Marine cargo insurance may not be something that all businesses need but if you are sending or receiving stock and goods it is imperative that the goods be insured. The loss of goods being shipped can be frustrating at best.
Marine cargo insurance is perhaps the oldest form of insurance with the first policies being issued more than 400 years ago from Lloyds Coffee House in London; now known as the most famous of all insurance companies Lloyds of London.
As the first policies were issued on marine cargo risks, the laws which affect transit between territories, jurisdictions and over the seas were based on marine terms. Even though cargo is now shipped around the world by a variety of methods including by Air, Sea, Road and Rail the term Marine Cargo is still the main term used in cargo insurance wordings thus, most of the following information will be cast in the term Marine Cargo Insurance.
Marine cargo insurance covers physical damage to, or loss of, your goods whilst in transit by most recognised methods of transit such as by Sea, Air or Land (road and rail, or combinations of any).
Single Cargo Shipments – (for One-Off Shipments often referred as ‘Voyage Specific’)
This is a common form of cargo insurance, mainly taken out by individuals and small businesses for One-Off Shipments of cargo & freight. This is where the cargo as a one-off shipment is priced and covered as one shipment from a particular destination to another – the cover usually commences at the point of departure and ceases upon arrival at the cargo’s destination which could be a port or the customer’s premises often referred to as ‘Warehouse to Warehouse’. This type of cover is also sometimes referred to as a ‘Voyage Policy’ as the insurance covers only that specific shipment/voyage.
Open or Annual Cover – (mainly for regular shippers such as Importers/Exporters)
This is the most common form of cargo insurance, most often used by regular shippers of goods such as importers and exporters including freight forwarding agents, where a policy is issued to cover a number of consignments being shipped to and from various ports and destinations throughout the year. The policy can be either for a specific value that requires renewal once the insured amount is exhausted, or an open policy that will be issued for an agreed period, allowing any number of shipments during that time. This type of cover is sometimes referred to as an ‘Open or Annual Policy’ as the insurance cover remains in-force for a stated period of time, usually a 12 month period.
It is important that we understand the exact processes that a client undertakes to ship any goods. The terminology used can be confusing and quite foreign to many businesses. Part of this understanding means ensuring that the right cover is placed to allow for correct claims management and awareness of what the insured needs to cover or at least be aware of.
The buyer is responsible for all costs and risks from the time the goods leave the seller’s warehouse until they arrive at their final destination.
The seller is responsible for all charges until the goods are alongside the ship. (The definition of “alongside ship” varies from port to port. It may mean customs warehouse, ship’s storage shed and so on.) The buyer is responsible for all costs and risks from that point until the goods arrive at their final destination.
The seller is responsible for all costs and risks until the goods are on board the vessel. The buyer is responsible from then on. The merchant agrees to declare details of all shipments falling within the scope of the policy, and the insurance company agrees to insure such shipments, according to the terms and conditions of the policy.
The seller is responsible for all charges incurred to the place of discharge, except for loss or damage after they have been delivered unto the custody of the ship owner at the place of ship mentor point of FOB. It is the buyer’s responsibility to insure the goods once they are delivered to the place of shipment or FOB until they reach their final destination.
The seller’s responsibilities are the same as for CFR sales, except that the seller arranges insurance to the final destination of the goods, providing cover in terms that are usual to the trade. The buyer pays for and takes title to the policy when the goods are paid for.
The seller is responsible for all costs and risks until the goods are delivered to the buyer’s warehouse. The buyer does not need to arrange insurance at all.