According to data published by CargoNet, businesses and consumers in the US lost cargo worth $23 million during the first quarter of 2015 alone. This was a significant increase from the $9 million worth of lost cargo reported during the first quarter of the previous year (2014). Although most of these thefts occur at storage locations such as warehouses (23%), transporters have also reported cargo thefts at truck stops (16%), parking lots (10%), and unsecured yards (10%). In light of these numbers, every transport business should own adequate cargo insurance. Below is some more information on this topic.
Definition of Cargo Insurance
Cargo insurance is a type of insurance policy that covers risks associated with the loss or damage of goods in transit as well as goods in storage facilities. This coverage remains valid while goods are transported from their point of origin to their final destination. Businesses require this type of insurance because suppliers and shippers may not cover losses incurred while goods are in transit/storage or they may offer inadequate coverage.
When to Purchase Cargo Insurance
Firstly, you should purchase cargo insurance if you intend to ship expensive, rare, or unique goods. Losing or damaging such valuable items could saddle your business with crippling legal and financial liabilities. This type of coverage will also come in handy when shipping beverages and food. This is particularly important because, according to CargoNet, 33% of all cargo thefts reported in the US during the first quarter of 2015 involved food and non-alcoholic beverages. Thirdly, cargo insurance is vital when shipping goods to regions where they are likely to be stolen while in transit or storage. In the US, California, Georgia, Texas, New Jersey, and Florida lead in the number of cargo thefts reported, according to CargoNet. Globally, a study done by FreightWatch International found that South Africa, Mexico, Brazil, USA, and Russia have the highest rates of cargo theft. Finally, this insurance product would come in handy when transporting fragile items.
Factors to Consider When Purchasing Cargo Insurance
Since cargo insurance is lightly regulated in the US, the terms and conditions tend to vary widely from one insurer to the next. As such, you should shop around and compare cargo insurance products offered by various insurance companies. Furthermore, scrutinize the fine print thoroughly because some policies cover almost every imaginable risk while others do not. For example, some policies exclude risks related to loss of market (buyers cancelling orders), warlike actions, any form of harmful radiation (such as nuclear radiation), and piracy. Alternatively, you can forget about the fine print and purchase an “all risk” policy that covers all cargo loss bases. Most suppliers and manufacturers use US-based insurers when shipping goods from overseas in order to benefit from America’s robust legal system and insurance laws. Suing and collecting compensation from a foreign insurer can be a tall order even for a company with huge financial resources.
Cargo insurance is important because it covers losses associated with theft or damage of goods in transit. To get the right coverage, shop around and compare available insurance policies. This is in addition to scrutinizing policy terms/conditions carefully and purchasing coverage from a US-based insurer.