Taking out a cargo insurance is the first thing that should be done in transportation, as it is carried out practically all over the world. Insurance companies offer two types of insurance in the shipping industry, pilferage/theft and accident insurance policies. One of the main reasons for this is the fact that companies can be indemnified in case of pilferage, theft, vehicle hijacking or accidents.Every shipment must be covered by at least two kinds of insurance: a transport insurance, which is taken out by the exporter, and a civil liability insurance, taken out by the transporter.
The second category, a.k.a. the civil liability insurance has several sorts of clauses that guarantee indemnity to the transporter (claim reimbursement or compensation), when he is required to pay for repairing the damage or for the loss of cargo he was transporting. The loading and unloading of shipments, in all means of transport, also need additional coverage.
In case of both inland and international transportations, cargo insurance covers damage caused to the goods whilst in transit on sea/river, land and air, or when more means of transport are used along the route (multimodal route). The owner of the cargo usually takes out a multimodal or an intermodal insurance policy to protect themselves against risks that might occur with the means of transport used for the transportation of the cargo, throughout the whole route, from the origin to the final destination, in addition to indemnifying for any loss or damage done to the goods.
In case of inland transportation, you can take out a separate insurance policy, i.e. it can be done for each shipment individually. Regardless of whether the owner of the goods is going to transport the cargo in their own fleet, or with a subcontracted service, the insurance guarantee is total, covering damages occurred during shipping, as well as pilferage and theft.
International transport insurance is a type of cargo insurance used in foreign trade, since the terms of the commercialization agreement define the party responsible for taking out the insurance. This insurance must be taken out in accordance with the riskiness of the journey and the negotiated conditions of the purchase/sale (Incoterms). The policy needs to follow the rules of the import/export contract, which vary according to the legislation of each country. In practice, its coverage is the same as of an inland insurance, however the required criteria of the destination country must be established with the insurance company.
Some insurance companies offer other kinds of cargo insurance with several additional benefits for risk management in logistics. It is up to the party taking out the insurance policy to evaluate the options and choose the one that fits their reality best.
Thus it is a safe assumption that insurance plays a very important role in cargo transportation, and it generates only benefits for the owner of the cargo and their clients.
Pedro Paulo is the Import Supervisor of Multicargo, managing sea, air and land import shipments, whilst providing a service customized to the clients’ needs. He has been with Multicargo since its establishment in 2010.