Cargo Insurance Or Carrier Liability Insurance: What’s The Difference?

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When you are shipping goods from one point to another – whether by road, rail, sea, or air –  you will need to have them insured in case they are lost or damaged on the way. In practice, claims for freight insurance are quite rare, but that doesn’t mean that you don’t need it or that they don’t occur.

There are two types of insurance, one of which is carrier liability, while the other is cargo insurance. In some cases, one might have both. There are differences between them, and you need to consider which is best for your purposes. At The Insurance Broker, as marine insurance specialists, we can advise you.

If your carrier has carrier liability insurance and your goods are damaged, you, as the shipper, have to provide proof of damage. You need to show that the goods were in good condition when they left you and arrived damaged or were lost on the way. This protects carriers from fraudsters. Claims for such damage or loss usually have to be made within nine months, which sounds like a long time, but can actually be quite small. However, some carriers may require immediate notification, so you need to check on this.

Once you have made a claim, the carrier must acknowledge the claim within a set time scale and provide a response/defence. This comes under legal jurisdiction that gives the carrier several ways in which to argue the case. Most carriers will take care to try to avoid such claims in the first place because they don’t want to lose the trust of shippers and they will try to avoid using ports that have poor security, and so on.

Another problem here is that there can be several shipping companies involved, and this means that you have to establish at exactly which point the damage or loss occurred. The insurance only works if the point of damage or loss occurred and what the value of the damage is. It also means that the onus can be on several parties to prove that they were not the ones responsible for the loss or damage.

Cargo insurance is different in that you don’t need to prove who was liable or negligent, and things such as acts of God are not relevant. In this case, the damage or loss occurred so the cost of it must be covered by the insurance company. Most carriers prefer shippers to use cargo insurance, partly because the issues surrounding carrier liability can be so vague and unclear. Such claims are rare anyway, because in 99% of cases the goods arrive at the destination in good condition when they should. This means that premiums are affordable. However, you still need insurance because Murphy’s Law states that what can go wrong will go wrong, and if you fail to insure your goods you can bet that your goods will fall under the 1% of times that accidents or loss occur.

With cargo insurance, pay-outs are usually very quick because there is normally only very basic paperwork required, and payment usually arrives within 30 days or so. Of course, you do need a reputable insurer, and it may pay to use different insurers for different destinations.

When you are looking at the two types of insurance available, with which we can help you, the main variable is the value of the goods. For valuable cargos or goods where the value is not linked to the weight of the goods, cargo insurance would seem to offer more benefits.