“Why do I need cargo insurance?”
The short answer is:
“Because you’re a shipper.”
If that isn’t enough for you, keep reading…
Cargo insuranse reduces shippers’ exposure to financial loss. Yet, so many shippers choose to risk importing and exporting goods without getting cargo insurance. Unfortunately, many shippers have suffered great loss for taking this risk. Below are six reasons shippers should get cargo insurance. Some of the reasons are dangers that can cause loss or damage to cargo, but the list actually goes well beyond that.
#1 – CARGO THEFT RISING
Cargo theft, especially through identity theft and fictitious pickups, is on the rise. We’re not even counting piracy, which is a major risk of cargo theft and loss in modern international shipping.
#2 – MORE CONTAINERS LOST AT SEA EVERY YEAR
Every year, containers are lost to sea. With the trend to megaships, carrying huge stacks of shipping containers across the oceans, cargo containers overboard have actually increased.
The World Shipping Council conducts surveys to find out approximately how many shipping containers are lost to sea in a year. Their 2014 update reveals a very significant rise in cargo containers lost to sea from their 2011 survey. The survey of the years 2011, 2012 and 2013 estimates that there were approximately 733 containers lost at sea on average for each of these three years, not counting catastrophic events. That number of approximately 733 shipping containers lost at sea during the 2011-2013 period is more than double the number of containers lost at sea for the previous period of 2008-2010.
#3 – CATASTROPHIC EVENTS HAPPEN
Storms, shipwrecks, explosions, pirate attacks… which have caused the loss of many shipping containers. In one event, an entire shipload or more of cargo containers can be lost.
The World Shipping Council defines a catastrophic loss “as a loss overboard of 50 or more containers in a single incident.”
When one includes catastrophic losses (as defined above) during these years, the average annual loss for [the years 2011, 2012 and 2013] was approximately 2,683 containers.
Catastrophic events like the Tianjin explosions in China’s port city or container ships taken by pirates wouldn’t even likely be included in the totals above because, while very large numbers of shipping containers of goods are lost, the cargo containers are not necessarily lost overboard to sea.
#4 – CARGO DAMAGE A COMMON OCCURENCE
As common as cargo theft or loss has become, even more common is cargo damage. Bad stowage and shore error are the largest contributors to damaged cargo.
#5 – GENERAL AVERAGE – EXPEDITE CARGO RELEASE
You may be required to post a bond and/or cash deposit in order to obtain release of your cargo following a general average – even though there was no loss or damage to your goods.
By purchasing insurance, your insurance company assumes the responsibility and expedites the release of your cargo in these instances. General Average is an internationally accepted principle where if certain types of accidents occur to the vessel, all parties share in the loss equally. You definitely do not want to find yourself in a General Average situation without insurance.
#6 – COVERAGE FOR LIMITED CARRIER LIABILITY
Carriers, by law, are not responsible for many common causes of loss that occur in transit (for example, acts of God, General Average, etc.).
Even when carriers are liable, carriers’ liability in the event of a loss is limited – either by contract in the bill of lading or by law. In most cases, shippers will only recover cents on the dollar from the carrier. Shippers should never count on the carrier that is shipping their goods to cover losses or damage that may occur over the course of a container ship voyage.