Don’t forget about cargo insurance!

Whether you export, import, or ship domestically, cargo insurance is a vital part of every transaction.

Air, ocean, and trucking carrier liabilities are limited and without cargo insurance your goods (and your profits!) are at risk.

We highly recommend that all shipments be covered by cargo insurance! American Cargoservice offers cargo insurance for every type of shipment. Certain destinations or commodities may require special arrangements with our insurers.

Some shippers operate under the misconception that declaring value to a carrier is the same as being covered by shipper’s interest cargo insurance. While declaring value to a carrier may be a good idea, the protection it provides is minimal, and in most cases the carrier will charge a declared value fee, which may be as much as you would have paid to have your own cargo insurance with better coverage.

To win a claim against a carrier, the shipper must prove that the cargo was damaged in the carrier’s care, custody or control. This is particularly important in instances where a loss is attributable to an “act of God.” The carrier’s liability is always limited by the fine print in the carrier’s contract of carriage.

Another important point to consider is “co-insurance”. For export shipments, you should insure for enough to cover the costs of transportation and insurance, plus 10%. Insuring for “CIF plus 10%” is a common requirement in international letters of credit.

If you insure for less than that amount, insurance companies will figure that you have insured for only a percentage of the total value of the shipment. That means, if you have damage or loss amounting to 75% of the “CIF plus 10%” value of the shipment, you will be paid for only 75% of the loss.

What if you are the buyer in a CIP or CIF transaction, and the seller has arranged insurance? The seller’s obligation, unless specified otherwise, is to provide minimum insurance cover for the benefit of the buyer. That means you, the buyer, will have to work with the insurance company selected by the seller in the event of a claim (Under CIF or CIP terms, the risk of loss or damage passes to the buyer when the shipment is handed to the carrier at origin). it also means you may have less insurance cover than you think! It is a good idea to specify the type and amount of insurance cover to be provided in the purchase contract.
For more insurance related information, click here.