Depending on your business, you may ship your good domestically, internationally, or both. You may use trains, trucks, cargo ships, planes, or a combination of all of these. That’s a lot of variations to cover. As a result, cargo insurance has a lot of variations, too.
These are a few coverage types you may need to know when looking for cargo insurance.
Land Cargo Insurance
This is freight insurance coverage for land shipments, most often via trucks and small utility vehicles. This coverage is often limited to vehicle accidents, but may also pay for theft and other damage. You want to ask if your policy includes theft coverage if your shipment needs to be stored in a truck overnight.
Land cargo insurance only applies within the boundaries of a given country. The coverage is for domestic transport only. If your shipments cross national borders, you may need additional coverage.
Marine Cargo Insurance
Most marine cargo insurance covers sea and air shipments, but some policies also cover land transport. It usually pays for damage caused by bad weather, loading and unloading, piracy, and other related risks.
Marine cargo insurance is not limited to a single nation. This makes it the appropriate coverage for international shippers.
Business owners who regularly ship goods may want to get open coverage cargo insurance. It’s a type of marine insurance that covers multiple shipments made during the life of the policy. The policyholder periodically reports a group of shipments to the insurer, and these reported shipments are covered.
The policyholder also needs to provide the insurer with details about their business, such as the type of goods being shipped and their destination. Failure to provide this information can void the policy.
Also called a voyage or specific cargo policy, single coverage is the opposite of open coverage. It’s a marine policy that insures one-time shipments. This policy makes the most sense for small businesses that ship products periodically.
All-Risk Cargo Insurance
All-risk cargo insurance offers the broadest coverage for shipments. It insures your shipment against external causes of damage except those outlined in the policy.
Some common exclusions in all-risk freight insurance coverage are:
- Improper packing
- Abandonment of cargo
- Rejection of goods by customs
- Employee dishonesty
- Loss due to the nature of the product
- Loss due to delay
With all-risk coverage, your insurer pays unless your loss is the result of one of the perils listed in your policy.
Free from Particular Average Coverage
Free from particular average (FPA) coverage is a clause that frees your insurer from covering losses in most situations. Generally, it covers events that are beyond a person’s control.
For example, free from particular average coverage for a marine insurance usually pays for total losses stemming from:
- Errors in vessel management
- Boiler bursts
- Defects in hull or machinery
This is sometimes called a total loss only policy because you only collect if you suffer a total loss.
General Average Coverage
When you transport goods by sea, you share responsibility for the boat and all its cargo with the shipowner and other cargo owners. Essentially, if the boat or another person’s cargo is damaged to save the ship, you share in that loss with the rest of the people involved.
You may be responsible for a general average if the captain needs to abandon some cargo after the ship runs aground or is caught in a storm. Sometimes the shipowner won’t even release your cargo until you’ve paid your portion. With general average coverage, your portion is paid by the insurer.
Most marine cargo insurance includes a warehouse-to-warehouse clause. It insures your shipment from the moment it leaves the seller’s warehouse until it reaches the destination warehouse. Without it, your cargo is only protected when it’s onboard the cargo ship.
Warehouse-to-warehouse coverage may not be in effect in some situations. For instance, it doesn’t cover cargo if either the shipper or the consignee picks it up. Your coverage may also be impacted by sales terms, like if the buyer takes ownership before the cargo reaches the final destination warehouse.