In today’s globalized trade environment, where goods traverse vast distances and face numerous risks, such as natural disasters, cross borders, and war risky routes, the benefits of cargo insurance have become an essential safeguard for businesses.
This type of insurance protects against losses while transporting goods, ensuring businesses can thrive despite unforeseen challenges.
In this article, we will explore the key benefits of cargo insurance and why it is vital for your business operations. Learn more about it here!
Why Cargo Insurance Matters for Your Business?
Before we delve into this topic more, we need to understand “what is cargo insurance?” so that we can answer the question, “Why is cargo insurance important for your business?”
Cargo insurance is a crucial component of international trade, protecting exporters and importers against the risks of damage or loss during shipping and transit.
This insurance ensures that your business can operate smoothly despite unforeseen events and circumstances that may arise during transportation, including:
- The potential for natural disasters
- Logistical errors
- Accidents
- Theft
- Piracy
- Transit through conflict zones
- Hijacking
- Losses during the loading and unloading process
- Varied regulations
Cargo insurance also provides financial protection against the risks associated with shipping and transportation. By investing in cargo insurance, you safeguard your assets and enhance the resilience of your supply chain.
Alongside this, one of the benefits of cargo insurance is to help businesses mitigate potential financial setbacks and maintain operational continuity.
Top Benefits of Cargo Insurance
The substantial growth of e-commerce has markedly enhanced global shipping activities. This increase in cargo volume has, in turn, amplified the necessity for cargo insurance, as a higher quantity of goods in transit elevates the risk of loss or damage.
Based on allietmarketresearch.com data, in 2022, the global cargo insurance market achieved a valuation of $71.4 billion and is anticipated to experience significant growth by 2032, with a projected compound annual growth rate of 4.1% from 2023 to 2032.
This trend emphasizes securing cargo insurance to safeguard your business investments in an increasingly competitive and complex market environment. From this perspective, we can draw a significant conclusion regarding the critical importance of cargo insurance for your business.
Here are the key benefits of cargo insurance you should consider for international shipping:
1. Financial Protection Against Loss and Damage
One of the primary benefits of cargo insurance, which we already mentioned, is its ability to safeguard against financial losses resulting from damaged or lost goods during transit. Particularly relevant when operating on credit, increasing the threat of non-payment due to non-delivery/cargo damage.
According to a report from the International Chamber of Commerce, the total value of goods transported globally is trillions of dollars, making even a small percentage of loss a significant financial burden for a business.
For instance:
If a shipment valued at 777.003,50 HKD ($100,000) is lost or damaged without insurance, the business must absorb that entire cost. Cargo insurance mitigates this risk, reassuring companies that they are covered in case of unforeseen events.
Also Read: Cargo Insurance vs Freight Forwarders Liability Insurance: What’s the difference?
Three distinct types of coverage are available under the Institute Cargo Clauses (I.C.C.): A, B, and C. Each of these clauses protects against partial and total losses, but they differ in the range of risks they cover;
- ICC A offers the most comprehensive protection,
- followed by I.C.C. B, which covers fewer risks and
- I.C.C. C provides the most limited coverage.
Institute Cargo Clause A
This clause offers the broadest coverage, protecting against a wide array of transportation risks, including:
- The inherent nature of the goods
- Obsolescence
- Intentional damage
Institute Cargo Clause B
The I.C.C. B provides coverage for the same risks as I.C.C. C, along with additional protection against losses resulting from events such as:
- Volcanic eruptions and earthquakes
- Lightning strikes
- Goods being thrown overboard
- Water damage
- Losses incurred during unloading
Institute Cargo Clause C
This clause covers losses resulting from:
- Fire or explosions
- Accidents involving grounded, submerged, or overturned transportation means
- Collisions between conveyances and objects other than water
- The deliberate sacrifice of goods for the safety of the overall shipment
Types of Cargo That Can Be Insured
- Machinery and spare parts (new and used)
- Textiles
- Frozen food
- Consumer goods
- Swallow bird’s nest
- Various types of plastic
- Vehicles, including cars, motorcycles, and heavy equipment (excluding self-driven units)
- Personal belongings (particularly for relocation), excluding antiques, jewelry, precious stones, and other valuables.
2. Peace of Mind for Business Owners
Knowing that your goods are protected provides invaluable peace of mind for business owners. With cargo insurance in place, as a business leader, you can focus on strategic growth rather than worrying about the potential loss of your products.
Many business owners have reported that cargo insurance alleviates logistics-related stress.
For example:
A client of Azure Risk shared;
“Hands down, I recommend Anmol for all insurance needs; very professional and always helpful even at concise notice, i.e., flying the next day or shipping internationally the same day. Not only does he offer the best deals, but he goes above and beyond in explaining and comparing all risks vs other providers in detail. Slowly migrating all our insurance to Azure. Thank you.”
– T.W.G.
3. Enhanced Reputation and Credibility
Having cargo insurance can significantly enhance a business’s reputation and credibility. Customers and partners are likelier to trust a company that demonstrates responsibility by securing shipment insurance.
A proactive approach conveys to clients that the company is genuinely dedicated to safeguarding their interests. In an increasingly competitive marketplace, such a commitment can yield numerous benefits, including:
- A significant differentiator
- Enhancing the company’s reputation
- Attracting additional business opportunities
4. Coverage for Various Transportation Modes
Another critical benefit of cargo insurance is its versatility across different modes of transportation, including:
1. Land
This cargo insurance type is designed to protect goods transported within a country. It covers risks like collision damage, theft, and other challenges related to freight shipping.
Businesses that rely on trucks and utility vehicles for domestic logistics often choose this type of insurance to ensure the safety of their cargo.
2. Sea
This type is crucial for businesses importing and exporting goods via maritime routes. It offers protection against a range of risks, including:
- Damage from inclement weather
- Incidents during loading and unloading
- Piracy
- Other potential threats that could impact cargo during transit
3. Air
This type of cargo insurance protects goods transported by air, safeguarding the insured against various risks, including loss or damage during transit, theft, and other unexpected events.
Its policy covers not only the value of the cargo itself but also related expenses, such as transportation costs, taxes, and duties.
Whether shipping goods by truck, container ship, or airplane, cargo insurance can be tailored to fit specific shipping needs.
5. Compliance with Legal Requirements
In some industries and jurisdictions, having cargo insurance may be a legal requirement.
Specific regulatory frameworks mandate insurance coverage to protect the shipper and the recipient. By securing cargo insurance, businesses can ensure compliance with these regulations, avoiding potential legal repercussions from non-compliance.
This safeguards the business and reinforces its commitment to operating ethically and responsibly. Get a quote with Azure Risk today!
6. Facilitation of Smooth Claims Process
Having cargo insurance can significantly simplify the claims process when issues arise. Insurers typically have established protocols to handle claims efficiently, which can expedite the recovery of losses.
Navigating claims helps businesses maintain accurate records of shipments, including documentation of the value and condition of goods upon departure. This proactive approach can streamline the claims process and allow companies to receive compensation more quickly when necessary.
Also Read: Amazon Seller Insurance Requirements
In summary, cargo insurance offers manifold benefits, from financial protection and peace of mind to enhanced reputation and compliance with legal requirements.
As the risks associated with shipping continue to grow, securing cargo insurance is a prudent investment for businesses seeking to protect their assets and ensure operational stability.
We encourage you to evaluate your current insurance needs and consider the advantages of cargo insurance through Azure Risk, your trusted business insurance broker in Hong Kong. Safeguard your shipments and fortify your business’s future with us today! Enquire now!
