What is cargo insurance?

Cargo insurance is an insurance policy taken up to protect against loss of or damage to your goods while they are being transported.

The policy is meant to indemnify you if there is any loss or damage to your cargo. Cargo insurance would cover the goods while they are being transported over sea, air and land (includes parcel post and carryings by courier service).

Although the term "marine cargo insurance" is sometimes used, it actually includes cover for the land transit commencing from the moment the goods leave the storage until they arrive at the final warehouse.

Why should I buy Ocean Cargo Insurance?

While physical damage on transit claims may not be a problem, importers and exporters should be aware that over 50 voyages a year encounter heavy weather where shipping containers are lost overboard.

Due to the international policy of all shippers with safe-landed cargo contributing to the loss will require that the owner of the goods either put up a cash security, post a bond or will be unable to have the goods released from the carrier until a financial guarantee is given to respond for the contribution.

With an open cargo policy, the insurance company will post the bond and ensure the speedy release on owners' cargo.

How much insurance do I need to buy?

The standard practice is to cover the invoice cost plus freight plus a percentage to cover the anticipated profit (normally 10% to 20% is adequate).

The largest shipment anticipated with the added freight and the percentage of advance added is normally the policy limit.

The shipments can be reported monthly to the Company and billed at the end of each month, so unlike property policies, the cargo policy can be issued on a "pay-as-you-go" basis.

What is the difference between a single voyage policy and open cover?

Single Voyage Policy
This is the most popular form of cargo insurance cover. A voyage policy, as its name implies, offers coverage for a particular voyage for which is is taken up.

It offers coverage from the time the cargo leaves the seller, while it is in transit and until it reaches the buyer.

Often, the port of loading, transhipment and discharge are also required to be disclosed in the proposal form.

Open Cover
An open cover is not an insurance policy. It is actually an agreement between the insured and the insurance company to insure all the shipments which fall within the terms and conditions agreed by both parties.

These terms and conditions which are agreed in advance include details of voyages, maximum value of cargoes carried in any one shipment, nature of cargo and packaging and rates applicable. The insured would then have to declare his shipments to the insurer on an individual or monthly basis.

As long as the details of the shipment comes within the terms and conditions of the open cover agreement, the shipment is automatically covered.

The insurer is also obliged to accept all declarations made by the insured under the open policy if they come under the terms and conditions of the open cover.

The open cover is especially beneficial to those who ship goods frequently as it saves them the need to apply for cargo insurance for each of their shipments.

There would also be no need to wait for these individual policies to tbe approved because, as mentioned, all shipments are automatically approved if they come within the terms of the open cover and a declaration is made for the shipment.

If I buy on terms of sale where I am not responsible to insure the goods, how can I insure the goods?

If you are the buyer and are importing goods from overseas on terms of sales such as C.I.F. (Invoice Cost, Insurance plus Freight), where you are not required to insure the goods, you may still have a "contingent" exposure that you could cover if the seller placed coverage that was "limited" and not offering the broad terms available in the insurance marketplace in your country.

Why isn't this "cargo" exposure covered by my other policies?

Cargo insurance is much different than other liability or property policies, the scope is international and the extensions of coverage available are specific to the industry and broader than other lines of insurance.

An example of an extension that is unobtainable in other lines of business is War Risk Coverage.

The "cargo insurance" is international and all coverages have been created to give the innocent shipper or importer the broadest protection available from most external causes of loss.