverage – Major damage due to many causes that are not included in the all-risk policy is covered by this type of freight insurance. The reasons are:
• Natural causes or acts of god
• Accident/ collision of the cargo ships
• Sinking
• Theft
• Derailment of the cargo carrier
• Non-delivery of cargo due to other reasons
• Single Coverage Policy - This policy is ideal for those who do not ship cargo frequently. A single coverage policy is also called a specific coverage policy. The freight for a specific shipment is covered under this policy.
• Warehouse to Warehouse Policy – Warehouse to warehouse policy covers the shipment from the moment it is unloaded from the ship or aircraft and on its way to the warehouse.
• Contingency Policy – The contingency policy is aimed at the shipping company, wherein the consignment is damaged and the company is asked for compensation. It is a cost-effective freight insurance policy that is beneficial for the shipping company in Oman.
• General Average Policy – General average policy covers only partial loss of the cargo.
• Open Coverage Insurance - open coverage policy can be purchased for a specific period. Clients normally opt for a period of one year. The firms that ship frequently should go for open coverage insurance. Two types of policies are there:
• Policy that can be renewed after the cargo has been delivered.
• The permanent type allows multiple shipments during the insured period.

3PL Assistance with Freight Insurance

Third-party logistics companies' assistance in freight insurance would offer extensive support and coverage. Being the best marine cargo insurance expert in Oman, Sohar Shipping can handle all the formalities to recover the loss.

To know more about our cargo insurance services in Oman and different types of freight insurances, call us now.