The Importance of Cargo Insurance or Shipping Insurance for International Freight
Updated on August 08, 2022
For international shippers, recent upticks in shipping delays have caused headaches beyond long delivery times. Days-long waits outside of ports can mean spoilage of food and agricultural products, as well as extended exposure to the elements. A snail's pace supply chain, paired with the unpredictability of ocean shipping, has many international shippers and freight forwarders reconsidering the importance of good, reliable ocean freight insurance.
In 2021, the Bureau of Transportation Statistics released a staggering report: in 2017, at the end of a five-year analysis period, the bureau found that $19 trillion in goods were moved along U.S. transportation networks alone. Broken down into days, the impact of this annual value becomes clear: “The annual numbers mean that on average 54 million tons of goods valued at $52 billion a day moved throughout the country on all transportation modes.” As we near the end of another five-year period, logistics experts predict that this number has only continued to grow.
In other words, having good ocean freight insurance is often the difference between whether a multi-billion dollar industry investment is protected or not. In a time of logistical uncertainty, the risks of operating without ocean freight insurance are too hazardous for almost any business. By considering the importance of ocean cargo insurance, shippers can better understand that planning for the inevitable isn't an option but a necessity in today's competitive logistics marketplace.
What Is Ocean Shipping Insurance?
Before understanding the benefits of ocean freight insurance, businesses need to understand what ocean freight insurance is. Ocean freight insurance, also known as marine cargo insurance, ocean shipping insurance, sea cargo insurance, or sea freight insurance, refers to a wide range of insurance policies and plans designed to protect shippers from the inevitable. Whether weather damage or theft, ocean cargo insurance can provide the coverage shippers need to face logistics disruptions whenever and wherever they arise.
However, the coverage provided by a sea cargo insurance policy can differ significantly between providers. Regardless of the provider, the cost to add insurance for individual shipments usually ranges between 1.5–4% of the item value. Generally, this rate is subject to change based on the type of freight insured and the shipment method. Depending on the ocean freight insurance policy a shipper selects, they'll receive a smaller or larger compensation package when accidents inevitably occur. By investing in an extensive ocean cargo insurance policy, shippers can avoid the massive expenses of lost cargo, regardless of the claim size.
In an unpredictable post-COVID-19 trade environment, accidents are inevitable. Staffing shortages can gum up ports, and unpredictable scheduling can result in spoiled goods and missed deliveries. Ocean freight insurance, in short, is a way for shippers to protect themselves from these inevitable, costly logistical hiccups.
Types of Insurance Coverage Seen With Freight Transport
There’s no one-size-fits-all logistics, so why should shippers settle for one-size-fits-all ocean freight insurance? Through careful consideration of the different types of sea freight insurance policies, businesses can choose a policy that reflects both their logistics needs and the changing rules of an evolving logistics landscape.
All-Risk Policy: These policies offer shippers the broadest possible range of protections. From theft to spoilage, weather to port delays, all-risk policies offer shippers the most comprehensive range of ocean freight insurance protections—including WSRCC (war, strikes, riots, and civil commotions), an invaluable asset in an increasingly unpredictable global landscape. However, this broad range of marine cargo insurance protections means that all risk policies tend to be some of the most expensive policies available to those invested in ocean shipping.
Named Perils Policy: This is a must-have insurance policy for shippers worried about damage and risks aboard a cargo vessel. Named perils policies are an ocean freight insurance option that protects shippers from costly liabilities en-route and at the board, including onboard fires, heavy weather, theft, and sinking or collision. With severe weather increasing in frequency and with less notice than ever, named perils insurance policies can be a valuable safeguard to protect vulnerable containers against stormy seas.
Single Policy: Often, shippers just venturing into the world of ocean trade don't quite have the capital to invest in an ongoing ocean freight insurance policy. For these shippers, or any other shippers looking for a flexible, no-strings single voyage insurance policy, a single policy can provide a quick, easy solution to everyday ocean cargo insurance worries. Unlike many ocean freight insurance options, single policies are short-term, flexible contracts that last only for the duration of a single voyage.
Warehouse-to-Warehouse Policy: In a B2B setting, these policies are standard. Designed to protect freight and capacity assets off-loaded from cargo vessels into warehouses, warehouse-to-warehouse policies are an integral ocean freight insurance asset for shippers looking for complete supply chain coverage. As last-mile expenses continue to rise—now accounting for 53% of total shipping costs, according to FreightWaves—this ocean freight insurance solution can protect shippers from extra costs in the final mile.
Contingency Policy: Generally orchestrated by freight brokers, these are the best-practice policies shippers want when something goes wrong onboard a cargo vessel. After accidents, it's easy for carriers to point fingers toward shippers. Contingency policies work on the shipper's behalf to insure them against costly damaged-goods expenses. These important ocean cargo insurance policies compensate shippers when carriers won't. As fuel costs continue to rise and carriers are forced to meet faster and faster delivery expectations, shippers must use ocean cargo insurance to protect themselves against any oversight on the part of overworked carrier services.
General Average Policy: Though less common than other types of ocean freight insurance, these policies are an essential alternative to more expensive traditional ocean freight insurance options. With a general average policy, the cost of the damaged cargo gets shared between all stakeholders. With the costs of damage distributed between all shippers and owners, all parties invested in the freight capacity end up paying a lower cost to compensate for typically costly mishaps.
Specialty Load Policy: These ocean cargo insurance policies are a must-have for shippers working in industries that demand careful, outside-the-norm shipping services in busy ports. Specialty load policies allow shippers to partner with ocean freight insurance providers to offer maximum insurance customization, meaning they can pay for the policy they need without the extra coverage.
How Shipping Insurance Protects Shippers and Customers
Ocean shippers are facing a costlier, more uncertain logistics environment than ever. However, with ocean freight insurance, they don't have to face it alone. Facing massive ocean crossings and sky-high fuel prices, ocean shippers must consider the key benefits of ocean cargo insurance.
Reduced short and long-term impact on shippers when issues arise. Without ocean freight insurance, shippers can quickly find themselves on the hook for inevitable logistical mishaps. These costs can quickly sink a shipper's bottom line in today’s busier-than-ever logistics marketplace. With ocean freight insurance, shippers can protect themselves from most expenses and spread compensation costs over a longer period.
Offers at least partial compensation for shippers and customers. Ocean shipping is a risky business. Dealing with customs, weather, and fast-changing political environments can leave shippers vulnerable. Regardless of the type of ocean freight insurance a shipper has, some loss is almost inevitable. What's important is how a shipper has prepared to handle that loss. Without ocean freight insurance, losses are quickly passed onto customers in the form of increased shipping fees and slower delivery times, causing them to look for alternative shipping solutions. With ocean freight insurance, however, the inevitable losses incurred during ocean shipping can result in equitable compensations, ensuring that shippers stay solvent while investing in their most valuable asset: customer loyalty.
Gives shippers an added layer of legal protection and support. The ocean cargo logistics industry is often isolating. An industry-wide tendency toward litigation means that shippers can quickly find themselves in deep water and often without a paddle. Ocean freight insurance, however, can often provide shippers with a much-needed lifeboat in turbulent waters. With ocean freight insurance experts, shippers can come out of even the most complex logistical accidents unscathed.
Ensures cargo loss is dealt with accurately and successfully. A good ocean freight insurance policy is a must-have when cargo loss occurs. Without ocean freight insurance, shippers and customers alike can be left scratching their heads and asking, 'what now?' Ocean freight insurance can help shippers take the guesswork out of cargo loss, helping customers feel secure while helping shippers bolster their bottom line.
Improves customer support and enhances customer loyalty. Nobody likes a missed delivery. For international shippers across all industries, reliable, cost-effective delivery is a sure-fire way to stand out from the competition. Ocean freight insurance can help shippers provide the best possible service, all with the peace of mind that comes from an affordable ocean freight insurance policy customized to each shipper's individual needs. With marine cargo insurance, shippers can face any shipping crisis head-on.
Less hassle and paperwork with claims for loss or damage. Along with litigation, all types of shippers can face piles and piles of paperwork in the aftermath of an inevitable logistics snafu. With ocean freight insurance, shippers can rely on a wide-ranging team of logistics professionals to face the paperwork head-on, allowing them to get back to what they do best: getting customers the goods they need on time, every time.
Allows for fast, reliable resolution of a range of claims-related issues Shipping is slow enough given the supply chain struggles and staffing shortages; shippers don’t need protracted resolution processes slowing them down even more. Luckily, ocean cargo insurance innovations can provide shippers with the guidance and compensation they need to resolve any claims-related issues quickly.
Protection for shippers against catastrophic loss and business impact Every shipper hopes the worst-case scenario never happens. But what is a shipper to do if a ship goes down or an entire load is lost during a once-in-a-lifetime weather event? Consider the spring 2022 events surrounding the Evergreen Marine where the carrier declared a general average for cargo owners affected by the stuck ship, as reported by Splash247.com. All cargo owners were faced with sharing in the costs associated with refloating the vessel. This is the perfect example of when proper insurance can be a life-saver to shipping costs. With ocean cargo insurance, they’ll never have to ask about those what-if scenarios. Protection against catastrophic loss through ocean freight insurance means businesses can bear even the worst of worst-case scenarios without batting an eye—a valuable asset for companies dealing with the aftermath of the COVID-19 Pandemic.
Find the Best Ocean Cargo Insurance For Optimal Protection
Optimal protection means insurance against the inevitable. For shippers handling sensitive items or working in fast-paced shipping seasons, ocean cargo insurance provides the security customers want and the security shippers need.
For designer labels or luxury items – High-end luxury goods are often extra-sensitive to the unpredictable conditions of ocean shipping. Customers buying these investment goods are often located near some of the world’s busiest ports and won't hesitate to return them if they arrive in anything less than pristine condition. This cost that often falls on shippers' shoulders.
For international deliveries – Long waiting periods for customs clearance can result in spoiled food and agricultural shipments. Without ocean freight insurance, shippers can end up on the hook for entire cargo vessels full of spoiled goods. Ocean freight insurance provides shippers the security they need to meet customs and tariff complications head-on.
For electronics, art pieces, and fragile items – Regardless of the type of sensitive cargo a shipping company handles, a single drop of seawater can quickly result in lost shipments. Without ocean freight insurance, these ruined goods can result in steep compensation expenses. Lucky for shippers, ocean freight insurance can intervene to ensure that compensation costs are taken care of quickly and effectively before being passed onto customers.
During peak shopping seasons – The last thing shippers need to worry about amidst the hustle and bustle of the peak shopping season is the expense of asset loss. Ocean cargo insurance means shippers can avoid sweating the small stuff and focus on delivering their customers’ goods.
During times of market instability – Unwelcome trade expenses are bad news in the best of times. Still, an unexpected expense can tank a business's annual prospects during market instability. As the global economy recovers from the COVID-19 Pandemic and grapples with ongoing political struggles, shippers can rely on ocean cargo insurance to provide the security they need to stay on track in difficult times.
Protect Your Cargo With the Right Marine Cargo Insurance With FreightMango Today!
Without marine cargo insurance, shippers are vulnerable to being blind-sided by inevitable logistics mixups. In worst-case scenarios, these mixups can quickly turn into bottom-line busting disasters, resulting in lengthy litigation and bankruptcy. Luckily, ocean freight insurance can protect businesses from the inevitable and ensure smooth sailing through even the roughest logistical waters.
By bookingwith FreightMango, the first-ever full-service freight marketplace, businesses can find the ocean freight solutions they need such as ocean freight insurance, to survive and thrive, regardless of what an unpredictable logistics environment brings. Get started with FreightMango, and see what simplified shipping can do for your business.
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