In this blog, let’s address marine insurance for your cargo. Whilst any form of insurance is never the most riveting subject of discussion, we all know it’s still very important for your import export business.

Arranging marine cargo insurance is crucial for both private individuals during relocations and businesses in international trade, as it protects against potential losses during transit.

Take the following news story for example, 277 containers washed overboard from this container ship:

What is Marine Cargo Insurance?

Marine cargo insurance protects your cargo not only when it’s on the water but for the entire journey of the goods in transit as per the specified “INCOTERM“. This could be from the warehouse where the goods are picked up, and/or the destination warehouse. It’s dependant on the INCOTERM so bare this in mind.

Incoterms aren’t something we are going to cover here but they’re an important part of an insurance policy so take the time to check out our INCOTERMS blog too.

Marine cargo insurance is a specialized type of insurance designed to protect goods against loss, damage, or theft during transit by sea, land, or air. This form of insurance is indispensable in the realm of international trade and logistics, offering financial protection against the myriad risks that goods face while in transit. Whether you are a small startup or a large corporation, marine cargo insurance policies can be tailored to meet the specific needs of your business. By purchasing marine cargo insurance, businesses can safeguard their shipments, ensuring that they are covered against unforeseen events that could otherwise lead to significant financial losses.

Marine Cargo Insurance

This footage clearly illustrates that accidents do happen and cargo ships lose containers perhaps more often than we may think. The seas that these vessels sail can get extremely treacherous so understanding how marine insurance works really is vital to any direct export business.

Marine cargo insurance can mitigate risks and minimize disruptions to business operations, allowing businesses to focus on their core activities. It’s obviously not as simple as the usual post or parcel insurance that we can buy down at the post office. It doesn’t take much to understand if your goods were to go overboard and you have to cover the financial value of the cargo shipment yourself, it will likely lead to a serious dent in your cash flow and in some cases can be fatal to your business itself.

International Shipping Insurance

Two simple but very important questions come to mind when seeing this report of shipping consignments being lost overboard:

Were the containers insured?
If so, was there adequate insurance cover to cover all the financial losses involved and would the shipper be able to make successful freight claims with their insurance company?

So, the first question, “were the containers insured?”, might sound like a silly question to ask but many shippers falsely believe that their cargo is automatically insured by the shipping line against loss or damage once the goods or containers are onboard.

It’s important to note that this is not always the case! You as the shippers should very carefully read the terms and conditions and contained in the shipping line contract of carriage and make sure you understand the services offered. As much as we all hate to read the small print, it really is vital, as if you neglect this, you are taking a massive risk should there be any unforeseen circumstances.

A marine cargo insurance policy provides comprehensive coverage against various risks associated with shipping goods by sea. This includes potential dangers such as harsh weather, accidents, and incidents that could lead to significant financial loss for cargo owners if not insured.

The Contract Of Carriage

The Contract of Carriage is printed in plain speak, on page one of the Bill of Lading and is there for all to read, including you. Make absolutely sure you read this and pay attention to all parts.

The contract of carriage will clearly set out the shipping lines liabilities under many different circumstances. Without going into the full detail of the many clauses that there can be, it’s very important to understand, you as the shipper WILL NOT receive full compensation for loss or damage of your UNINSURED cargo, except under certain circumstances, such as a General Average clause. Liability insurance is crucial for covering policyholders’ liabilities towards third parties in various scenarios, such as collisions and wreck removal. The scope of this clause and others is a little too much to delve into with this article but we do cover this in our online import export training course.

Adequate Shipping Insurance

Having “insurance” alone, as you may have guessed, may not be enough. If you’ve taken the key step to have your cargo insured, you must go the extra mile and make sure that your containers have adequate insurance.

Indemnity insurance, specifically marine protection and indemnity (P&I) insurance, provides coverage for vessel owners against third-party risks, including loss of life, injury, and damage to cargo.

As with car insurance, you would not want to insure your lovely, brand new Ferrari with just third party, fire or theft, you would need to make sure you have adequate insurance, fully comprehensive to cover any damage in an accident or any other circumstances.

Types of Marine Cargo Insurance Policies

Marine cargo insurance policies come in various forms, each catering to different shipping needs and volumes. Here are the main types:

Single Shipment Policies: Ideal for businesses that do not ship cargo regularly, these policies cover individual shipments. This type of policy is perfect for occasional shippers who need coverage for specific consignments.
Annual Policies: For businesses that frequently ship goods, annual policies provide coverage for all shipments made within a year. This option is convenient and often more cost-effective for regular shippers.
Open Cover Policies: These policies offer ongoing coverage for all shipments made by a business, making them suitable for companies with a high volume of shipments. Open cover policies provide continuous protection without the need to arrange insurance for each individual shipment.
Project Cargo Policies: Specifically designed for goods involved in project construction phases, these policies offer added protection against loss of revenue due to delays or non-delivery of goods. They are particularly beneficial for developers or project owners who need to ensure that their materials arrive on time and in good condition.

Coverage and Exclusions

Marine cargo insurance policies typically provide coverage for goods against loss, damage, or theft during transit. However, it’s crucial to be aware of certain exclusions or limitations that may apply:

Geographical Exclusions: Some policies may exclude coverage for shipments to or from certain countries or regions deemed high-risk.
Goods Exclusions: Certain types of goods, such as hazardous materials or high-value items, might be excluded from coverage. It’s important to check the specific exclusions in your policy to ensure your goods are covered.
Exclusions by Region: Coverage exclusions can vary depending on the country or region of transit. Understanding these nuances is essential to avoid unexpected gaps in coverage.

To navigate these complexities, businesses can rely on experts like Howden’s team, who can help clarify the exclusions and limitations of their marine cargo insurance policies, ensuring comprehensive protection for their shipments.

Your ABC’s

Container shipping insurance rates obviously vary but your insured shipping with either be Clause A, B or C.

Marine insurance policies help cargo owners mitigate liabilities associated with loss or damage to goods during maritime transport.

If you as the shipper have Clause A insurance cover, you are insured under “ALL RISK” insurance. Therefore, were they your containers washed overboard in the above news story, your goods would be covered and you would be able to breathe a sigh of relief! All you would need to do is contact your insurance company and ask them for a claim pack and start the claim.

If you had Clause B cover, you would also be covered as containers being washing overboard is covered. Again, take that sigh of relief, go and make a cup of tea and then call your insurance company!

However, if you as the international shipper had Clause C Insurance cover, you would not be covered and you would have to suffer the financial loss of those containers being lost.

International Commercial Terms

As mentioned previously, in addition to your shipping insurance, you must understand Incoterms and their roll in in international trade. International commercial terms, or Incoterms, outline the responsibilities, costs, and risks associated with the global transport of goods, and they play a crucial role in shaping insurance policies. You must take the time to understand these so we’ve written quite an in depth blog on what Incoterms are to get you started.

Liability Insurance Is Your Responsibility

Hopefully this story illustrated that cargo insurance whilst it may not be all that interesting to talk about, it’s really very important that traders fully understand what is and what isn’t covered by their shipment insurance policy. Even if you’re using a freight forwarder, never leave it to in the lap of the gods and certainly never ask a third party to ”Insure my Cargo”.

Businesses involved in importing or exporting goods require reliable transportation and tailored coverage that caters to their specific cargo needs.

You must take the responsibility for your own goods and be specific, making sure you have the correct shipping insurance cover for your cargo, otherwise you may well be throwing the cost of your insurance premium overboard to the bottom of the sea with those lost containers!

Marine Cargo Insurance Claims Information

In the unfortunate event of a loss or damage, prompt action is crucial to ensure a smooth claims process. Here’s what you need to do:

Notify the Insurance Company: Contact your insurance company as soon as possible to report the claim. Timely notification is essential for a successful claim.
Provide Detailed Information: Include a detailed description of the loss or damage, along with supporting documentation such as receipts and invoices. This information is vital for the insurance company to assess the claim accurately.
Adhere to Timeframes: Different modes of transport have specific timeframes for reporting claims:
Shipping Line: Within 3 days from the time of delivery
Airline: Within 14 days from the time of delivery
Road: Within 7 days from the time of delivery

By understanding the intricacies of marine cargo insurance and taking proactive steps to secure adequate coverage, businesses can protect their shipments and mitigate the financial risks associated with international trade.