Cargo Insurance
Cargo insurance is a type of policy that protects goods while they are being transported, whether by sea, air, road, or rail. It covers the financial risk of loss or damage during transit, ensuring that importers and exporters are not left to absorb the full cost if something goes wrong. For businesses involved in international trade, cargo insurance is a key safeguard against unexpected disruptions.
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Why Cargo Insurance Matters
Global supply chains are exposed to a wide range of risks. Goods can be damaged in handling, lost in transit, or delayed due to accidents and natural disasters. Without adequate insurance, companies may face significant financial loss. Cargo insurance provides peace of mind by shifting that risk to an insurer. It is particularly valuable when goods are high in value, fragile, or moving across long, complex routes.
What Cargo Insurance Covers
Typical cargo insurance policies protect against:
- Loss or damage caused by accidents, theft, fire, or natural events
- General average contributions, where all cargo owners must share costs if a shipping company sacrifices goods or takes emergency action to save a vessel
- Delays and related expenses, depending on the policy terms
When Cargo Insurance Is Essential
While some businesses take the risk of shipping uninsured, history shows this can be costly. For example, in 2012, a fire on board the MSC Flaminia container ship resulted in extensive cargo loss. Many shippers without cargo insurance were forced to pay out of pocket for damaged or destroyed goods.
Another widely reported case was the Ever Given vessel that blocked the Suez Canal in 2021. After the grounding, a “general average” was declared. This meant every cargo owner had to contribute to the costs of refloating the ship and covering associated losses, regardless of whether their goods were damaged. Those with cargo insurance had their insurers step in to cover these costs, while uninsured importers faced direct and unexpected financial demands.
Types of Cargo Insurance
Cargo insurance can vary in scope, but common options include:
- All-risk cover: The most comprehensive option, protecting against most external causes of loss or damage.
- Named perils cover: Protection only against specific risks listed in the policy, such as fire, collision, or sinking.
- Total loss cover: Covers only if the entire shipment is lost, for example, if a vessel sinks.
At Barrington Freight, we specialise in making your importing and exporting straightforward. From customs clearance to finding the right commodity codes, our expert team is here to assist. Don’t let the complexities of global trade hold you back. Reach out to Barrington Freight for efficient and reliable shipping solutions.
How Rates Are Calculated
Premiums for cargo insurance depend on several factors:
- Type of goods: Fragile, high-value, or hazardous goods are more expensive to insure.
- Mode of transport: Air freight typically has different risks and premiums compared to ocean freight.
- Route and destination: Some trade lanes are considered higher risk than others.
- Shipment value: The higher the insured value, the higher the premium.
Cargo Insurance vs Carrier Liability
It is important not to confuse cargo insurance with carrier liability. Carriers are legally responsible for some losses, but their liability is often limited by international conventions and capped at a low rate per kilo. In practice, this rarely covers the true value of the goods. Cargo insurance fills the gap, ensuring the full value of a shipment can be recovered.
Documents Required
To arrange cargo insurance, businesses usually need to provide:
- A commercial invoice stating the shipment value
- Details of the mode of transport and route
- A packing list and description of goods
- The bill of lading or airway bill
Our Partnership with Breeze AI
Barrington Freight has partnered with Breeze AI to make cargo insurance more efficient and transparent for our clients. Breeze AI’s digital platform integrates directly with our freight services, allowing businesses to arrange insurance quickly and with minimal paperwork.
Through this collaboration, our clients benefit from:
- Instant digital quotes for tailored insurance cover
- Faster policy issuance, cutting out delays and manual processes
- Improved visibility, with all insurance information stored securely online
- Simplified compliance, ensuring documents meet international trade requirements
Key Takeaways
- Cargo insurance protects importers and exporters from the financial risks of shipping goods.
- It covers damage, loss, and sometimes additional costs such as general average contributions.
- Historical examples, such as the MSC Flaminia fire and the Ever Given Suez Canal blockage, show how uninsured shippers faced high costs.
- Insurance rates are based on factors like shipment value, transport mode, and destination.
- Carrier liability is not a substitute for cargo insurance, as compensation is limited.
- Barrington Freight’s partnership with Breeze AI ensures a faster, more streamlined insurance process.
Cargo insurance is a practical investment for any business that ships internationally. By protecting goods in transit, it ensures trade can continue with less exposure to financial risk.
About the Author
Simon Poole began his career in production planning, quickly rising to manage 24-hour manufacturing lines and oversee a team of 140 staff. In 2007, he joined Barrington Freight, where he brought his operational expertise into the logistics sector. Appointed Operations Director in 2021, Simon now leads all day-to-day operations, including sea, air and European freight, working closely with clients and partners worldwide.
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