Why take out cargo insurance?
The transporting company/forwarder is only partially liable for damage to goods shipped by them. In some cases, they are not liable at all. For instance, in case of force majeure, or if you have not packaged the goods properly. Goods can also get damaged or lost during transport. By taking out cargo insurance, you can cover these risks.
Good to know: while cargo insurance protects the sender, freight insurance protects the transporting company.
Agree on the liability
You and your business partner should reach an agreement on who is liable for damages, loss or theft of the goods at each point of the transporting process. For example, when does liability transfer from the seller to the buyer? You can use the ICC Incoterms® standard international delivery conditions. Transport insurance is obligatory when you opt for the ICC Incoterms® CIF (Cost insurance and freight) or CIP (Carriage and insurance paid to) terms. You do not have that obligation when using another ICC Incoterms® terms, but it is advisable since damage or losses might occur during the part of the transport for which you are liable.
Consider sellers interest insurance
Do damages or losses occur during a phase of transport for which your customer is liable? If they refuse to pay despite your agreement, sellers interest insurance will cover the amount the buyer will not pay for the lost or damaged goods. If your customer cannot pay, this insurance will not cover your losses. You could take out credit insurance to cover this risk. When you have credit insurance, you pay a percentage of your turnover, in return for assured payment. You could also ask your customer to pay in advance.
Continuous coverage or insurance per shipment
If you trade and transport goods regularly, continuous coverage is your best option. All your shipments will be insured for a pre-determined amount during a set period. If you only transport goods occasionally, you can take out insurance per shipment.
Tailor-made transport insurance
Your insurance company or agent can assist you with information and advice. You can also take out transport insurance with carriers who are members of Fenex (in Dutch).