The cargo insurance premium on a single shipment is typically calculated as the insured value times the policy rate. And what is insured value? The simplest method to calculate insured value is to add the commercial invoice value of the goods to the cost of freight and add ten percent to cover additional expense.
It is important that the correct insured value is selected when insuring your cargo. Selecting an amount that is less than the value of the goods, or underinsuring the shipment, can have dire financial consequences. You may be familiar with the term Coinsurance from medical coverage where it is quite common. Coinsurance is the amount in claim that the cargo owner has chosen not to insure – this amount is essentially covered by the cargo owner after the deductible has been paid and before the insurance company pays.
Coinsurance is typically expressed as a percentage. In a policy with twenty percent coinsurance, the insurance company will pay eighty percent of the loss, and the insured will pay the remaining twenty percent. In a cargo policy, coinsurance comes into play when a shipment is underinsured.
