Marine Cargo Insurance
Why Do I Need Cargo Insurance?
If you do a quick search on how many shipping containers are lost at sea each year, you’ll find results averaging around 1500 containers. For a global industry, this might seem inconsequential. Why should an importer worry about insuring freight that will most likely arrive safely?
Short answer: because when disaster does strike, damage or loss to a container or ship can have devastating consequences for businesses relying on those goods to arrive safely, and carrier liability does little to mitigate the costs.
While cargo insurance has always been an important protection for importers and exporters, the last couple years in particular have redefined “most likely” in more ways than one.
In late December 2020, the ONE Apus lost upwards of 1900 containers at sea due to inclement weather, not to mention thousands of containers damaged on board. Losses are estimated to be around $200,000,000. In January 2021, 750 containers fell off the Maersk Essen and were lost at sea.
And perhaps most infamously, the Evergreen ship “Ever Given” was blown off course and blocked traffic in the Suez Canal for an entire week, leading the vessel’s owners to declare a General Average.
Cargo Insurance vs. Carrier Liability
In these situations, carrier liability is nowhere close to being enough to cover costs. Cargo lines typically offer rates per pound that amount to vastly less than the cargo’s actual worth.
Did you know that carrier liability does not cover damages caused by natural disasters?
Depending on how your bill of lading or airway bill is worded, your total reimbursement may be limited to a maximum of $500 per ocean container (or $9.07 per pound for an air shipment) in the case of a loss. Carrier liability is not insurance.
Sometimes in the event of a catastrophe, carriers will declare a “General Average” (GA). This is a provision of maritime law that spreads the losses incurred across all cargo owners with freight on board, and all parties must pay a set amount for their cargo to be released, regardless of whose cargo was lost or damaged and at what cost.
Without marine cargo insurance, importers are left without any real protection in the event of containers being damaged or lost in transit. Such a situation is not, as we have seen, out of the question—and is more a question of when than if.
What Does Cargo Insurance Cover?
Cargo insurance offers protection from external damage during transit—of one’s own cargo or in the case of a General Average (GA) claim.
C J can provide you with reasonably priced cargo insurance policies based on the value of your freight.
If you have specific questions about marine cargo insurance or would like to know more about this, please contact your local C J International representative.
Our blog posts are for informational purposes only. While we use reasonable efforts to furnish accurate information, C J is not liable or responsible for the accuracy or reliability of any information contained herein.