How Do I Know If I Need Cargo Insurance?

For most businesses, the word insurance often just feels like another unnecessary cost. I mean, we all understand that the purpose of insurance is to mitigate risk in a transaction, but I think we also all feel like we’re being ripped off from time to time.

Consequently, so many of us skip out on paying for insurance under the presumption that the occasional anecdotal business accident will cost less than accumulated insurance payments over time. We get it – it’s a gamble. Unfortunately, for international shipping, that’s not the case.

Cargo Insurance: Do You Really Need It?

While we can’t answer the question for you, there are certainly some general guidelines that you can follow to help determine whether or not cargo insurance is right for your business. However, if you are shipping internationally via ocean, we would almost always recommend you insure your cargo.

Here are a few reasons why:

Carrier Legal Liability

Most companies who have never had to deal with international shipment damage claims don’t know that their cargo isn’t really insured. Carrier legal liability makes us feel like we’re covered – you’re told that your carrier is responsible to pay a certain amount of money for damaged or lost cargo regardless of if you separately insured your cargo. It’s just “the law.”

Here’s an unfortunate news flash about that. According to maritime law, carrier legal liability is limited at $500 per shipping unit. If that doesn’t sound like a bad deal, you may want to read the fine print in your claims process. Most ocean carriers (steamship lines) will define a “shipping unit” as a “container.”

In other words, if your cargo gets damaged or goes overboard while in transit, you’ll get a whopping $500 for your trouble and that’s it… If insurance doesn’t sound necessary by now, I’m not sure when it will.

Damaged Cargo is Quite Common

As mentioned before, we think of insurance as risk mitigation for “the worst-case scenario,” but when it comes to international shipping, damage happens all the time. It’s not the same as shipping small packages via FedEx where everything is wrapped tight with minimal hap hazardous handling.

Think about how may touch points there are in any international shipment – especially in LCL shipping. Getting it in the container, blocking & bracing, pickup, drop off at a CFS, deconsolidation, re-consolidation, drayed to the port, loaded onto the vessel, and departure… And then the whole thing again at destination. And carriers aren’t dealing with easy-to-handle packages – they are handling massive containers weighing thousands of pounds. They’re often stored next to containers with hazardous materials with potential for leakage, and you’re at the mercy not just of your own blocking & bracing and safety procedures, but also everyone else’s whose cargo you have the luxury of being next to.

Basically, there’s lots of risk involved in any international shipment and there’s no way to fully gauge whether or not damage will happen. But here’s the deal: cargo damage does happen, and it happens much more frequently than most shippers realize. And when it happens, it will be the biggest headache of your life if your cargo isn’t insured.

Cargo Insurance is Cheap

You’d be surprised how affordable cargo insurance actually is. For the peace of mind that you’ll get your entire cargo’s worth and won’t be forced to buy your goods twice in the instance of an accident, cargo insurance is well worth the investment.

For most companies, the cost of insuring cargo is usually insignificant when contrasted with the cost of all other logistics procedures. In other words, you’re not really wasting money gambling on an accident. You’re just putting a very small amount towards protecting your business from a catastrophe.

How to Get Started

It’s pretty simple – our team can answer any and all questions you have about cargo damage risk mitigation, safe shipping procedures, and how much insuring your international cargo may cost. If you have any questions at all, don’t hesitate to reach out and ask one of our team members. We’re experienced in insuring domestic and international cargo and do it all the time – we’d love to help you and your team find the safest and most affordable solution for your current shipping practices.

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