What types of shipping insurance exist and what to look out for?

Anyone involved in the freight business knows that at any point on a voyage, unexpected situations can occur and become very challenging.

That is why many freight forwarders stress the need for safe packing and loading of goods, knowing that it is impossible to predict natural events and therefore to guarantee 100% of a shipment.

If experience tells us anything, it is that not even by packing thoroughly, stacking the pallets carefully and loading the cargo, as suggested by the forwarder, can we be absolutely sure that the goods will arrive safely.

The importance of shipping insurance

Is shipping insurance necessary? As we mentioned, even by taking all possible precautionary measures, it is still difficult to avoid damage to your cargo.

Factors such as whether or the lack of proper packing by other shipments on board, in the case of shipping groups, can easily damage your cargo.

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For this reason, in addition to designing a safety plan according to the type of cargo and the type of route to be used, it is essential to take out a good shipping insurance policy.

Insurance becomes even more significant when it comes to international shipping.

Different types of shipping insurance

As with health and/or life insurance, there are a wide variety of shipping insurance policies. Each one, offering its own coverages and limitations.

That said, there are two types of shipping insurance that stand out above the rest:

Land cargo insurance

As its name indicates, land cargo insurance covers your shipment while being transported by land (road or rail).

And not only while the cargo is inside the transport vehicle, but also when it’s being transported or managed by cranes or other utility vehicles

Coverage: loss, theft, collision damage and other risks.

Marine cargo insurance

Marine cargo insurance covers eventualities that may occur during sea or air transport. Unlike the land cargo insurance, this applies to international transportation.

Coverage: damage from loading and unloading of the container, bad weather and other incidents that may damage the cargo.

It is important to underline that these can be either permanent or for a specific duration, being the latter the most economical and recommended, as they can be obtained and detailed for each and every shipment.

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Types of marine cargo insurance coverages

Cargo insurance coverage may include transportation by land (road and rail), sea and air, with the degree of coverage varying according to the details of the policy.

In general, this type of insurance is governed by ICC clauses, which in turn are classified into three different degrees of coverage A, B and C, being A the most protected.

1. All risk

The all risks coverage is the policy that offers greater coverage with a wide large of protection against unexpected events that do not depend on the shipper.

In general, it usually covers a large part of the physical losses and damages as a result of external factors.

The type of coverage applies for what’s deemed as “approved” or “general” goods, which are goods that are new and not easily susceptible to losses and damages.

What’s excluded:

●???????Damage caused by poor stowage.

●???????Damage to cargo as a result of negligence.

●???????Inherent vice.

●???????Customs rejection.

●???????Cargo abandonment

●???????WSRCC: War, Strike, Riot and Civil Commotion.

●???????Loss of profits.

●???????Losses due to non-payment.

●???????External factors such as natural phenomena, pollution, pandemics, etc.

●???????Fraud.

2. Named perils policy

Unlike all risks policies, named perils policy only protects the losses caused by the causes described in the policy. The most common are:

●???????Collision between two vessels

●???????Vessel sinking

●???????Derailment

●???????Meteorological phenomena

●???????Non-delivery

●???????Fire

●???????Theft

3. General average

General average is defined in article 347 of the LNM as that act in which "damage or expenditure is intentionally and reasonably caused for the common safety for the purpose of preserving from peril the property involved in a common maritime voyage”.

In case of extraordinary circumstances at sea generate losses, these losses must be borne proportionally among the different cargo owners on board the vessel.

Therefore, the owners of the cargoes that have not suffered damage in these specific circumstances must financial compensation to those whose cargo has been damaged.

In case of refusal to do so, the shipping company will have the right to keep the part of the cargo proportional to the compensation indicated in the policy.

With this coverage, your insurance company will be responsible for paying the compensatory amount and, without general coverage, the person with non-affected cargo will be legally responsible to contribute the portion of the claim,

Other aspects to take into account when taking out a shipping insurance policy

Before signing your shipping insurance policy, do not forget to check whether it has excesses, as well as to read the fine print to avoid unnecessary surprises. Prevention, when it comes to shipping, is much better than cure.

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