Every importer and exporter knows that they face a certain amount of risk. Even over relatively short distances, incidents and accidents can always occur that may not only see some of the goods in transit damaged, but perhaps the whole cargo lost. Having adequate protection is important, and arguably the most important form of protection to have is Marine Insurance.
Marine Insurance is considered by many freight forwarders as essential. By definition, it covers any possible risk of damage or loss to cargo while in transit. However, the policy does not relate to the quality of goods being transported, such as sub-standard materials used in their manufacture or if there are equipment parts missing.
And, it’s not limited to transport by sea either. In fact, policies usually offer warehouse-to-warehouse coverage over 90 days, so your cargo is protected whether it is transported by air, sea, road or rail.
So, if your consignment of t-shirts from Vietnam is lost during a storm at sea, or your custom-made machinery is broken when a container falls off a truck, you have indemnity against those events. The policy covers such events as:
- accidental damage while in transit, including from fire
- theft of goods
- incidents relating to the ship, including sinking, capsizing, or being grounded
- often includes General Average, where cargo is jettisoned to prevent a ship from capsizing or sinking
- incidents relating to truck and train, including overturning, road accident, derailment
- loading and unloading of cargo
- while in warehouse storage between transport stages
What Marine Insurance Doesn’t Cover
Of course, while Marine Insurance is the principal mode of protection for cargo, it doesn’t cover every eventuality. These can vary, so it’s important to speak to your freight forwarder or insurance broker to ascertain the details of the coverage offered, but usually Marine Insurance does not cover:
- dangerous goods, like firearms and ammunition
- combustible substances, like fuel and chemicals
- damage due to poor packing
- transport by a third party
There are also other insurance policies that importers (and exporters) should consider. Here’s a brief run-down of the most significant.
Political Risk Insurance – Your cargo’s country of origin, or the countries it’s due to stop off in while in transit, might be politically unstable. This increases the risk of an overseas government intervening in your investment by either closing ports or airports unexpectedly, confiscating cargoes or otherwise freezing international traffic. This policy can cover your cargo in such events as a civil war, a coup d’état or major civil unrest, like a riot. Some policies also cover unexpected importation or exportation bans, or sudden trade agreement collapses.Product Liability Insurance – This policy protects against the risk of harm to customers or third parties by the product. For instance, liability can be a grey area so if a heavy box falls and injures someone, and it’s important to have a defense against claims that, since it was your box that fell on the person, that you are responsible. However, liability coverage does not cover goods that arrive spoiled or poorly made.Currency Insurance – International trade is greatly influenced by the currency markets, with sharp changes in exchange rates sometimes turning a healthy profit into a loss. Importers can protect themselves against this event through a Currency Insurance policy. While it cannot guarantee the expected profit is conserved, at least losses are avoided.Credit Insurance – This has nothing to do with transportation, and is of greater concern to exporters that importers. But when dealing with companies abroad, it’s common for business to declare themselves insolvent in order to avoid paying money owed. Credit insurance can protect an exporter for up to 90% of the sum owed.
Getting Marine Insurance Through ICE
International Cargo Express has always recommended its customers to take out Marine Insurance but, according to Managing Director Ronald Spahr, it’s an optional extra that not everyone feels compelled to take.
“It is a choice, but it is one that we encourage our customers to get,” he says. “We have customers that have been with us for 25 years, and they have never had a problem, but the fact is they are flying without a net. If they suddenly have a problem, they have to pay for it themselves.
“The risk is something that every customer has to weigh up. After 25 years not paying Marine Insurance, they can argue they save money. But then, something does go wrong and they face perhaps a $100,000 claim.”
The likelihood is greater than many think, especially with such aspects as General Average to consider. This is where a ship captain jettisons some cargo in order to save the ship and crew. But the owners of all the rescued freight have to pay proportionally for the cargo that was jettisoned. It could be 3 years after the event, but even if you imported $1,500 worth of freight you might be hit with a $15,000 share of the lost cargo. Marine Insurance would protect importers in these situations.
Contact Your ICE Team
International Cargo Express is always happy to highlight the advantages of taking our Marine Insurance, especially for the small and medium-sized businesses that can suffer greatly from cargo loss, or a General Average claim.
To find out more about Marine Insurance, simply call your nearest ICE team and talk to experts who can help you towards better protecting your cargo, and narrowing the financial risks you face.
