Cargo Insurance Basics

Jun 24, 2021Blog, Supply Chain Management

As demonstrated repeatedly in recent months, cargo insurance is a necessity when transporting goods by air, land, sea, or rail. There are multiple types to choose from depending on the mode of transport, frequency of shipment, and destination.

Let’s take a look at some of the most common cargo insurance types that can be employed to help protect your freight.

Land Cargo Insurance

As the name implies, this provides coverage for land transportation using trucks, trains, or utility vehicles. This coverage typically includes collision damage, fires, theft, and other risk factors, depending on the individual policy. This insurance is often domestic and operates only within the boundaries of the country it is issued in.

Marine Cargo

Marine policies protect cargo that is transported by sea and sometimes air, both domestically and internationally. This method protects against loading/unloading damage, inclement weather, container loss, collisions, and piracy while cargo is in the possession of the shipping line or airline.

Open Coverage

Created when an insurance holder opts for coverage for a specific period of time, usually over the span of a year. Open coverage has two types to choose from, renewable or permanent.

Renewable Policies

This is the most cost-effective option for any organization that doesn’t ship regularly. These policies are designated for a specific value that requires renewal after each shipment is completed. They are best suited for one-way trips or single voyages.

Permanent Policies

This option allows for unlimited shipments over a set period of time. Because of this, it is more cost-effective if an organization is shipping frequently.

All-Risk Insurance

Marine insurance can be tricky, as many incidents that occur on the seas may be beyond the coverage offered by most carriers. This is where All-Risk Insurance comes in. In the event of an unexpected incident, All-Risk Cargo Insurance covers loss from any external cause (depending on the individual policy), including physical loss or damage. It is hands-down the most comprehensive way to protect your goods.

Named Perils Policy

In contrast to All-Risk policies, this option only covers losses that are explicitly listed within the contract. These most often cover fires, sinking, collisions, stranding, derailment, weather events, and theft. These options are individually selected per contract and are far less comprehensive.

Free From Particular Average

This type makes the shipper liable for only a portion of the shipment in the occurrence of loss or damage. This means the shipper only covers select major losses and doesn’t pay for a “pre-decided average” of minor losses designated in the policy.

General Average

As demonstrated in the recent Suez Canal incident, once a vessel owner declares general average, every shipper on the boat contributes to making the vessel owner and cargo owners whole. This holds all cargo owners with goods on a shipment responsible for paying compensation to any cargo owner who suffered losses. This means each owner contributes to any lost goods, even if their load made it safely to port.

With so many options to choose from, finding the right insurance policy can be a bit overwhelming. No matter the freight, we’re here to help keep cargo protected. Reach out to your TOC representative today to learn more about adding cargo insurance to shipments, even after they are already in transit. We want to protect your cargo; let us show you how to get started.


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