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Transport Insurance: What is it and how does it work?

Publicado por: Soares, Vera em 7/12/16 1:12 PM

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Everyone, who works on a daily basis in cargo transportation, knows the dangers the roads and the various means of transport expose the cargo to, therefore the need to adopt risk management techniques is continuously increasing.  

With the growing level of crime in basically all parts of the world, taking out a cargo insurance has become quite essential in international cargo transportation. In Europe alone, many billions’ worth of cargo is either lost or stolen, every year. Despite a significant rise in safety measures and the effectiveness of transport solutions, cargo damage or loss might still occur, due to external causes.  

In Europe, the responsibility of road transport service providers is usually limited by CMR standards (Convention on the Contract for the International Carriage of Goods by Road). However, in case of loss or damage, this responsibility is oftentimes not representative of the real value of the merchandise.

Hence, when it comes to cargo transportation, taking out a cargo insurance, specifically for international trade, is fundamental, since the risk of accidental theft, pilferage and loss of cargo is a factor that should always be taken into consideration when deliberating the final costs of commercialization.

The responsibility to take out a transport insurance is determined by the type of purchase and sales agreement which was made, in accordance with the Incoterms. In this contract, the party responsible for taking out the insurance must be named, as well as the time when the insurance comes into force. The lack of knowledge regarding the contract, its details and terms lead to many exporters and importers signing the documents, even though they might know what they agree to.

As said before, having a cargo insurance allows the customer and the supplier to have an assurance that in case the cargo is stolen or pilfered on the way, they will have a refund. In addition, the insurance protects against damage during the shipping as well, e.g. if the ship has an accident.

Taking out a transport insurance is important, because thereby, the companies comply with legislation, ensure more safety to their clients, and make sure that if there is any damage resulting from an accident, it shall be repaired and the value shall be reimbursed.

Besides ensuring a reimbursement in the event of loss resulting from theft or accident, having taken out an insurance also gives more credibility to the company, thereby it becomes a differentiating factor in the market. I.e. it is worth more for a company to hire a freight forwarder that has already negotiated the transportation of the cargo with insurance included, than having to negotiate with another company and pay extra for transport insurance.

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Autor: Soares, Vera

Superior Technician of Hygiene and Safety at Work and Auditor-Coordinator of the ISO 9000 Quality Management Systems. Since 2014 she has been collaborating with Multicargo Lda. as an External Quality Consultant, whilst supporting the company in the implementation of the Quality and Safety Action Programs, and verifying the compliance of the company’s Management Systems. More recently she has dedicated herself to the project of obtaining the certification of Authorised Economic Operator (AEO).

Tópicos: Transport Insurance