How often do you feel the pressure of handling cargo safely and transporting it with the utmost safety? Quite often, we are sure.
When you are trusted with someone else’s valuable goods, you have an added responsibility on your shoulders. As a truck driver, you are accountable for the security of cargo during transit. This makes it crucial for you to get cargo insurance.
Already wondering what cargo insurance is? Don’t worry, continue reading and all your questions will be addressed–what are the cargo insurance types, what is the importance of cargo insurance, and what does cargo insurance cover–we will solve all your queries. So, let’s get started!
What Is Cargo Insurance?
Cargo insurance is meant to offer financial security to the losses incurred by a goods owner due to the loss or damage of cargo in transit. In the event of an unforeseen mishap or accident, such as a road accident or sinking of the ship/cargo, the damage inflicted by natural calamities or man-made disasters, the cargo insurance will cover the losses.
Suppose you are shipping goods from Mumbai to Bangalore in your truck, so the responsibility of the shipper ends as soon as he/she hands over his/her goods to you. As a transporter or fleet owner, the onus is then on you to safely transport the cargo. If for some reason, the cargo in the warehouse suffers damage, maybe due to heavy rainfall, then the shipper will suffer a huge loss. However, with the benefits of cargo insurance, the losses of the same cargo will be covered by the policy.
What Is The Importance Of Cargo Insurance For Truckers?
The importance of cargo insurance is undeniable. It is a way of managing risks or preventing financial losses. Cargos and shipments often undergo a number of risks in transit that can lead to the loss of goods and complete or partial damage. We cannot control external factors, but we sure can safeguard our funds. A business can suffer huge losses due to such uncontrollable risks.
When Mr Shah, owner of a packer and mover company, was helping one of his clients relocate to another city, he did not foresee the theft that one of his vehicles met. The vehicle ferrying the household goods lost its way and was attacked by a group of thieves who ran away with the cargo. However, the loss of goods did not turn into a financial loss, neither for his client nor for Mr Shah because the entire shipment was insured. Such is the importance of cargo insurance.
Cargo Insurance Types:
There are two types of cargo insurance:
- Land Cargo Insurance:
As the name suggests, land cargo insurance is for the cargo being shipped via road in trucks, trailers, and other commercial vehicles. Usually restricted to the country, this cargo insurance for truckers covers loss, theft, road accidents, and damage to the goods in freight shipping.
- Marine Cargo Insurance:
This cargo insurance is for goods being transported internationally using sea routes. Depending on your insurance company, it can cover losses incurred due to weather conditions, theft and piracy, carelessness during loading/unloading, and the like.
In addition to the two mentioned above, there are a number of other policies such as
Single coverage: Cargo insurance for single shipments
Open coverage: Cargo insurance for multiple shipments over a specific period
All-risk coverage: These policies cover a wide variety of damages caused to the cargo
What Does Cargo Insurance Cover?
If you are thinking, “what does cargo insurance cover?” then you should seek some clarity on this from your insurance agent or company. Most cargo insurance companies cover the following:
- Damage to goods caused due to fire or explosion
- Seawater damaging the goods
- Lost packages during loading, unloading, or handling the goods
- Natural calamities such as earthquakes, tsunamis, heavy rains, floods, or volcanic eruptions
- Road accidents and collisions, overturning of vehicles, etc.
However, there are a few conditions against which cargo insurance does not provide any coverage. These can be conditions which can be controlled by the shipper or transporter. Some of them are listed below:
Cargo damage due to improper packaging: Packaging the goods in a way that can expose them to the risk factors is never covered by an insurance company. Hence, most cargo insurance companies lay down their specific guidelines for packaging the cargo. Hence, if Mr Shah did not package the goods appropriately before shipping them, he cannot raise a claim for his loss due to theft.
A specific mode of transportation: Your insurance company might cover only a particular mode of transportation be it rail, road, water or sky. It is advisable to thoroughly read the clauses and terms of the cargo insurance before proceeding further.
Loss aggravated by already damaged goods: No insurance company will be responsible for the shipping of faulty/damaged goods. So, if the goods that you were supposed to ship from Mumbai to Bangalore are already in a bad and damaged condition, then the shipper cannot hold you responsible for his losses. Nor will these be covered by any insurance company.
What are The Benefits Of Cargo Insurance?
There are multiple benefits of cargo insurance that make it a must-have for every transporter and fleet owner. Some of these are listed below:
- The benefit of cargo insurance for truckers is coverage of the business liability.
- The insurance offers a specific amount of the cargo’s worth as a claim and safeguards the shipment.
- You can secure your profit even after suffering a loss of your shipment.
- In the case of fragile goods, the benefits of cargo insurance are reaped to the maximum as you can have the losses compensated for.
What Is The Cost Of Cargo Insurance?
The cargo insurance costs will vary from one insurance company to the other. The truck cargo insurance rates depend on the type of insurance you opt for, the coverage, and the value of goods among other things. Every insurance company has different offerings which will determine the cargo insurance costs. However, as a rule, truck cargo insurance rates are 0.15% of the net worth of the goods being shipped.
We hope to have helped you with the basics of cargo insurance, and how it can take the load of shipping someone’s goods responsibly off your chest. In case of any queries, you can reach out to our team at Vahak.