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What is Cargo Insurance?

Updated on September 18, 2011

Cargo insurance is a type of insurance policy that you buy when you have goods that will be transported from one place to another by another company or service. Most people think of ships carrying shipping containers as an example of where you'd want to have some sort of cargo insurance. But the insurance actually covers the goods from the time they leave your possession until they arrive at their destination, whether they're taken over land in trucks, trains or by air for part of the voyage, as well.

Companies that import and export find the most need for cargo insurance, because their products are often in shipping containers and sent overseas on large ships. If the ship sinks, they may lose out on their investment unless they have insurance to cover the cost. The cost of the insurance policies often depends on what's being shipped and its value, and the length of the voyage. Sometimes, companies that import don't have to buy cargo insurance, because the export company covers the cost so the goods can be replaced in case of damage, theft or disaster.

It's sometimes not required for companies to buy cargo insurance, but almost five dozen shipping voyages a year report losing shipping containers over the side because of high seas and bad weather situations. The odds of having a shipping container lost at sea are slim, but not so slim that anyone would want to risk it happening without insurance.

There are two basic types of cargo insurance most people need to be familiar with: single voyage and open cover policies. Open cover technically isn't an actual policy as much as it is an agreement between the person or company who needs the policy and the insurance company. It's the ideal choice for companies who need insurance frequently because they ship or receive many goods. As long as a particular shipment meets the criteria in the agreement, it's automatically covered without the need to draw up a new policy each time. This saves companies time and paperwork, and prevents shipping delays while new policies are being created.

A single voyage cargo insurance policy, on the other hand, is quite straightforward in that it only covers cargo sent on one single voyage, from the time it leaves the seller's hands until it arrives at its destination. This is the best choice for someone who rarely ships and doesn't need continued coverage.


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