What are Different Types of Freight Insurance and Risks Covered Under Cargo Insurance
Does your business involve the import and export of goods globally? If yes, no one can understand the risks associated with exporting and importing products better than you. There are high chances of damage due to external factors or cause the loss of shipment while goods are in transit. Here is where freight insurance comes into play.
Freight insurance provides protection against physical loss or damage to freight during the shipment process. For instance, your shipment was lost at sea as the container ship sank, or your truck was involved in an accident. In both cases, your insurance company is liable to bear the cost of your loss.
That is why it is important to consider freight insurance for your cargo, especially for international shipping. If you are looking forward to buying a transport insurance policy, it can turn out to be a great decision. However, not all insurance companies provide this type of insurance. So, before you go ahead, carefully choose your insurance company.
In this guide, we will discuss the types of transit insurance. Without ado, let’s get started.
Types of transport insurance policies
Cargo insurance can be used for domestic as well as international shipping. However, cargo insurance is categorized as follows:
- Land cargo insurance: As the name suggests, this type of insurance provides protection against land-related transportation, including trucks and other automobiles. This type of policy is beneficial in the case of theft, collision, and other damages due to a disaster. However, remember that this insurance is only for domestic transportation & operates within the boundaries of a country.
- Marine cargo insurance: This type of insurance is ideal for transporting goods via sea or by air. This insurance provides coverage if the product gets damaged while loading or unloading the cargo, theft while sailing, climate contingencies, etc. This insurance is a must for international transportation.
Marine cargo insurance can offer you a wide range of insurance policies, including:
- Open cover: This policy is beneficial for export and import businesses. This policy includes all the marines sent to a client for 1-year.
- Specific voyage policy: This policy is tailored for the businesses that require coverage for a voyage and are required during the duration of their trade.
- Duty insurance: When goods are imported, custom duty is applicable at the port. However, in case of damage, the CIF value won’t suffice the real value of the goods. Here is where the duty insurance policy comes into play. This insurance covers those additional costs if the products get damaged during the transit process.
What type of risks are covered under transit insurance?
Freight insurance covers a wide range of risks involved in transporting cargo by land, sea, or air. It includes:
- All risk coverage: This insurance covers all types of physical losses to the cargo due to external factors, such as collision, truck overturning, theft, natural disaster, etc.
- Free of particular average: This insurance is the same as the all-risk coverage insurance. However, it doesn’t cover theft. Most of the insurance companies pay for significant losses.
- Shipment-by-shipment policy: This policy protects the carrier that will be used for the shipping of your products. However, it doesn’t provide coverage in case of an illegal act, flaws in the vessel, an act of God or war, etc.
The Bottom Line
Now that you know what freight insurance is, why it is important, the different types of insurance policies and what risks they cover, it is time to find the right insurance company that can offer you the best policy and protect your export and import business from financial losses.