Marine Cargo Insurance
Why Do I Need Cargo Insurance?
A quick search on how many shipping containers are lost at sea in a given year comes up with results 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?
While cargo insurance has always been an important protection for importers and exporters, the past year in particular has redefined “most likely” in more ways than one. In late December, 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. Just this January, 750 containers fell off the Maersk Essen and were lost at sea.
Most recently, the Evergreen Ever Given was blown off course and blocked traffic in the Suez canal for a week, leading the vessel’s owners to declare a General Average.
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. For example, carrier liability does not cover damages caused by bad weather. 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 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 Is Cargo Insurance and What Does It 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.