“I ALREADY HAVE INSURANCE” -Many insurance buyers are unaware that a separate cargo policy should be a part of their insurance program . Clients often believe that their property insurance policy, or their freight forwarding company, protects them from cargo losses.

The problem is that most standard property policies do not cover goods in transit. Those that do, provide limits that may be inadequate to meet your clients’ needs. And, the company that you hire to transport goods may not cover losses – unless insurance is purchased from them. No cargo carrier is obligated to pay for losses which occur beyond their control. Furthermore, international law typically limits the liability of ocean of air carriers to $500 per package and the liability of air carriers to $9.07 per pound. Even truckers and warehousemen can limit their liability for loss according to tariff.

Manufacturers, retailers, wholesale-distributors, import and export companies – what do they have in common? In today’s global marketplace, chances are that businesses in these industries have some level of international shipping exposure and need cargo insurance for their goods.

The extreme rigors of transit – long extensive lifting, theft, motion, shifting and bad weather – almost guarantee that some goods in transit will suffer damage. In fact, approximately 30 percent of losses in transit are unavoidable, due to forces over which neither the owner nor the carrier of the goods has control. To put the need for cargo insurance in perspective, consider a recent report from one of the world’s leading marine underwriters, Lloyds of London, that on average, a ship sinks every day. Many of those ships carry cargo, maybe even cargo shipped to or from one of your clients. Losses may also occur to goods shipped to or from one of your clients. Losses may also occur to goods shipped internationally by air transport.

The Pitfalls of Protecting Goods through a Freight Forwarder
You may be insuring your goods in transit though a freight forwarder. Although this may be easiest, fastest, or cheapest way to go, in most instances this coverage doesn’t provide the same protection that an ocean cargo policy does. If you are currently buying your coverage from a freight forwarder, their risk or loss may be greater than they realize.

Here are some questions you may want to ask:

What is the value of your client’s typical international air or ocean cargo shipment?
Does the freight forwarders’ coverage meet their specific needs or is it designed for general coverage for a wide range of commodities and trades?
Are insurance costs specific to their commodity or are they being charged a higher rate due to the general nature of the freight forwarder’s calculations?
Is the freight broker providing first party coverage or only assuring that there is liability coverage in place for the cargo carriers?
Does the freight forwarders’ coverage include protection for warehousing worldwide, domestic transit, installation, salesmen’s samples and exhibitions? Are there additional premiums for these risks-if they’re covered at all?
Who will your clients call for claim support and adjustment?
Are there restrictions or coverage limitations in the freight forwarder’s policy that could have adverse effects on their shipment?
Is coverage extended even after the goods reach the consignee? Is the policy continuous until cancelled?
Is there protection if the end buyer declines to make payment for or accept the shipment due to damage or irretrievable?

While your specific commodity may be less susceptible to damage and loss than others, they still face the risk of catastrophic loss or loss due to “General Average”. “General Average” applies to good shipped by boat and means that if some cargo or part of a ship is sacrificed to save the voyage, you are required to pay a proportional part of the loss even if the cargo is not harmed. Without insurance for the shipment, you would be required to post a cash bond before receiving the cargo.

Source: The Hartford