What Does Cargo Insurance Not Cover?

Cargo insurance is a must-have to protect your freight while it’s in transit. Not only is cargo at risk of damage, but there is also the chance that it might go missing. From a sinking ship leading to your shipment being lost at sea to the truck carrying your goods getting into a car accident, many risks make cargo insurance necessary.

Cargo insurance is a great way not only to save money in the case of anything going wrong but also to save you time if things go south.

What Is Cargo Insurance?

Many dedicated cargo and freight insurance companies, freight forwarders, agents, and large brokers offer carrier liability and insurance policies. However, cargo insurance is not the same as these options.

Cargo insurance, instead, protects you from financial loss due to losing your cargo or your cargo being damaged during shipment. If a covered event occurs, it pays you the amount you are insured for.

What Does Cargo Insurance Not Cover?

There are a few things that cargo insurance does not cover. It’s a good idea to be familiar with the ways your goods might be damaged or lost that will not be covered by insurance to best prepare.

It is important to understand exactly what is covered under your cargo insurance so that you can take all of the necessary precautions to ensure any damage or loss your goods suffer is at no fault of your own.

Inadequate Packaging

Your cargo insurance will not cover damage due to your products being improperly packaged. 

Flawed Products

In the case that your goods are faulty, cargo insurance will not cover any damage that is the result of flawed products.

Specific Freight

While not true for all cargo insurance companies, some do not cover hazardous materials, electronic products, fragile products, or highly valuable items.

Modes of Transportation

There are various ways your goods can be shipped. Because of this, some cargo insurance will only cover your freight if it is shipped via a certain method, like on a ship, plane, or truck.

Coverage From Cargo Insurance

It’s important to remember that cargo insurance will only compensate you for events that are covered. After understanding what your insurance does not cover, consider what it does cover. 

There are many types of events that cargo insurance covers.

Natural Disasters 

Natural disasters such as rain, snow, and wind can cause damage to your goods during shipment. From products becoming wet to freezing temperatures, if your goods suffer from natural disasters, cargo insurance will cover the damage.

Vehicle Accidents 

There are a variety of vehicles that your goods can be transported on, such as trucks and ships. In the case the vehicle carrying your goods gets into an accident and your products are damaged in the process, cargo insurance will cover it.

Cargo Abandonment 

Cargo can be abandoned for many different reasons. Importers may not be able to clear the cargo, pay import duties, or present the correct permit. Regardless of the reason, if your cargo is unable to be delivered after a reasonable period, cargo insurance will compensate you.

Customs Rejections 

Sometimes, goods being shipped can be seized by customs. While there may be a reason a shipment has been kept by customs, it can be unclear what a company should do to have its goods released.

Because a shipment hold-up in customs can cause disruption to your customers’ buying experience, damage your reputation, incur extra costs, and lead to lost revenue, cargo insurance covers customs rejections.