Transport Insurance: A Short Overview

Transport insurance, according to the Insurance Dictionary, is insurance where an insurance company undertakes to pay certain indemnities as a result of damage occurring during the transport of goods. 

This damage can either affect the transporting object (calledhull insurance) or the transported goods themselves (termed as goods insurance).

Purpose 

In its simplest terms, Transport Insurance is the contract entered into between the transport company and the shipper of the goods.The purpose of the transport insurance is to compensate your goods if they are damaged in transit.

Generally, without the transport insurance, your goods are insured by the carrier with a limit set by national and international conventions.

 This means that when the carrier’s liability is admitted, the amount of compensation may be lower than the value of the damaged or lost goods.

For these reasons, many companies that use transport companies take out this insurance to guarantee the security (at least in financial terms) of their goods. The type and the price of transport insurance will depend on the mode of transport.

Coverage

Transportation insurance is thespecific policy that offers coverage on the insured’s property while it is in transit from one location to another via any necessary mode of transport. 

This coverage is based on the value of goods, plus the amount of risk the insurance company is taking on (while the property is moved from loading to the stated destination).

Transportation insurance can apply to personal lines of insurance but is also used in commercial insurance for businesses shipping products inland and internationally. This type of insurance can include transport by land, air, and water. 

Types

Depending on the type of coverage you purchased, it could consist of the packing and unpacking, the loading or unloading, and the transportation and storage of the goods while in transit.

It also covers any damage or loss of the goods due to mishandling or other forms of damage. Examples of such types of damages could include accidents, explosions, impact fires, theft, and malicious damage or theft. 

Individuals often rely on this type of insurance when moving or relocating overseas. For businesses who rely on their inventory or goods to arrive as expected, this type of policy offers security, plus a degree of financial protection for their revenues if losses can happen.

Importance

Transporting your goods from point A to point B is not particularly dangerous, but you never know the risks that can happen during transport in terms of theft, damage or other risks. 

In order to limit these risks, to prepare their goods the shipper is advised we recommend preparing your goods carefully. They need to ensure that they are protected by transport insurance which covers most of the many eventualities.

Sea freight insurance

Sea freight insurance generally covers the risk of general damage to your goods. This means that if something happens that jeopardizes the safety of the ship and the cargo, and which can require that some of the goods to be thrown overboard.

When this happens is thatthe shipper is to be compensated.Some shipping policies will compensate you for specific damages. 

This covers breakage, and loss or theft during the course of the shipment, including those considered as war risks.

Land freight insurance

In practical terms, there could be more or less risks for your goods, depending on the type of road transportation and land transport you choose. The more load breaks there are between the place of shipment and the delivery destination, the greater risks of damage to the goods.

However, it is worth taking out a transport insurance policy for truck transport. Depending on the insurance you choose, it may cover all the damage and circumstances that would lead you to be compensated. 

On the other hand, it may only cover certain types of damage. It is therefore very important to inquire with a truck transport carrier.

Transport insurance for couriers

Your courier shipments are generally covered up to $100. If the value of your package exceeds this amount, you will need to indicate how much you want your goods insured for and pay for the additional insurance.

Air freight insurance

The air freight insurance covers property damage and loss that may occur during the journey, but also during pre- and post-transits, whether on land or at sea.

There is a wide range of coverage that you can purchase under air cargo insurance. Those with more limited needs may want to consider more cost-effective coverage. This is whereyou need transport insurance governed by Incoterms.

Incoterms

In the complex world of transportation, there is what they call Incoterms. The International Chamber of Commerce created these Incotermfor one purpose.

This is to standardize the obligations and responsibilities of the seller and the buyer during transportation. These terms are used in contracts for the sale or purchase of goods.

It is one of the factors that will determine whether the buyer or the seller has to take out transport insurance. For the best possible insurance and merchandise security, you should therefore carefully choose the Incoterm to be used in your contracts.

Responsibility of the carrier

Accordingly, the carrier is responsible for the goods entrusted to it, but its liability remains limited in the event of a claim. As was mentioned, the conventions of land, sea and air transport limit the liability of transport companies.

In case of damage, the compensation of the carrier will be based on the weight-volume ratio of your goods or on their weight and not their value. 

This is one important reason why you need to take out transport insurance to limit your possible losses.In most cases, the contract with your carrier will imply the implicit approval of its conditions of transport, which indicate the limits of its liability and the compensation in case of damage.

Last notes

Transport insurance should not only be seen as an additional expense, but as an essential part of your transport strategy.

If you have small shipment volumes, you can ask the transportation company you work with to insure the goods on your behalf. Again, you will need to indicate the amount and pay the cost of this insurance. 

Your insurance policy contract details will depend on the type of cargo, the weight, cargo’s declared value and the goods’ predefined areas of transport. Also, there are policies or companies that typically offer coverage ranging from specific risks to all risk or loss or damage, and premiums will vary accordingly.