Cargo insurance offers protection against many risks involved in the transportation of goods. However, it doesn’t cover everything. Most insurance policies offer comprehensive damage cover, however, they may not cover all the specifics. These include:
- Special freight: Your insurance may not cover any hazardous cargo, specific electronic devices, and other expensive or delicate things.
- Modes of transportation: Some policies will only cover your freight depending on the type of transportation mode you use. (sea, land, air etc.)
- Damaged by poor packaging: Your insurance company might not cover any damage to your goods if they’re linked to poor freight packaging.
- Flawed products: You might not be covered for cargo damage that could be caused by faulty products in your package.
So before you choose an insurance type, remember to check with your insurance company first.
The key exclusions from cargo insurance
Improper Packaging
Cargo insurance generally excludes losses or damage due to inadequate or improper packaging. If the packaging fails to protect the cargo during transit and results in damage, insurers will likely reject the claim. Proper packaging is crucial, especially for fragile and high-value items. Shippers must ensure that the cargo is packed securely to withstand the journey’s conditions.
Natural Deterioration or Decay
Certain goods, such as perishables and food items, are prone to natural deterioration. Cargo insurance does not cover losses due to the inherent nature of these goods. If items decay or spoil during transport because of delays or improper handling not covered in the policy, the insurance won’t apply. Businesses shipping perishable goods should consider specialized policies or temperature-controlled logistics services.
Delay-Related Losses
Delays can lead to significant losses, particularly in industries dealing with time-sensitive shipments. However, standard cargo insurance does not cover financial losses caused by delays, even if the delay results in product spoilage or missed business opportunities. Shippers might need additional coverage or endorsements to address these risks.
Losses Due to Insufficient Documentation
Proper documentation is essential in shipping. If a shipment is delayed or rejected because of incorrect or incomplete paperwork, any resulting financial losses will not be covered by cargo insurance. Insurers require that all shipping documents comply with regulations and be in order for claims to be valid.
Acts of War and Terrorism
Most cargo insurance policies exclude damage or loss caused by acts of war, terrorism, or nuclear hazards. If goods are shipped to or through conflict-prone areas, shippers must obtain specialized coverage, such as war risk insurance. Without this additional protection, the insurer will not compensate for damages related to these risks.
Intentional Misconduct by the Insured
If damage to cargo occurs due to deliberate acts or negligence by the insured party or their representatives, the insurance will not cover the loss. This includes fraud, willful damage, or illegal acts committed by the insured or their employees.
Confiscation or Seizure by Authorities
Goods confiscated or seized by government authorities due to regulatory violations, legal issues, or customs infractions are not covered under cargo insurance. Shippers need to ensure full compliance with the laws and regulations of the countries involved in the transportation process.
Mechanical or Electrical Failure
Damage caused by the inherent mechanical or electrical breakdown of items being shipped, such as machinery or electronic equipment, is excluded. If the equipment fails during transit without external physical damage, the insurance policy won’t cover repairs or replacements.
Ordinary Wear and Tear
Regular wear and tear from transportation, such as minor scratches or scuffs, is not covered. Cargo insurance aims to protect against unforeseen and accidental damage, not the natural degradation that occurs over time.
Temperature and Climatic Changes
Losses caused by temperature variations or humidity may not be covered unless the policy explicitly includes protection against such risks. For temperature-sensitive cargo, shippers must seek specialized coverage.
