If you ship goods on a regular basis, then you do need to look into the various types of insurance policies for cargo that are available. Such a policy will cover the value of approved merchandise without having to negotiate for insurance each and every time you want to ship cargo to distributors or customers. This article will discuss the various types of coverage available and the exclusions that are usually included in such a policy.
* Free of Particular Average (FPA)
* With Average (WA)
All risk cargo coverage
This is the broadest form of coverage for cargo insurance for approved merchandise including new and packaged materials and physical losses due to an external cause. However, all losses are not covered, especially if you are shipping cargo to international destinations. The exclusions of such a policy include:
– improper packing of the cargo
– abandoned cargo
– rejection of goods by custom officials at the point of entry into a foreign country
– liens on the cargo due to overdue accounts or monies owed
– infestation of the property
– dishonest employees
– losses due to delays in the market
– losses at the destination port after the cargo has been there for 15 days
– goods that are shipped on deck
– losses due to temperature variations
– failure to submit a claim within the period stated on the policy
Free of particular average
FPA cargo insurance is that issued on shipments of used goods, waste materials or goods that are shipped on deck. Some of the perils named on such policies include sinking of the vessel, extreme weather and fire at the dock. In the case of weather, a partial loss policy does not cover any losses incurred due to lightning strikes. You would need to have a full loss policy to collect on a claim for this type of damage. If there is a fire on the dock or on the ship, you will be covered for both partial and full loss. Collision with another ship is also one of the named perils under FPA cargo insurance.
WA cargo insurance usually covers loss due to heavy weather, but can also be extended to include theft and non-delivery of goods.
Most cargo insurance also includes coverage between warehouses once the goods leave your hands. This cover is for the length of time it is in the shipper’s warehouse prior to being loaded on the vessel until it reaches the warehouse of the destination.
When goods are shipped without insurance, the owner places himself and the business at considerable risk. The insurance can cover shipment by air or by water. Air coverage usually costs a set amount per pound, whereas shipping by ocean shipment carries a set fee per unit you want to ship.
Insurance policies for cargo operate according to the Vessel Owner’s Limited Liability. Although the owner does have a certain amount of insurance for carrying cargo, this is likely not sufficient to cover your losses and there are many exclusions that protect the vessel owner in this regard. For example, if the loss of the ship is deemed to be the result of an Act of God, and act of war, normal perils of the sea or the fault of the captain or another person on the ship, the vessel owner is not responsible for any loss of cargo incurred.
When you take out an insurance policy on the cargo you wish to ship, you do have to declare what the contents are and the value of the cargo. If the contents are found to be other than what you state or are illegal, they you are subject to criminal charges and the punishments that come with them.