Transporting goods across regions involves high risks due to factors beyond one’s control. From container thefts to transit accidents, the logistics industry faces numerous unpredictable challenges in delivering shipments safely. This makes securing cargo insurance claim a top priority for businesses.
Thus, opting for cargo insurance claim gives logistics firms much-needed stability to withstand unexpected disturbances and continue operations unhindered. In this article, we will see what cargo insurance is, why it is required, and what is needed to get compensated for insured losses.
What is Cargo Insurance?
Cargo insurance is a form of coverage that safeguards goods, commodities, or other materials transported via air, land, or sea. Having a proper cargo insurance claim can protect the long-term financial interests of businesses should any mishaps such as loss, damage, or theft occur during transit from the initiation transit point to the final destination.
What are the Different Types of Cargo Insurance Coverage?
Mainly there are three types of insurance coverage. These three types of cargo insurance can vary on the coverage provided and the premium amount they provide. Let’s go through them in detail:
All Risk/Open Coverage
It provides the highest level of protection covering all unforeseen losses unless specifically excluded. This includes risks from accidents like improper loading, theft, transit accidents etc. Insured is indemnified for both total & partial losses. Premium is highest but valuable for high-value goods where unexpected events cannot be ignored.
Total Loss Only
As the name suggests, it covers only when an entire cargo is completely destroyed/unrecoverable. Partial damage is not covered under this. Premium is lower than all risks, but protection is limited. Ideal for low unit value goods where instances of total losses are comparatively less.
General Insurance
Also known as perils or enumerated risk coverage, it protects against only those contingencies explicitly stated in the policy like fire, lightning, sea perils during ocean transit etc. and excludes all unspecified risks. Premium is the lowest among the three. Suitable only when the insured is willing to take a calculated risk for a reduced price.
Why is Cargo Insurance Required?
Cargo insurance is a pivotal shield for goods, merchandise, or consignments. Logistics company can help you mitigate unexpected risks like excess rain or storms with proper cargo insurance. Let us go through several reasons why cargo insurance is required:
Limited Carrier Liability: Entities such as airlines, shipping lines, or trucking firms typically uphold only limited liability concerning cargo loss or damage. This limited ability is inadequate in compensating for losses incurred.
Unexpected Risks: Cargo transport is vulnerable to unforeseen risks, including accidents, piracy, hijacking, theft, and natural calamities. However, if you have any cargo insurance, it can help you stem your financial losses from any unpredictable disaster.
High Cargo Value: Certain cargo categories like chemicals, medicine, and machinery are expensive. Without the availability of cargo insurance, any damage or loss of high cargo value can pose a substantial financial risk to you and your company.
Compliance requirements: Numerous import-export pacts and contractual agreements necessitate comprehensive cargo insurance coverage throughout its transit. Insurance signifies financial fortification and facilitates seamless shipment processes from one country to another.
What are the Documents Required for Cargo Insurance Claim Settlement?
Cargo insurance companies require many essential documents to verify claims and process payment. This includes invoices, packing lists, photo/video evidence of loss or damage, pre-loss survey reports, etc. Providing complete documents is essential as the insurance company cannot settle claims until they assess validity and coverage with sufficient proof
The critical documents required by US authorities to process a cargo insurance claim include:
- Claim form detailing item description and transit documents
- Original insurance policy document
- Commercial invoices and packing lists
- Signed delivery receipts and notifications of loss
- Carrier statement acknowledging damages/losses
- Photos/video evidence of loss or damage
- Repair estimates and liquidation documents
- Law enforcement reports in case of theft
How Do I Recover my Cargo Insurance Claim?
One must inform insurers immediately to recover insurance money for cargo damages or losses. A detailed claim form must then be filled in along with all valid documents. Insurers will appoint a surveyor to inspect. If approved, the compensation will be paid after assessing the insured value and deducting the policy excess amount. Generally, recovering an insurance claim involves several steps. Let’s go through them in detail:
- Assess the Overall Loss: Examine the scope and extent of damages/losses and gather supporting documents.
- Notify your Insurance Provider: Inform the insurer about the incident within the stipulated timeframe.
- Investigate the Cause of Loss: Determine the exact reasons and circumstances for loss.
- Claim Your Money: Submit the necessary documents to process claims and receive payments.
Conclusion
Cargo insurance offers essential financial protection for 3PL logistics companies against risks during transit. With Cargo insurance one can quickly recover financial losses and continue business operations smoothly.
If you are a logistics manager or business owner and are shipping cargo between two states or between two countries, make sure you have proper cargo insurance so that in case of any harm to cargo you can claim the insurance on behalf of your carrier.