The global shipping industry moves trillions of dollars of cargo every year, be it raw materials, parts, and components or finished products. As shipment volumes and values have increased, so too has the risk of loss or damage during transit.
Just one catastrophic incident from fire, flooding, or collision could wipe out the profits from hundreds of shipments for a company. In such a complex and risky system, shipping insurance and additional coverage have become a vital risk management strategy and financial safety net.
Proper shipping insurance will become only more important to protect corporate balance sheets and ensure cargo delivers as promised to customers worldwide.
Read on as we tell you more about shipping insurance, its benefits, and the tips for choosing the right shipping insurance.
Understanding Shipping Insurance
Shipping insurance is an essential requirement by most shippers on top of the overall shipping price. That’s because it helps mitigate risks associated with shipping goods internationally. Insurance provides financial compensation in the event shipments are lost, damaged or delayed in transit according to the declared value.
Shipping insurance works by transferring the financial risks of domestic and international shipping from the business owner to an insurance company. The business pays an insurance premium based on the declared value of the goods and associated risks. In exchange, if anything goes wrong with the shipment, the insurance will provide compensation up to the insured declared value.
Types of Shipping Insurance Available
There are various types of insurance options to suit different shipping needs. This shipping insurance can be bought through couriers or third party vendors. Here are the most popular:
- Cargo Insurance: This covers the cargo being shipped. It protects the owner of the goods from financial loss if the cargo is damaged or lost during transit.
- Hull Insurance: It covers the physical ship or vessel itself. It covers losses or damage to the hull of the ship from risks like grounding, sinking, collision, and fire.
- Freight Insurance: This covers the financial loss if the cargo is lost or damaged. The shipper purchases this insurance. It reimburses the shipper for any loss of revenue from not being able to deliver the goods to buyers.
- War Risk Insurance: It covers losses or damage from events like war, terrorism, and piracy. It is additional liability coverage above typical cargo or hull insurance policies.
- P&I Insurance: Protection and Indemnity (P&I) insurance covers the ship owner against liability claims from other people. It is a third party insurance provider for events like oil spills, collisions with other vessels, or injury/death of crew or passengers.
Benefits of Shipping Insurance
Getting shipping insurance from recognised shippers like Canada Post comes with a lot of benefits that will cushion you against losses in case of an accident at sea. Here are some benefits you stand to gain:
Cost Protection Against Unforeseen Losses
Shipping insurance provides financial protection against costs associated with losses and damages that occur while your goods are in transit. This includes losses due to events like accidents, theft, and natural disasters.
Without insurance, these expenses would likely come out of your own pocket. Domestic and international shipping insurance shifts the financial burden of these risks to the insurance company.
Peace of Mind Knowing Your Shipment is Protected
Shipping insurance offers peace of mind knowing that if something does go wrong during transit, your goods, customers, and business are protected. You don’t have to worry about how you would cover the costs of replacing damaged or lost inventory.
The insurance company will handle investigating and settling any file claims, so you can focus on running your business.
Maintaining Customer Satisfaction and Reputation
Shipping insurance helps maintain customer satisfaction and a business’s reputation by ensuring customers are compensated accordingly. When shipments are lost or damaged in transit, insurance payments can compensate customers or fund replacement orders.
This keeps customers satisfied and avoids negative reviews that could hurt the business’s reputation. Therefore, shipping insurance acts as a buffer protecting the customer experience and the relationship between business and customer.
Meeting The Requirements of Your Buyers and Suppliers
More businesses are requiring their suppliers to purchase shipping insurance when products are shipped. This ensures that any losses will be covered, reducing risks for all parties.
Having shipping insurance can help you meet the requirements of your buyers and suppliers so you can maintain good relationships along your supply chain.
Simplifying The Claims Process for You
While filing an insurance claim can still be a hassle, the insurance company handles most of the fine print and work investigating the loss and determining claim values.
This significantly reduces the time, paperwork, and resources you need to allocate to processing claims history for the declared value of damaged or lost shipments. The faster claims are settled, the sooner your business can get back to normal operations.
Choosing the Right Shipping Insurance
Here are some tips for choosing the right shipping insurance:
- Know your risks: Understand what risks your shipment faces and what type of damage or loss would be most likely. This determines the level of liability coverage you need. Common risks include theft, loss, or breakage during transit.
- Understand your options: There are different types of shipping insurance plans with varying levels of coverage. Compare things like replacement value vs. depreciated value coverage, exceptions and limitations, and insurance coverage for delays.
- Determine the value of your shipment: Get an accurate estimate of the declared value of your shipment, including the cost of the products, packing materials, and shipping fees. Compare this to the carrier’s maximum liability and various insurance limits offered.
- Inquire about additional services: Some major carriers offer insurance plans that also include added features like package tracking, delivery alerts, and receipt verification which can give you added peace of mind.
- Review exclusions: Make sure you understand what types of losses would not be covered by the insurance plan. Common exclusions include damage due to improper packing, wear and tear, or war and terrorism.
- Check the claims process: Find out how easy or difficult it is to file an insurance claim if needed. Look for plans with streamlined claims procedures and quick reimbursement.
- Compare multiple offers: Get shipping insurance quotes from multiple carriers to compare coverage, limits, pricing, and claims processes. This will help you find the best option.
- Purchase at the time of shipping: Make sure to get shipping insurance when you arrange for pickup or drop off of your shipment. Insurance purchased after the fact will likely not provide coverage.
Shipping insurance is crucial for mitigating the substantial risks involved in transporting cargo by sea or air. Though premiums may seem high up front, a tragic loss in transit would likely far outweigh any insurance costs.
Without proper coverage, shippers are one accident or natural disaster away from financial ruin. The litany of potential calamities should compel any responsible business owner to strongly consider cargo insurance.
Aside from protecting your products from damage during transit, shipping insurance provides peace of mind knowing that your losses will be covered if the unexpected occurs. Protect your products, your profits, and your people with the certainty that shipping insurance provides.
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