When do I need Marine Insurance
You are about to organise your sea freight shipment and your forwarder asks if you would like marine insurance. You are not sure if you really need it and if it is worth the cost. Well this article is here to help.
Over 90% of the world’s trade is transported by ocean freight. This equates to over 10 billion metric tonnes of cargo moved each year around the globe. For the most part the container shipping industry provides a cost effective and safe way of transporting goods. In most instances your cargo will arrive on schedule and in the condition you expect.
Shipping, however, is not without associated risks.
Below we will discuss some of these risks, give an insight on what happens after an incident at sea, and discuss what options are available to mitigate against these risks.
When transporting goods via sea freight there are two types of risks you can insure against. The risks specific to your consignment and the risks for the vessel.
Risks specific to your consignment:
- Poorly designed packaging – Poorly designed or inappropriate packaging can result in product being damaged when exposed to the rigours of shipping
- Theft – Cargo can be susceptible to theft during transportation
- Improper handling – Equipment used to load and unload cargo, such as cranes and forklifts can cause damage to cargo
Risks to the vessel:
- Vessels may Run Aground and become stranded
- Fire on board
- Stack Collapse on board a container ship
- Collision with another vessel
- Natural Disasters and Weather events can result in containers being lost in high winds and heavy seas
- Political Unrest and Piracy
The Risks Realised
If your cargo arrives damaged, or goods have been stolen from your consignment, the shipping expense and the commercial loss can be severe. When shipping without insurance you need to consider the impact this would have on your business.
In the event that things go wrong at sea, the task of successfully salvaging a container vessel and your goods is an immensely complex one. This requires engineering expertise, all the while navigating strict environmental rules.
This ultimately means substantial costs associated with any recovery undertaking and these costs are shared by the shippers and consignees.
In circumstances where the ship or cargo has undergone losses to save the voyage, the shipowner may declare a General Average.
General Average is a principle of maritime law, which acts to share financial liability across all parties involved in a voyage. In short, if a vessel is lost at sea with your container on board, not only will you lose your goods but you will be expected to pay a contribution towards the loss of the ship.
The Value of Marine Insurance
Marine Insurance will cover loss, damage or theft of goods in transit, including any storage points between the origin and final destination. The right policy can also cover you against General Average costs. When organising your shipment, ask your forwarder for a marine insurance quote and weigh up the costs vs the potential risks to make the right decision for your business.
Many forwarders, including ICE, offer marine insurance and should be promptly alerted if your stock arrives damaged or stolen.
To get a marine insurance quote today please contact your ICE team member on 1300 CARGO1.
Image source: Freestock.com