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Cargo Insurance Guide

How much would you stand to lose if your cargo was damaged or lost in transit? If freight damage or loss could be costly for your business, you should invest in insurance. Cargo insurance allows you to file a claim to your insurance provider for damages that occur in transit, with a few exceptions depending on the policy. You’ll recover the damages in full, making your deductible your maximum fina­ncial loss.

cargo insurance guide

Should You Insure Your Cargo?

If risk reduction and peace of mind are not incentive enough to insure your cargo, there are several other reasons you may want to invest in a cargo insurance policy.

When you’re importing goods from outside the country, the foreign manufacturer may have insurance for the cargo. However, their insurance policy will likely be through a locally-based provider, and if you end up having to file a claim for damages, the process can get complicated. When you obtain your own insurance, you have U.S. federal and state laws on your side.

In some cases, you may be required to purchase an insurance policy. Some smaller exporters require their customers to insure their freight as soon as it leaves the manufacturing facility. Many countries also require an insurance certificate for all goods entering their borders.

Types of Cargo Insurance Coverage

There are many different insurance policies available for cargo being transported by landsea, or air. It’s important to look closely at what is covered and excluded in each policy so that you can choose the one that best mitigates your financial losses. Some of the most common types of cargo insurance coverage are:

  • All Risk: This type of policy typically covers any physical loss or damage from external causes, with some exclusions listed. Things this type of policy should cover include collision with an external object, jettison, train derailment, truck overturning, deliberate destruction, improper stowage by ship owners, theft, and acts of God (e.g. earthquake, lightning strike).
  • Free of Particular Average (FPA): This is a Named Peril policy, which will list exactly what is covered. It is important to note that theft is usually not covered under this type of policy. The policy usually covers collision, stranding, burning, sinking, train derailment, truck overturning, and some acts of God.
  • Shipment-by-Shipment: This is insurance coverage through the carrier who is shipping your goods. There may be certain exclusions, including defects in the transportation vessel, criminal acts on the part of the vessel’s crew, acts of God, and acts of war.
  • International Cargo Insurance: Global shipments create a greater potential risk of damage or loss. Insuring international cargo helps mitigate the risk for these shipments from piracy, hijacking, and other disasters, especially in more dangerous regions.

How to File a Cargo Insurance Claim

If you receive a shipment and discover that your goods have been damaged in transit, you should file an insurance claim as soon as possible. Here are the steps to take:

  1. Note any shortages or damages on the bill of lading, being as detailed as possible. Do not give a clean receipt; a clean receipt is a statement that you have received your goods in an undamaged state, which could invalidate your insurance claim.
  2. Take pictures of the damage to the shipment.
  3. Hold onto the damaged freight. You will need to hold onto it as evidence until your claim has been resolved.
  4. Send notice to all the parties involved in the supply chain (the supplier, the carrier, port authorities, etc.).
  5. Notify your insurance provider and submit a claim. Your insurance provider should send you their official claim form upon request if it is not available on their website.

After receiving your claim, the insurance provider will evaluate all available evidence. If your claim is approved, the insurance company will cover the cost of the damaged goods.

Get Cargo Insurance from Global Shipping Services

If you are uninsured, receiving compensation for goods damaged in transit becomes much more challenging. Avoid putting yourself in this situation by acquiring a cargo insurance policy before shipping your merchandise. In addition to providing freight forwarding services, Global Shipping can help you obtain insurance to protect your goods from many types of damage that can occur in shipping. Contact Global Shipping Services today to receive the insurance you need.


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