Cargo insurance isn’t always automatically included for all shipments. Pay a small fraction of the value of your goods, you’re protecting yourself for the day that the unexpected happens. Many try to save a little money by not insuring cargo, but here’s just some of the many reasons why that’s a bad idea.
1 - Because you’re a Seller or Buyer
Cargo insurance reduces shippers’ exposure to financial loss. Yet, so many shippers choose to risk importing and exporting goods without getting cargo insurance. Unfortunately, many shippers have suffered great loss for taking this risk. Getting cargo insurance means Worry-free international shipping
2 - Catastrophic Events Happen
Storms, shipwrecks, explosions, pirate attacks… which have caused the loss of many, many shipping containers. In one event, an entire shipload or more of cargo containers can be lost. Every year, catastrophic losses happen that affect many, many shippers. Those affected without cargo insurance, deeply regret their decision not to get insured.
3 - General Average – Expedite the release of your cargo
General Average means a general loss. The law of general average is a principle of maritime law whereby all stakeholders in a sea venture proportionally share any losses resulting from a voluntary sacrifice of part of the ship or cargo to save the whole in an emergency. For instance, should the crew jettison some cargo overboard to lighten the ship in a storm, the loss would be shared in proportion by both the carrier and the cargo-owners.
You may be required to post a bond and/or cash deposit to get release of your cargo following a general average – even though there was no loss or damage to your goods. By purchasing cargo insurance, your insurance company assumes the responsibility and expedite the release of your cargo.
4 - Who is liable for damage?
Some of the most common types of damage are outside a carrier’s liability, including fire, acts of God, strikes, accidents of the sea, insufficiency of packing, and more. With these regulations in place, proving a carrier is legally liable for your freight can be difficult.
Next to that, there are many companies handling your freight throughout storage and transit. It can make it difficult to trace where damage occurred or prove who is liable for said damage. With a cargo insurance policy, you are covered for these losses and don’t need to prove liability.
5 - Contractual Requirement
Shippers’ sales contracts may obligate them to provide ocean cargo insurance to protect a buyer’s interest or their bank’s interest. This is especially true when trade term is CIP ( Carriage and Insurance Paid To) or CIF ( Cost, Insurance, and Freight). Shippers should always pay attention to the small details of their contracts. Unfortunately, insurance sometimes gets overlooked and the shipper can be held responsible.
Failure to get cargo insurance when a shipper is contractually obligated to do so can not only subject the shipper to financial loss if there is loss or damage to the goods, but non-compliance with the terms of the contract with the buyer can lead to loss of sales and legal problems.
Litigation can quickly surpass the financial repercussions of uninsured cargo that is damaged or lost.
6 - Have more control over insuring terms
Relying on the buyer’s or seller’s insurance may be a viable option. But Shippers who purchase cargo insurance themselves are usually better protected than shippers who allow other parties in their importing or exporting transactions to handle the cargo insurance.