What does cargo insurance cover, and how do you find the right insurer? Let’s look at the ins and outs of shipping insurance so you can learn the keys to effectively insuring your imports and exports.
If your business relies on moving goods and products across borders, you probably worry about the safe transit and delivery of your shipments. A lot can go wrong as goods move by land or sea. This can leave your products damaged or even completely lost. To protect your business and recover losses, should something happen, your business needs insurance.
What does cargo insurance cover?
Most international carriers will provide liability coverage for the goods they carry, but this coverage is usually limited. Importers and exporters who want to recover the full value of lost or damaged cargo usually must take out separate cargo insurance. Insurance goes by many names: freight insurance, shipping insurance, marine cargo insurance, motor truck cargo insurance, etc.
The coverage you get will depend on your policy and insurer. Some policies may not provide coverage due to events such as piracy or war. Generally, an “all-risks” policy will cover you for most foreseeable accidents or external events that could damage your cargo. An all-risks cargo policy may include the following:
- Customs rejection
- Infestation
- Abandonment
- Sinking
- Burning
- Vessel mismanagement
- Theft
- Heavy weather
- Damages from inappropriate packing or stowing
You should discuss coverage with your potential cargo insurer to determine which incidents will allow you to file a claim for your cargo.
The types of cargo insurance
Insurance varies by how you intend to move your cargo across borders.
- Land: Also known as motor truck cargo insurance, this type of insurance covers freight or commodities hauled by for-hire truckers or smaller utility vehicles. Land cargo insurance typically covers fire, collision, or if the cargo is struck by an animal or something else while in transit.
- Marine: This type of insurance usually covers transportation over sea or air. Coverage may include cargo loading and unloading, weather contingencies, or piracy.
Although the land cargo insurance usually pertains to domestic transportation and marine cargo to international, you may use motor truck freight to move your cargo as a Canadian business sending or receiving goods throughout North America.
Who is responsible for covering losses in transit?
As you’re considering whether to take out insurance, you may be wondering who is responsible for cargo losses in transit? Is it on the carrier, the supplier, or your business to cover it?
- Carrier: As previously mentioned, carriers will only cover lost or damaged goods up to a certain extent. Typically, ocean carriers are responsible for up to $500 (USD) per package and air carriers have a minimum liability of $20 (USD) per kilo. These liability limits are usually not nearly enough to cover the true value of your goods.
- Supplier: If you’re importing goods into Canada from overseas, it’s possible your supplier’s insurance covers your freight. But that policy might not be adequate. Additionally, making a claim could be difficult if your insurer is based in another country.
What are the Potential Costs?
An all-risk cargo insurance policy could cost as much as 1-2% of the declared value of your shipment. The cost of an insurance policy will vary depending on the type of product you’re transporting and whether you’re shipping portside-to-portside (marine cargo insurance policies) or from your distribution center to your buyer (land cargo insurance).
Is there a difference between shipping and cargo insurance?
Not everyone refers to cargo insurance by the same name. It can be referred to shipping insurance instead. But shipping insurance tends to refer less to moving freight across borders and more to e-Commerce businesses sending goods directly to individual buyers.
You can generally buy shipping insurance from the carrier you use to send your goods, but there are third-party insurers as well. The best choice for shipping insurance will depend on the value of the products you’re moving.
How to find a reputable cargo insurer in Canada
Finding a cargo insurer can be difficult. You need to find an insurance company that covers the kinds of freight you’re importing or exporting, as well as the transportation methods you’re using. You’ll also want a company that’s reputable, easy to file claims with, and won’t leave you high and dry when something goes wrong with your cargo.
Keep these factors in mind when looking for a cargo insurer in Canada:
- Is the company based in Canada? Filing a claim across time zones or countries may be irksome and delay payment of your claim.
- How much is insured? Get the exact value of your cargo to be insured from the insurance company.
- What’s the duration of the coverage? Ensure your cargo is covered from the moment it leaves until the moment it arrives.
- What incidents does your policy cover? If you don’t take out an all-risks policy, what events will your cargo insurance actually cover?
Let a Broker Help
If you regularly move high-value products across the Canadian border, then your business will benefit from cargo insurance. Insurance is usually a small expense to ensure that you recoup losses from lost or stolen freight. Even if you’ve never encountered problems with your shipments, you never know when an accident could severely damage your products, costing you thousands of dollars.
As a Canadian customs broker, Border Buddy can answer your questions about cargo insurance and help you move your goods into and outside of Canada. Give us a call today to see what we can do for you.