What is All-Risk Insurance and What Does it Mean For Me?

What Is All-Risk Insurance and What Does It Mean for Me?

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If you’ve ever wondered why companies worry about cargo insurance, it’s really rather simple: There’s a lot on the line when shipping goods, and we’re talking often thousands upon thousands of dollars — if not millions — to replace lost shipments. There are two primary categories of insuring conditions offered to shippers: All-Risk Insurance, of Free of Particular Average.

All-Risk Insurance

All-risk insurance has the broadest insuring conditions and covers the greatest number of perils. It’s held to cover all physical loss or damage from an external cause with the exception of certain exclusions, such as improper or inadequate packing, abandonment of cargo, rejection by Customs or other governmental authorities, failure to pay or collect, etc.

Free of Particular Average

Generally, when all-risk insurance coverage cannot be obtained, Free of Particular Average is used. This is often the case due to the elevated risk associated with the product or shipping conditions. FPA is a named perils coverage meaning that the policy will only cover losses resulting from specifically named causes.

It’s important to note that cargo insurance covers physical loss or damage. Cargo insurance is not intended to cover financial loss due to delay, loss of market, or other subsequent or liability-related losses. When it comes to physical losses, All-Risk/Shippers Interest insurance provides the best means of protecting the shipper’s financial interest.

Some cargo owners expect that carriers and/or warehousemen will pay any losses incurred. This is a frequent misconception. Most carriers and warehousemen are not responsible for losses that are unforeseeable and beyond their control. Furthermore, national and international treaty restrictions limit the monetary liability of most carriers.

You should always refer to a carrier’s BOL, tariff, or other terms and conditions for specific limits of liability.

If you’d like to learn more about all-risk insurance or to discuss whether this type of coverage is necessary for your shipment, the team at InterlogUSA is more than happy to help.

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