There are far too many shippers today who start breathing easy as soon as they know their cargo is safely on board an aircraft or ship – despite not being insured. But as many people have learned the hard way, shipping things without insurance means taking a major risk financially. Research has shown that a lost shipment of goods worth around $1,000 means a shipper would have to make $20,000 in sales just to recoup their losses.
For those that still think cargo insurance is just a superfluous luxury or perk, take a look at some of the many reasons why insurance is crucial nowadays.
Carriers Have the Upper Hand
Although every carrier is required to provide liability coverage, this would still be far less significant than shippers might think. The maximum liability offered for air shipping at a mere $9 per pound while that of a steamship line is at $500 per unit shipped.
Even if your shipment isn’t that large that this may seem enough to cover it, the claims process will still put the carrier at a significant advantage. The ocean shipments would require that a claim is made within three days after delivery date. Not only that, but carriers also have numerous defenses under the Carriage of Goods by Sea Act (COGSA). That is why there are many unpaid claims, and that results in the bill being passed on to shippers.
Cargo Insurance for Rising Theft
Back in 2015, the FBI made a report stating that almost $30 million in cargo goods had been stolen and only less than $6 million worth of goods have been recovered. Although shippers will usually have to worry about identity theft and false pickups, carriers are also starting to become increasingly concerned with piracy in international shipments. This growing threat can put your bottom line at risk and can be a logistical nightmare for your uninsured cargo.
Damage to Cargo is Quite Common
When shipping cargo, the complicated logistics will, unfortunately, provide numerous opportunities for goods to be lost or damaged. A recent report outlined how cargo losses and damage are still a very big problem for carriers and shippers alike. It was stated in the report that about 25% of damage is physical while 15% was related to temperature. Another 11% were containers that were lost overboard. The last thing that you and your company would want to do is to pay for someone else’s mistakes.
Cargo Release is Affected
A General Average is a principle which makes all parties liable in case an accident happens to the vessel with which your cargo was shipped. Even if the cargo would be delivered safely and without damage, you may still be required to pay up a bond or deposit so that it can be released after a General Average. With the help of cargo insurance, this lets the insurance company handle and assume liability. This will let you get your cargo released quicker.
Those shippers that choose to purchase cargo insurance are often much better protected compared to shippers who let other parties dictate their transactions.