When exporting cargo involves safety issues, cargo insurance is usually used. Many people don’t know why to use cargo insurance and what the benefits of using cargo insurance are. A series of cargo transportation disputes arise from a lack of understanding of what the most common risks associated with the transportation of goods are.
In this article, we will tell you everything about cargo insurance in detail.
What is cargo insurance?
Cargo insurance is the kind of guarantee of safe transportation of goods. The insurance company will pay for part or all of the financial losses if the cargo is lost due to natural disasters or sudden accidents.
It is unavoidable to cause damage when meeting bad weather. To help reduce this risk, carriers always purchase cargo insurance. Cargo insurance can protect the goods, minimize the capital risk of transportation, and guarantee the interests of the insured.
You have two choices to purchase the cargo insurance: purchase it directly with the insurance company or your agency to help you. There is no special requirement to buy cargo insurance. It is up to you. However, it is highly recommended to buy it to protect your goods from exposure to risks.
What are the benefits of cargo insurance?
1. Fast payment processing
The compensation processing of cargo insurance is relatively fast. Even if the loss is huge and the cause of the loss is unclear, etc., the compensation will be processed as soon as possible.
2. Transport risk transferable
When an accident occurs to the cargo and the buyer does not receive the cargo and does not pay the seller, the cargo transportation insurance can effectively transfer the risk according to the arrangement of the insured.
3. Reduce transportation risk
Regardless of the mode of transportation, there is a risk of accidents in the cargo. Cargo insurance can reduce transportation risk and minimize the loss of cargo in the event of an accident.
What are the types of cargo insurance?
Before the goods leave the factory, it is necessary to find a reliable cargo insurance company to insure. When the goods have been transported, it is not supported to buy insurance again.
Many people ask what kind of goods can buy insurance. In fact, no matter how much the goods are worth, you can buy cargo insurance to reduce the risk of transportation. Especially high-value goods that are prone to accidents are more needed.
1. Marine Cargo Insurance
When you chose shipping cargo by the ocean, buying marine cargo insurance is reasonable. Marine cargo insurance covers the loss of goods caused by natural disasters or accidents during ocean transportation. The risks underwritten by China Marine Cargo Insurance are divided into three types: PPA, WPA, and All Risks.
PPA (Free from Particular Average) is to ensure the safety of the goods. During transportation, due to bad weather or accidents, any loss of the cargo can be claimed for compensation.
WPA (With Particular Average) is used during transportation, due to accidents or bad weather, the cargo falls into the sea or the cargo is wet, etc., you can claim compensation.
AR (All Risks), in addition to the PPA and WPA, it is also responsible for all or part of the loss of the insured goods due to general external reasons during transportation.
2. Land transportation cargo insurance
Land transport cargo insurance covers the loss of cargo transported by railway and road. It is divided into land transportation insurance and lands transportation all risks.
Land transportation insurance refers to the loss of goods caused by natural disasters or sudden accidents during transportation. This insurance is also responsible for the insured to pay for the reasonable expenses that rescue, prevention, or loss reduction measures for goods.
All land transportation expenses: In addition to the liability of land transportation insurance, this insurance is also responsible for all or part of the loss of the insured goods due to external reasons during transportation.
3. Air Cargo Insurance
Air insurance is a cargo compensation that protects a variety of cargo that is transported by air. You can claim to the airlines when the shipment is damaged during the air shipping process according to the agreement.
4. Parcel Insurance
It refers to the loss of the package caused by natural disasters, accidents, or external reasons during the transportation of the postal package by sea, land, and air.
How to calculate the cost of cargo insurance?
To calculate the cost of cargo insurance, it is first necessary to clarify whether it is general cargo or sensitive cargo; export or domestic delivery; is a premium rate required?
The premium rate is paying for above and beyond some basic or intrinsic value. If you purchase it, you will get the high cargo compensation when your goods are damaged. Generally speaking, the premium rates between 10%-30%.
Premium = product value * premium rate * exchange rate.
For example, to transport a batch of goods worth 100,0000 RMB, the calculation results are as follows:
Export general cargo: Insurance fee=100, 0000 RMB *1.1*0.0003
Pure overseas goods: insurance fee=100, 0000 RMB *1.1*0.0005
If you export sensitive or dangerous goods like e-cigarette, you need to find a professional insurance company and they will formulate a reasonable transportation plan for you. If not, you can entrust your shipping agent to help you buy the insurance.
How to make a claim when your cargo is damaged?
Cargo compensation reduces the capital risk of the policyholder when shipping cargo, but once the cargo is damaged, many people do not know the claim process and cannot get compensation smoothly.
The simple claims process is described below.
1. Notify the insurance company
2. Arrange inspection
You can get in touch with the local agent, and quickly arrange to inspect the damage to the goods, take photos of the damaged to goods and prepare relevant documents.
3. Determine whether the claim is according to the damage to the goods.
4. The claim application is submitted to the insurance company or directly to the party that caused the damage to the goods, such as the shipping company.
5. The claim notice must include the bill of lading number, container number, ship name and voyage, a brief description of the damage to the cargo, and the estimated loss.
6. Rescue the remaining goods or take other relevant measures to reduce losses.
If the claim documents are fully prepared, the appeal process will be accelerated. The claim documents should contain the following:
1. Original insurance policy or certificate of insurance.
2. Contract of Carriage.
4. Packing list.
5. Correspondence or other documents requesting compensation from the carrier and other third-party responsible parties, as well as documents proving that the insured has fulfilled the required recovery procedures.
6. An inspection report issued by a foreign insurance agent or a foreign third-party notary agency.
7. Maritime reports. The loss of goods caused by maritime affairs is generally paid by the insurance company, and the ship is not responsible.
8. Proof of cargo damage or difference.
9. List of Claims.