What cargo insurance protects

The policy protects the owner's insurable interest in the goods during carriage: from the moment the cargo is accepted for carriage at the consignor's warehouse until delivery to the consignee's warehouse. It is needed by manufacturers, distributors, importers and exporters, trading companies and freight forwarders, as well as sellers and buyers who, under the terms of the contract and the chosen Incoterms rules, are responsible for the goods in transit. Cargo insurance does not replace the carrier's liability: that is limited by law and by the contract of carriage, proving the carrier's fault takes a long time, and for a number of events the carrier is not liable at all. A cargo policy lets you obtain compensation from the insurer, who then pursues the party at fault on its own account.

Coverage terms

Three main variants of terms are used on the market:

  • all risks — loss of or damage to the cargo from any cause is covered, except what is excluded in the contract;
  • with particular average — damage and loss resulting from the listed events are covered: road accidents, wrecks, fire, natural disasters, collision of vessels;
  • free from particular average, except in case of a wreck — the narrowest variant, essentially total loss in major incidents.

Theft and pilferage, non-delivery of the cargo, general average expenses in sea carriage, salvage and loss-mitigation costs are included additionally, and for perishable goods the risk of breakdown of the refrigeration unit. Loading, unloading and transshipment, as well as storage at intermediate warehouses, are dealt with separately: these stages are often the source of losses.

Route and mode of transport

The terms depend on how and where the cargo travels: by road, rail, sea or air, or a combination. For international routes it matters which countries the carriage passes through, how many transshipments there are, and where long stops and customs clearance may occur. Companies with regular shipments usually arrange an open cover (a general contract): it fixes the general terms, and each shipment is declared as it is dispatched. For a one-off delivery a separate policy is enough.

What is usually not covered

  • improper packing and marking, incorrect stowage and securing of the cargo by the consignor;
  • the inherent nature of the goods: shrinkage, leakage, spontaneous combustion, deterioration without external cause;
  • delay in delivery and related losses, loss of market;
  • intent or gross negligence of the policyholder and its representatives;
  • war risks and strikes — unless included by a special clause;
  • confiscation, seizure, and the consequences of breaching customs rules.

What determines the price

The price is determined by the nature and value of the cargo, its vulnerability to damage and its attractiveness for theft, the mode of transport and route, the length of the journey and the number of transshipments, the type of packing and storage conditions, the cover chosen and the size of the deductible. The carrier's experience, the presence of guards and satellite monitoring, and the policyholder's loss history are also taken into account. With an open cover for an annual volume of shipments, terms are generally more favourable than with one-off policies.

What to check in the contract

  • the insured value: whether it includes the invoice price of the goods, delivery costs, duties and expected profit;
  • the start and end of liability — "warehouse to warehouse" or by individual stages;
  • cover of loading and unloading operations and intermediate storage, and time limits;
  • the deductible and how it is applied — to each shipment or to each claim;
  • requirements for the carrier, security, stops and packing;
  • the list of documents for payment.

What to do if cargo is damaged or lost

  1. Record the damage in the transport documents on receipt and draw up a report with the carrier's participation.
  2. Notify the insurer immediately and allow it to carry out an inspection or appoint a surveyor.
  3. Send a written claim to the carrier within the set deadlines — this preserves the right of recourse.
  4. Take steps to preserve the cargo and reduce the damage.
  5. Collect the documents: the sales contract, invoice, transport waybills, reports and photographs.

How Polis Re helps

The broker analyses routes, the logistics scheme and supply contracts, selects the terms and format of the contract, compares insurers' offers and helps to complete the paperwork for each shipment correctly. In the event of a loss, the broker coordinates with the insurer and the surveyor. You can estimate the approximate cost in the cargo insurance calculator; for sea carriage see the marine risks section; and terms such as general average and deductible are explained in the glossary. For a calculation for your shipment, use a request to the broker.