Some importers and exporters are slightly inexperienced, and oftentimes overlook the small details that end up costing you a huge sum in the end.
Here are 5 pitfalls you can avoid when choosing your cargo insurance:
- Limited cover – Limited cover is a kind of insurance policy that only pays benefits in the event of particular incidents or specific events as agreed in the contract.
- Cover on price – Most businesses tend to choose cover based on price without truly understanding terms and conditions, which can be risky.
- Reducing liability – It’s important to choose the right amount of cover to avoid cutting down on liability costs as it’s not advisable.
- Costly deductibles – Although choosing a high deductible can lower premium costs, it’s better to choose one that’s more affordable.
- Low-level cover – When the insurance is chosen by the other party, the lowest insurance is usually selected, which could not offer the cover you want.
Looking out for these pitfalls can help you save a few extra bucks and determine which cover works best for you.
When selecting cargo insurance, companies must avoid several key pitfalls to ensure comprehensive coverage and minimize unexpected losses.
Here are some critical areas to consider:
Insufficient Coverage Options
One common pitfall is opting for inadequate coverage types. Standard cargo insurance often covers only specific risks, which may not suit every shipping scenario. Many policies cover basic risks like theft, fire, or collision but might exclude coverage for natural disasters, strikes, or improper handling. Companies should assess their shipping routes, transit methods, and cargo type to determine the most relevant risks, then ensure the policy addresses these adequately.
Not Understanding Coverage Exclusions
Cargo insurance policies typically contain exclusions that limit or exclude coverage for certain situations. For instance, some policies exclude damages from improper packaging, acts of war, or delay-related losses. Failing to review these exclusions can result in denied claims when unexpected issues arise. Businesses must read the fine print to understand exactly what the policy doesn’t cover and discuss with their insurance provider any conditions that may affect coverage.
Choosing the Cheapest Policy
While lower-cost policies may seem appealing, they often provide limited coverage and may not protect against significant risks. Opting for the cheapest policy without assessing its suitability can leave a business vulnerable to financial losses. Instead, companies should balance cost with comprehensive coverage that aligns with their unique needs, even if it means investing in a higher-premium policy that offers stronger protection.
Overlooking Geographic Limitations
Some cargo insurance policies restrict coverage to specific geographic areas, such as certain countries or continents. For businesses shipping internationally, it’s essential to confirm that the policy provides global coverage or at least covers all planned destinations. Shipping routes can vary due to logistical or weather-related changes, so flexible geographic coverage ensures protection regardless of route adjustments.
Ignoring Liability Limits
Cargo insurance policies often come with liability limits, which cap the amount the insurer will pay for a claim. If these limits are too low, they may not cover the full value of high-value shipments. Companies must confirm that the liability limits align with the cargo’s value, or seek additional endorsements if needed. Adjusting liability limits can prevent situations where the business has to absorb large, uninsured losses.
Neglecting to Verify Claim Procedures
Some companies assume that filing a claim will be straightforward, only to find that complex procedures or documentation requirements create obstacles during the process. Knowing the claims process ahead of time, including any required documentation like inspection reports or photographs, can simplify the experience if a loss occurs. Choosing an insurer with a clear, accessible claims process can also reduce delays and improve payout timelines.
Not Considering Insurer Reputation
The reputation and financial stability of the insurance provider play a critical role in ensuring reliable coverage. An insurer with a track record of disputed claims, payment delays, or denied coverage can become a liability. Researching reviews, consulting industry references, and evaluating the insurer’s claim resolution history can help businesses choose a trustworthy provider that will fulfill its obligations during a loss.
Overlooking Coverage for All Cargo Types
Some policies might be restricted to particular types of cargo and may not cover specialty items like perishables, hazardous materials, or high-value goods. Companies transporting specialized items should verify that the policy explicitly covers these cargo types to avoid unanticipated exclusions.
