Managing both international and domestic shipping is a challenge for all businesses.
Whether it’s coordinating air and ocean shipments, trucking, or multimodal movements, minimizing risks is a crucial aspect within every shipping plan. Freight insurance is an essential component of risk management, offering various coverage options. Freight insurance, also known as cargo insurance, is a type of coverage that protects the value of goods being transported against loss or damage during transit. It provides financial compensation to owner of the goods in the event of accident, theft, lost cargo, natural disasters, or severe weather conditions that may occur during the shipping process.
Freight Insurance
Freight insurance is important for businesses to carefully assess their cargo’s characteristics, value, and the associated risks to choose the most appropriate type of cargo insurance.
It becomes even more significant, especially with winter and associated challenging weather conditions. The significance of obtaining cargo insurance during this period cannot be overstated, as adverse weather poses a lot of risk to the transportation of goods. Snowstorms, icy roads, and extreme temperatures can lead to accidents, delays, and damage to cargo. Also, cargo in transit during winter is susceptible to various perils such as freezing and water damage, and temperature-sensitive goods may be at risk. In addition to physical damage, bad weather conditions and political issues can also disrupt shipping routes and cause logistical challenges.
A great example of the need for freight insurance is the current Red Sea crisis. Due to the attacks, shippers are taking consignments through the Cape of Good Hope, resulting in delays of about 20 days. It is also resulting in increased shipping costs, potential cargo loss, and the risk of damage to goods. Insurance could have helped offset those costs for some shippers.
There are several types of cargo insurance designed to meet diverse of shippers and cargo owners. Here are common types of it to consider for insuring your cargoes.
1. All-Risk Cargo Insurance
This insurance provides coverage for a wide range of risks such as theft, damages, and losses. It’s the most comprehensive type of cargo insurance.
2. Named Perils Cargo Insurance
This policy covers specific perils that are explicitly mentioned in the insurance contract. It covers fires, collision, sinking, natural disasters, and theft. Unlike All-Risk, it only covers the specific risks explicitly named in the policy.
3. General Average Insurance
This type of insurance covers losses that occur during a voyage when a ship or its cargo faces a common peril. The losses are shared among all parties.
4. Open Cover Insurance
It provides continuous coverage for multiple shipments over a specified period. Instead of obtaining individual policies for each shipment, a business can have an open cover policy. It is commonly used by businesses engaged in frequent shipping activities.
In conclusion, as challenging weather conditions and unexpected emergencies linger as risks, securing cargo insurance is a strategic and vital step for businesses involved in the shipping process. It provides comprehensive protection against the uncertainties posed, ensuring the smooth and secure transit of cargo even in the face of these challenges.
