One major goal of every business owner is to please his customers. Pleasing your customers comes with a lot of benefits. When you continue to please them, they would keep patronizing you, and they would even spread word about your business. This explains why it is very important for every business owner to ensure that his customers are always happy and satisfied.

Now, imagine that you have your business in Hong-Kong but you also have customers in the U.S.A or the U.K who patronize you regularly. Of course, you would need to find a way to get their goods to them after purchase. Most times, you would have to transport these goods by either sea or air.

Now, you are neither the captain of the ship nor the pilot of the plane carrying your goods, so you would have to trust the competence to get your goods to their destination safely. But unfortunately, this is not always the case, as many unfortunate events do occur that may lead to loss of life and cargo during transit. When this happens, the consignee (you) will have to bear the greater risk, as international insurance laws typically favor freight carriers. Though the freight carrier might give you a paltry sum as compensation of the loss, it is usually too meager you will have to bear the bulk of the loss. No doubt, this will hurt your business.

However, such an ugly situation can be mitigated just by getting a cargo/freight insurance cover. This type of insurance cover is a must-have for every business that involves transporting goods from one place to another. Now, let’s go into more details about cargo/freight insurance.

What is Cargo/Freight Insurance?

Cargo or freight insurance is a kind of insurance designed to cover for goods in transit. It does not cover for damages already incurred before the goods get to the freight carrier or after it leaves the freight carrier’s care. It is designed to cover for thefts during transit, damages in transit and all other conditions that affect the state of the goods in transit.

Types of Cargo/Freight Insurance

There are different types of cargo/freight insurance depending on the mode of transportation. Some of the common types include-:

  • Motor truck cargo insurance-: This is designed to cover for goods being transported by road using a motor car or a truck.
  • Marine cargo insurance-: Marine cargo insurance covers for goods transported by ocean or sea waterways.
  • Railroad cargo insurance-: Railroad insurance covers for goods transported by rail.
  • Open cargo insurance-: This is an insurance policy suitable for frequent shippers especially those involved in importation and exportation business.

Who is responsible for Cargo/Freight Insurance?

This usually depends on the arrangement you have with the other party. If you are the buyer (of raw materials, for example), you might be lucky enough to get a seller who also provides freight insurance for its goods-in-transit until it gets to you, the buyer. Otherwise, you might have to do it yourself.

However, if you are dealing with a foreign seller, it’s always better to insure your cargo yourself. This is because foreign sellers use foreign insurers and in the event that you would need to file a claim, it’s usually tough for you to deal with a foreign insurance company except, of course, you have an agent in the foreign country who can advocate for you.

What does it cover?

Cargo/Freight insurance basically covers all forms of natural and man-made disasters such as accidents, thefts, collision, damages, war, piracy or train derailment. However, the extent of coverage you would have would largely depend on the type of freight insurance policy you choose. But in order to be at peace, it is advisable to go for an ‘all risk’ insurance policy which would cover for most types of disasters.

How to Buy Cargo/Freight Insurance

You can either choose to buy directly from an insurance company or indirectly using a freight forwarder. If you are involved in a business that requires regular shipping, it is more advisable to buy your coverage directly from an insurance company. But if you only ship once in a while, then you can reduce costs significantly by buying through an intermediary like your shipping agent or your freight forwarder.

This post is meant to be a brief overview of cargo/freight insurance. If you need more detailed information on the topic, search online for relevant resources or contact a seasoned insurance professional.

Ajaero Tony Martins