CARGO insurance – why is it important?

Freight transport is never free of risk, whether we mean domestic or international transport. CARGO insurance is the type in which the beneficiary is the owner of the goods carried and the goods are insured for the entire duration of the transport.

You cannot always protect a shipment against loss. What is more, if we look at the statistics, the quantity of goods lost or damaged each year during transport is very large. That is why it is important to insure the goods against potential losses during transit.

CARGO insurance – what is it valid for?

The CARGO insurance policy is valid for all modes of goods transport: land, air, sea or combined.

This insurance covers goods carried on domestic and/or international routes by any type of means of transport (road, rail, air, sea, river or combined).

What types of CARGO insurance are there?

CARGO insurance has 3 basic cover options:

Institute Cargo Clause (C) – provides cover against major risks, but has the most restrictive scope of cover for them:

• fire or explosion;
• the vessel being wrecked, stranded, sunk or capsized;
• overturning or derailment of the land conveyance;
• collision or contact of the vessel or conveyance with any external
  object other than water;
• the costs of sheltering the goods and of forwarding them on in the event of
  the vessel being discharged at a port of refuge;
• the general average sacrifice clause;
• jettison of the goods, to reduce the weight of the vessel during
  storms or when the vessel runs aground and can be recovered on the rising tide by
  reducing the weight carried.

Institute Cargo Clause (B) – provides all the cover of clause (C) plus a few additional risks:

• earthquake, volcanic eruption or lightning;
• accidental loss overboard of the goods carried, caused by
  the forces of nature;
• entry of sea, river or lake water into the conveyance, container or
  place of storage;
• total loss of any package lost overboard or dropped during
  loading onto or unloading from the vessel or conveyance.

Clause (B) therefore provides significantly more cover than clause (C), namely water damage and accidents during loading and unloading, but it does not include cover against theft, robbery and non-delivery.

Institute Cargo Clause (A) – also called “All risks”, it is the one most widely used in international transport.

It has the most generous cover, providing all the cover of clauses (B) and (C). In addition, it also protects against loss of or damage to the insured goods caused by all risks arising unintentionally or accidentally. The exceptions are the situations listed in the exclusions of the conditions.

The cover is:

• breakage, scratching, bending, chipping or malicious damage;
• theft, robbery and non-delivery;
• damage caused by water, including rainwater;
• the general average clause for vessels;
• the both-to-blame collision clause for vessels;
• the piracy clause (Institute War Clauses).

Institute CARGO Clause (ICC)

This is the most widely used set of terms worldwide for insuring goods in transport. They have been adopted voluntarily as an
international standard by most international professional insurance organisations.

The main clauses used worldwide are clauses (A), (B) and (C) of The Institute of Cargo Clauses (ICC). They were updated in 2009. The wordings of the ICC clauses are accepted in more than 140 countries around the world.

Through lengthy negotiations, the participating countries agreed exactly what each clause means in legal terms, that is, what is and what is not covered.

Because international shipments may cross several countries, each with its own legislation, using the ICC Clauses reduces the chance of any misunderstandings or delays in payment should an unforeseen incident occur.

Who can benefit from CARGO insurance?

When goods are insured during transport, whether by land, air or sea, it means that if the cargo is damaged or lost in transit, its value will be reimbursed (or the goods will be replaced) to whichever party held “technical” ownership (in accordance with INCOTERMS).

For example, under the terms DPU or DDP, the buyer of the goods cannot regard them as his property until he actually receives them, in which case the seller continues to hold title until they are delivered.

If the insured cargo is damaged, the seller will receive the insurance proceeds and will refund the buyer the amount paid up to that point. The fact that the goods are insured is a gain for both parties.

Honexpres helps you understand the benefits of CARGO insurance!

If your business involves transporting goods of any kind, Honexpres offers you complete services from A to Z, as regards shipments. You can take out the CARGO insurance policy with an insurer or an insurance broker.

Contact us for a successful collaboration!