Ocean Cargo and Sea Freight Insurance
As a supplier or importer of products that are being shipped overseas, you simply can’t afford to leave the investments you’ve made in valuable shipments completely exposed to the myriad risks that come with transporting goods over oceans. Ocean cargo and sea freight insurance can cover the risks to both suppliers and purchasers, and it’s recommended that each carry their own coverages for the reasons articulated in this post. If you are a shipping company or own a shipping vessel or fleet and are looking for coverage to protect your vessels from collision, fire, hijacking, piracy and more, please visit our Ocean Marine Insurance Explained page.
Controlling your Purchase Risks with Ocean Cargo and Sea Freight Insurance
As a buyer or purchaser, you may be tempted to rely on supplier-provided ocean cargo and sea freight insurance to cover a shipment of your product. These are the gaps in your protection that doing so presents:
- Supplier arranged insurance coverage is generally written to cover the supplier’s risks and not the buyer or purchaser’s risks related to the shipment
- In fact, because the exporter is their client, it may even be in the insurance company’s interest to deny your claim in situations that would require the shipped goods be returned to the supplier without payment (due to damage, for example)
- If you do have a claim, there may be a high deductible that you will have to pay during the claims process
- The limit on supplier-provided cargo insurance policy may not be enough to cover your loss or damage
- Relying on an insurance company in another country means you don’t have access to unbiased references as to the reputation of that company and their claim payment history
- Dealing with a supplier’s insurance company could present language and time zone barriers
- Not having your own, local insurance broker explain the terms and conditions of your coverage leaves you vulnerable to loss or damage
- Supplier-arranged coverage is often provided as a way to increase the purchase price (and the supplier’s profits) and could mean that you are overpaying for coverages that leaves you under-insured
- If you are using bank financing or other investment income to fund your purchase (or your business in general), the investor(s) will want to ensure that their investment is fully protected which you cannot guarantee with supplier-provided cargo insurance
Increasing Your Sales and Protecting Your Interests as a Supplier with Ocean Freight and Cargo Insurance
On the other side of marine shipments, suppliers also need their own marine cargo insurance coverage to take control of their risks and protect their business interests. These are the advantages to you, as a supplier, of arranging your own ocean freight and cargo insurance:
- As a general rule, customers will not pay an invoice if a shipment arrives damaged, leaving you vulnerable to extensive cargo loss or damage if your products are damaged in transit and you do not have your own shipping insurance coverage
- With work slowdowns and increasing backlogs, shipments are spending more time in port and held up in warehouses, leaving you unprotected in the face of increased chances of fire, loss or damage without cargo insurance policy
- As more exporters include insurance coverage to protect shipments, providing ocean cargo insurance may help you increase sales or, at least, help you keep up with competitors
- Purchasers may be willing to offset an increase in the invoice amount by passing the cost of ocean cargo insurance coverage on to the end customer if it provides them with security for their investments and commitments
- Purchasers and other partners may require proof of marine cargo insurance policy
- Having your own marine cargo insurance can protect you from product liability and brand reputation losses due to stolen or damaged goods that end up selling on the gray market
- Using a local ocean cargo insurance broker can speed up applications and claims
Factors that Affect Ocean Cargo and Sea Freight Insurance Premiums
Recent trends that affect the cost of ocean freight insurance in general include:
- Increasing international trade which leads to more collisions, supply chain delays and other risks
- Increasing severity in weather events such as hurricanes and tropical storms
- Increasing cargo theft of trailers on land
- Increasing cargo theft of shipping containers on transit due to piracy
These are some of the factors that determine your rates for cargo insurance policies:
- Shipment full value
- Type of goods being shipped
- Cargo Destination
- Voyage
- Coverage rating (limits, what’s covered)
- Loss ratio (your record of insurance claims)
- Number of years in business
Get ALIGNED with the Right Ocean Freight and Cargo Insurance
Our commercial insurance specialists work with Canada’s top insurance companies to get you comprehensive ocean cargo and sea freight insurance at competitive rates. Contact an ALIGNED advocate for a free quote in minutes or get started now by using our online tool.
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