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Your Guide to Understanding Marine Cargo Insurance

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The Hartford Liberty Mutual Progressive mylo Acuity

Anyone engaged in international trade knows that shipping overseas can be risky. If you want to protect your products you need to have the right insurance policy in place.

Marine cargo insurance provides coverage for physical damage to any products shipped by sea or air. It must be legally transported goods and includes both foreign or domestic waters. Cargo insurance coverage is often included in an ocean marine policy.

What Marine Cargo Insurance Covers

Marine cargo covers your goods being shipped by air or water—but what does that mean? Most insurance policies provide protection for your products from the moment they leave a warehouse, through transit (rail, truck, sea, plane), until they reach their destination.

Some insurance companies allow you to tailor your coverage:

  • When your products are stored in a warehouse
  • There is concealed damage to goods (damage that isn’t apparent upon delivery but is discovered upon inspection)
  • There is loss of revenue due to damaged goods or shipping delays.

In most cases, marine cargo insurance covers the physical loss or damage to your cargo from fire, storms (lightning, hurricanes, waves) water damage, piracy, sinking/capsizing, barratry, or jettisoning.

Is freight coverage different? Freight coverage protects freight forwarders if the cargo becomes damaged or lost in transit.

How Cargo Insurance Policies Work

There are a few different ways your cargo can be insured.

Open Cargo Policy

An open cargo insurance policy acts as an umbrella. What does that mean? It covers all shipments that an intermediary (such as a cargo ship) is taking on a trip. When a shipper chooses to do this, they must provide the intermediary with a letter of instructions requesting coverage on all of their shipments. The insured business must volunteer any and all information about their shipment to the insurance company or risk voiding the coverage.

All Risk vs. Free of Particular Average

An all risk marine cargo policy covers most perils associated with your goods being shipped. An all risk policy covers any loss or damage from external causes, unless those perils are specifically excluded from your ocean cargo policy.

Free of Particular Average (FPA) is usually only obtained when an all risk policy isn’t offered to you. This could be because your shipment has elevated risks of loss associated with it. FPA is a named-perils coverage. What does that mean? Only those perils or risks that are named in the insurance policy will be covered if losses occur. An FPA policy most often covers damage from fire, lightning, collisions, sinking, or if cargo is stranded or lost. Most FPA or named peril policies do not cover cargo theft. 

General Average Coverage

If your cargo is on a vessel that encounters a storm—such as a hurricane—and your cargo is tossed overboard to save the boat, general average coverage comes into play. Each business and/or person with goods on that vessel must help compensate the loss, even if their cargo was not affected. This is unique to marine policies. 

Who Needs Marine Cargo Insurance?

Shippers who need insurance include:

  • Importers + exporters
  • Freight forwarder
  • Logistics providers
  • Manufacturers + wholesalers + retailers
  • Multinational businesses
  • B2B sales (internet-based or otherwise)

What is Excluded from Marine Cargo Insurance?

Some exclusions from marine cargo insurance include:

  • Improperly packaged products
  • Cargo that was abandoned
  • Cargo that isn’t allowed through customs
  • Cargo that has not been paid for
  • Goods that were stolen or are illegal

If you are insuring products on a case-by-case basis you may have more exclusions, such as:

  • Acts of war (riots, civil commotions, etc.)
  • Acts of God (hurricane, earthquake, lightning)
  • Ship defects that cause damage
  • Theft, criminal acts, or negligence

How Much Does Marine Cargo Insurance Cost?

Some insurance companies will insure almost any type of good being shipped, from apparel to oil. Your cargo can be insured on a gross sales or value basis. But factors that impact the cost include:

  • What your shipment is worth
  • Whether insured on an all risk or FPA basis
  • The nature of the shipment (sea, land, etc.)
  • The policy limits you choose
  • The insurance company you choose
  • The service you provide (freight forwarders, ship repairers, transport vessels, etc.)

Other factors will apply. We recommend you speak to an insurance agent with expertise in marine insurance to learn more. 

Get a Free Cargo Insurance Quote

We’d love to help you get a quote for cargo coverage! To do so, we’ll need some basic information about your business and your products.

  • What type of merchandise are you shipping?
  • What are the gross sales of your business?
  • What is the origin and destination of your shipment? 
  • How is it being shipped (ship, plane, truck, etc.)
  • How will your products be packaged?
  • What is your previous loss history?

The bottom line is that you need insurance protection to safeguard your business. We can help you get the insurance solutions you need at a price you can afford. Simply complete the form at the top of the page or contacts us by phone at 877-907-5267 (U.S.). If you'd simply like more information, we can help explain the benefits of the insurance policy and answer any other questions you may have!

Related Business Insurance Options:

Ocean Marine Insurance | Marine Liability Insurance | Bumbershoot Insurance | Commercial Boat Insurance

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