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                                            Frequently Asked Cargo Insurance Questions:

Q.What is Cargo insurance?

A. Cargo insurance covers goods and/or merchandise against damage or loss, while in transit from one location to another.

Q. If my transit carrier provides insurance, why do I need to buy separate cargo insurance?

A. Carrier liability is often limited to only .50 cents per pound and not based on the actual replacement value of your items. If you want to be covered for the full value of you items, you need full replacement value primary cargo insurance.

Q. What is the difference between inland cargo insurance and ocean cargo insurance coverage?

A. Inland transit covers domestic shipments via land (truck & rail) and or air shipments. Ocean Cargo Insurance provides coverage for shipments traveling via boat/ocean.

Q. What does warehouse to warehouse mean?

A. Coverage for cargo insurance is often referred to as Warehouse to Warehouse. This coverage begins when transit begins and terminates when the cargo is delivered to the final destination.

Q. What is an "Open" marine cargo policy?

A. An "Open" marine cargo policy is designed for frequent shippers. The contract will cover all transits that come within the scope of the insurance. Premiums are debited monthly, quarterly or annually. The main advantage of this type of policy is that the client does not need to report each shipment individually to ensure cover is in place. Instead, they declare shipments as required, or in bulk for a set period, on a set date. The policy is generally written on a wide basis to cover all goods and merchandise throughout the year. The Insured must present the Insurer with all the specific details of their business, including the type of goods involved, limits, and destinations. Shipments outside of the norm, or in excess of limits or geographic allowances, must be reported in advance.

Q. Why do I need War Risks Insurance?

A. Marine cargo policies always contain a FC&S (Free of Capture & Seizure) clause, which excludes war risks, strikes, riots and civil commotions and similar risks. A specific agreement must be made for an additional premium to be paid if these perils are to be insured. There are three Institute War Clauses covering cargo, air cargo, and postal shipments. War Risk rates are set by the London Market War Risks Rating Committee or the American Market War/SR&CC Schedule. The political and social climates of a given country determine the rates.

Q. What is a General Average?

A. A loss arising through a voluntary sacrifice of any part of the ship or cargo. When the vessel/boat owner declares a general average, the vessel owner and all the cargo interests will share the expenses associated with the general average on a pro-rated basis. These expenses are covered under a Marine Cargo Policy.

Q. What is a "free of particular average" (FPA) policy or 'C' Clauses?

A. An FPA policy is the most restrictive type of cargo insurance available. An FPA policy covers goods against total loss by marine perils. Partial losses, other than General Average losses, are recoverable only in certain cases. This coverage is now generally referred to as Institute Cargo Clauses (C), or 'C' Clauses.

Q. What is a "with average" policy ('B' Clauses)?

A. This type of policy offers broader coverage than an FPA policy and covers partial losses caused by perils of the sea when they reach a certain percentage of the insured value. 

Q. What is an "all risks" policy ('A' Clauses)?

A. An all risks policy covers all transportation risks. However, unless specifically included, it will not cover loss of market, loss or damage caused by delay, inherent vice of the goods, war, strikes, riots or civil commotions. This coverage is now generally referred to as Institute Cargo Clauses (A), or 'A' Clauses.

Q. What is a bill of lading?

A. A bill of lading is a legal contract of carriage between the carrier and shipper. It outlines the liability of carrier, terms and conditions of the shipment transport and serves as the shippers receipt for the goods.

Q. What are the "Incoterms"?

A. Incoterms define the responsibilities of the buyer and the seller and are recognized as the international standard by custom authorities and courts in all the main trading nations. They are standard trade definitions issued by the International Chamber of Commerce. Incoterms reduce the risk of misunderstandings and legal disputes. Incoterms also specify the loading and unloading responsibilities of the buyer and seller. There are 13 Incoterms, each denoted by a 3-letter code. The terms are grouped in four categories based on the first letter in the three-letter abbreviation.

Under the "E"-term (EXW), the seller only makes the goods available to the buyer at the seller's own premises. It is the only one of that category.
Under the "F"-terms (FCA, FAS and FOB), the seller is called upon to deliver the goods to a carrier appointed by the buyer.
Under the "C"-terms (CFR, CIF, CPT and CIP), the seller has to contract for carriage, but without assuming the risk of loss or damage to the goods or additional costs due to events occurring after shipment or dispatch.
Under the "D"-terms (DAF, DES, DEQ, DDU and DDP), the seller has to bear all costs and risks needed to bring the goods to the place of destination.

Q. What information does an insurance underwriter need to provide a quote?

A. The more information one is able to provide about one's insurance needs, the easier it is for an underwriter to asses the risk and quote accurately. To enable an underwriter to assess the risk and give a competitive set of rates, the following information is essential:

Q. What does "uberias fides"(utmost good faith) mean?

A. Mutual trust in negotiating an insurance contract. The Insured must fully disclose all aspects of their request for coverage truthfully. A breach of good faith by one party entitles the other to avoid the contract.

Q. What happens if I under-value a shipment for insurance purposes?

A. The value of the shipment declared for insurance must reflect the true actual value of a shipment. If a loss occurs and the amount declared is found to be less than the true value, the claim settlement may be pro-rated to a lesser amount. It is as if the insured is acting as a co-insurer of the shipment.

Q. What do I do when I discover damage or loss to my shipment?

A. Follow the instructions outlined on your insurance Certificate to submit a claim. Visit our claims page for more info: Cargo Insurance Claims


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