Do freight forwarders insure automatically their clients’ goods?
First of all, you must know that it isn’t mandatory for a freight forwarder to insure the shipment of a client.
Also, depending on the incoterms used for the transfer, the insurance may be included or not in the freight service. Most of the time it isn’t, so the customer has the responsibility to verify if its shipment is covered. Then he can ask for an insurance where appropriate. Also, there isn’t unique insurance policies protecting your goods from A to Z.
Even more when your goods are transiting through several countries. For example, there is insurance for the warehousing, for the freight between two countries, or for a sea transit which is bulk in nature… No insurance companies are providing an “all inclusive” insurance package.
For a freight, via cargo vessel or other methods, SINO Shipping can provide you a freight insurance. It will cover your goods from damage and breakage. Without subscribing to an insurance, you’re exposing yourself to unpredictable problems.
In fact, carriers are lightly impacted in case of loss of your goods or delay of delivery. The financial compensation that you will receive depends on the value of your shipment and the type of shipping.
SINO Remark: Conditions vary depending on the transport, national or international but also on the declared value of your goods.
Freight insurance – What you need to know
We negotiated with the best certified insurers to select the most attractive package for our clients, both in terms of cost and safety. Our insurance is limiting considerably the risks for your enterprise. A supply loss can be terrible for your business.
What is the freight insurance?
Legally, it is a contract established between an insurance company and an insurance holder. All carriers have to bear a minimum insurance rate, known as “Carrier liability”.
However, the carriers' responsibility brings a tiny coverage. It is called the “Hull insurance”, which covers the body of the ship, its equipment and sometimes its crew from natural disasters, vehicles accidents or war acts. As you understand the shipments are not covered in this situation, so we cannot say it’s a reliable coverage.
SINO Info: Consequently, shippers can ask for a cargo-insurance to protect their goods against losses, damages or theft. Usually, the goods are covered during their warehousing and their transport, until they reach their destination.
What are the limits of the freight insurance?
This cargo service is limited, of course. For instance, during a shipping by truck in the USA, the freight insurance doesn’t protect against all losses that can be caused by the carrier, under certain laws. There is no unique form of cargo insurance, that a carrier could buy to be totally covered.
There are several types of cargo insurance, some are named “all-risks”, “large form”, “legal liability”, and “trucking freight”. What you must know is that depending on the events that caused the damage, loss or else, you may not be covered.
*Usually, it is important for the shipper to document their cargo value in case of dispute, loss or damage. You might also work with an agent and an attorney to understand the process and be sure that you’re covered.
How much will cost my cargo insurance?
*It depends on your items and freight value.
SINO Note: The method of calculation of your insurance cost is the following. You’re additioning the value of your goods and the value of your freight, then you apply a 1-3% factor on it, depending on your products’ category.
Your insurance cost = (Goods’ value + Freight value) x 1-3%
Types of shipping insurances
The cargo insurance can be taken for national and international transport. It is very hard to standardise an insurance in different countries at the same time. We can divide this insurance in several categories:
The transfer insurance is covering freight charges for non-delivery of the goods. This will provide you a reimbursement by the insurance company, if the goods are not being delivered, or if the freight contract is not honoured by the freight company after being paid. In case of a delay, this insurance is not applying. It can be useful if the freight is as expensive as your goods.
Marine Cargo Insurance
Despite its name, this insurance covers your goods and commodities for an air, land or sea transport. It covers trucks, vessels, planes and other vehicles. Here, the transport and the goods are covered against damages caused by the loading/unloading, climate, piracy, thefts, accidents and other problems.
Mainly, it covers international transport. Your goods will be covered during transhipment processes also.
*There are policies that can help you to understand more about these concepts.
These policies are :
- Open insurance loading policies: There are two offers about this policy, the renewable or the permanent policy. A renewable policy must be renewed after each police control, contrary to the permanent one. The permanent policy can be established for a definite period allowing unlimited shipments within this period.
- Particular average policies: When an enterprise reaches an insurance company or an insurance broker, they can ask for a specific freight policy. These policies are also called journey policies because a single journey will be covered by the insurance contract. It’s a type of insurance in which losses are only recovered by cargo owners, regarding particular average loss.
- Conditional insurance policy: In certain cases, not the seller but the customer is responsible of the insurance of the goods against loss or damage. There are risks for the client, if some goods are damaged during the transport and he refuses to accept them. In some cases, customers are not covering their goods and are denying their responsibilities. In such circumstances, sellers can ask for a financial compensation in front of a law court. This can become very expensive to one of the parties involved in the dispute.
Advantages of the cargo insurance
This service is covering transfer by air, sea, road or rail. Thanks to this insurance, the following aspects are covered:
This coverage offers an extended protection against damages and losses caused by external factors. However, despite the “All-risks” name, you must know the included and excluded aspects of the contract. This insurance covers your goods against:
- Damages caused by an inappropriate packing
- Cargo desertion
- Customs reject
- Dishonest employee
Free of charge coverage (related to marine insurance)
The coverage clause “free of charge” excludes the coverage of partial losses on the cargo, except those that results of the grounding, the break down, the combustion or the collision. Another important aspect is that the shipper doesn’t pay for the minor losses (percentage determined at the beginning) and can be liable only in major cargo losses case. This coverage belongs to a special category and covers only precise risks. There is a difference of coverage depending on the warehousing place.
Here are the risks included in this policy :
- No delivery
General average coverage
This coverage is a staple requirement for ocean freight. More precisely, it only covers a partial loss of the shipment. This requires that all the other shipment owners pay amenities to the proprietor of the lost cargo. The value amount is shared proportionally to the value of other cargos onboard, so other owners that are possessing goods on the vessel will pay a part of the missing one.
The contract is applicable when the shipment is discharged of the vessel and transported to the client’s warehouse. Insurers will only compensate for the insured cargo, and not for cargo of other proprietors.
If you’re still not convinced
In which situations a marine cargo insurance is necessary?
For security, because in international trades, competition is rough on markets. Insurances are unneglectable to protect shipments from the occurrence of a bad event, as it can be lethal and ruin an enterprise if there’s a missing.
In some countries, the customs duties are calculated with the CIF value of the products as a base. So, if there aren’t any insurance documents testifying of the coverage of the goods, customs officials might decide to increase the customs duties.
So, should you ask for a freight insurance?
After reading this article, we hope that you realise how important it is to insure a cargo for a freight. Otherwise, think about the impact you may face in case of troubles.
- How your enterprise will endure a full cargo loss?
- What to do if the vessel transporting your cargo is going underwater?
- What if the truck handling your freight is involved in a major collapse?
- Your enterprise is liable for part of the losses. How can it affect you?
Accidents can happen. Consequently, shippers must ask a freight insurance to protect their enterprise when bad events are occurring. If you want to know more about the protections adapted to your situation, don’t hesitate to contact SINO Shipping, we are always happy to help!
🛡️ What is transport insurance?
The law requires each courier to take out certain mandatory policies, this is called carrier's liability. But this is small and covers a very small range of risks such as natural disasters, vehicle accidents and acts of war that could damage your goods. For this reason, many deliveries are insured through cargo insurances in order to insure against damage.
⚠️ Does the transport insurance have limits?
Cargo insurance can have weaknesses, especially when you carry out road freight in the USA, you will not be protected against all damages due to the specific legislation of each state. Moreover, no such insurance can provide complete protection against risks.
🔐 What is comprehensive insurance?
This insurance offers a high level of protection against damage or loss due to external factors. In spite of the name of this insurance, there are some aspects that you should be aware of that are taken into account and not taken into account in the contract.
🛑 What is the purpose of the special average coverage?
This coverage does not include compensation for partial loss of cargo or hull unless caused by sinking, grounding, collision or combustion. An important point about this coverage is that the seller is not liable and will not have to compensate anything if the loss of the cargo is significant.
🚨 What's the warehouse cover for?
It is when the goods are unloaded from the ship and transported to the warehouse of final destination that this contract is applicable. Only the holder's merchandise will be compensated by the insurer and not that of another owner.
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