If the goods are processed in a hurry, the shipment may be damaged. Accidents happen during the loading and unloading process at unloading ports in China and the United States. In order to be protected, you need a transport insurance that compensates you for all damages.
Freight insurance is also sometimes referred to as "cargo insurance" or "shipping insurance". Essentially, it covers business owners for the majority of damage to goods in transit.
If your cargo is partially or fully damaged, you can file a claim and get a full refund. To do this, you must choose appropriate cargo insurance and check with your carrier before shipping the container.
How much does transport insurance cost? calculator
Ocean freight insurance costs vary depending on the carrier and insurance coverage. To estimate the total cost of cargo insurance, you should contact your carrier/shipping company and request an insurance quote.
The fee is estimated based on the total value of the goods. In most cases, the cost of insurance is 0.5% of the total value of the freight.
Example:
- Freight value: 15,000 $.
- Deduction: 0.5% of $15,000 is $75.
- Total cost: $75.
Depending on the carrier, you can pay as little as $75 or as much as $150 for shipping insurance. The rate can vary between 0.5% and 1% of the total value for risky goods. Prices are generally affordable and worth it for large shipments of thousands of dollars worth of goods.
How much insurance coverage do you need?
CIF freight insurance obliges entrepreneurs to pay 110% of the required insurance cover for the value of the goods. The carrier determines the total value of the goods.
If you have $10,000 worth of goods in your container, you need a plan that covers $11,000 worth of coverage. The total payment is usually $50 to $100 depending on the carrier and what the insurance agency quotes.
2 shipping methods: CIF and FOB
When you order a container from China, the freight forwarder will probably offer you some options regarding the Incoterms.If you are not familiar with Incoterms, read our guide.
If you want to insure your shipment, you have two options: FOB or CIF shipping. What do these two represent? The difference is merchandise insurance, which increases your shipping costs but covers you in the event of damage to the goods.
Tipo_01 Freight // Cost, Insurance and Freight (CIF)
C.I.F.Insurance is the most popular form of insurance offered by all major shipping companies. CIF guarantees the full value of your goods from the port of shipment to the port of destination. CIF plans can be added to any container order by contacting your carrier.
The main advantage of CIF insurance is that you can make a claim in the event of damage. However, you have to pay 0.5% of the total value of the goods to get insurance cover. Read below to find out how to get the CIF coverage you need.
Tipo_02 Shipping) Free On Board (FOB)
If you choose the FOB model, it means that you are not insured. Your containers are not insured and if the products are damaged in transit you will have to take responsibility yourself.
The main benefit of FOB shipping is that you don't have to pay 0.5% for insurance (saving you upfront costs), but if your products get damaged you don't have a backup plan.
How to get shipping insurance for cargo
Make sure your carrier includes shipping insurance as standard. If you are not covered by a basic insurance plan, you must contact your carrier to be included in an insurance plan or purchase a CIF shipment directly (which is insured). There are two ways to secure an ocean freight shipment:
Method 1 // Request CIF shipments
Start the shipping process by finding carriers with CIF support. CIF stands for Cost, Freight and Insurance, so all rates are insured as standard. When you buy CIF freight, your goods are fully insured from loading at the port to unloading at the port of destination. The goods are insured throughout the sea voyage, regardless of how long it takes to arrive.
Inquire about CIF carriers who can help you insure your cargo and always ask for a copy of the insurance policy as proof that you are insured. If you need to make a claim you will need cover for your goods. The insurance policy will be translated into English and the money will be credited to your bank account 3 weeks after the claim is submitted.
Method 2 // Add a policy with your carrier
Many manufacturers have been working with the same carriers for years because they are reliable. If you don't want to cut ties with your carrier, ask them to add an insurance policy to your shipping load and request a copy of the insurance plan. Freight forwarders can offer insurance that goes beyond the ports and covers road transport between the factory and the port of shipment.
The CIF contract mentions insurance by default. If you choose alternative contracts, you will need to contact your contractors, including suppliers or carriers, to add an insurance policy to your goods.
How to submit a cargo insurance claim
Manufacturers who order small shipping quantities have a very low risk of damaging their products. However, for those who ship regularly from Chinese ports, there is a risk that at some point they will have defective products that they need to claim.
The shipping process is simple and runs through your carrier, who collects payment on your behalf. However, you must act quickly and file a claim within 48 hours to recover the amount of the damage. Here's what you need to do to get paid:
- Contact your wireless service provider// The freight forwarder or broker responsible for your insurance policy will forward the claim to you and collect your payment. You don't have to deal with the insurance company directly. Once you make a claim, you can expect insurers to respond quickly and make the payment in less than 1 week (or 3-4 weeks maximum).
- Collect documents// You must provide evidence of the damage, including the packaging (images and videos of the damage). The insurer will require a full list of the damaged items and their value, including proof of value. To provide proof of value, you must collect receipts for business transactions. You will also need a bill of lading to confirm that you have received the shipment.
- collect payment// The insurer pays based on the value of the damaged cargo or the full container, depending on the damage. The money will be transferred to your bank account.
Final thoughts on shipping insurance
Shipping by sea is relatively safe, however, there is always a chance that something will happen which may result in your shipment being lost or damaged by sea. That's why insurance exists, so you can eliminate your financial risk. To get the best rate and the right coverage, make sure you are knowledgeable about cargo insurance for your ocean freight.
FAQs
How is marine cargo insurance calculated? ›
The cargo insurance premium on a single shipment is typically calculated as the insured value times the policy rate. And what is insured value? The simplest method to calculate insured value is to add the commercial invoice value of the goods to the cost of freight and add ten percent to cover additional expense.
What is the difference between cargo insurance and marine insurance? ›Marine insurance includes cover for the hull, machinery, third-party liability, the shipment/goods carried in the vessel, etc. In the case of cargo insurance, insurable interest lies in the cargo or goods carried from the place of origin to the final destination.
What are the three types of marine insurance? ›Marine protection is additionally separated into three classes of protection. These are freight insurance, ship or hull insurance, and cargo protection.
Why do we add 10% in marine insurance? ›Q: What does “CIF+10%” mean? PLUS an additional 10% to cover additional charges incurred due to fluctuations in currency or additional freight cost. The intention is to indemnify your client, including allowances for additional cost for reshipping.
How much does marine cargo insurance cost? ›Q: How much does marine cargo insurance cost? In most cases, the insurance cost is around 0.5% of the total value of the cargo. This cost will vary based on the type of goods, the origin and destination, and whether it's being shipped in a closed or open container.
How much does marine insurance cost? ›The average cost of boat insurance is $200 to $500 a year—although for a really big or expensive boat (like a yacht or sailboat), insurance can cost around 1–5% of the boat's value. For example, you may pay about $2,500 a year to insure a $100,000 yacht.
How much does it cost to insure cargo? ›...
How much does Cargo Insurance cost for Truckers?
The two main types of cargo insurance coverage an importer can purchase to protect their goods while in transit are All-Risk and Named Perils.
What's marine cargo insurance? ›Provides insurance cover in respect of loss of or damage to goods during transit by –rail, -road –sea -air.
What are the 4 types of insurance? ›- Health Insurance.
- Motor Insurance.
- Home Insurance.
- Fire Insurance.
- Travel Insurance.
What are the 4 types of general insurance? ›
Different types of general insurance include motor insurance, health insurance, travel insurance, and home insurance. A general insurance policy pays for the losses that are incurred by the insured during the period of the policy.
What are 4 common types of insurance? ›There are, however, four types of insurance that most financial experts recommend we all have: life, health, auto, and long-term disability."
What are types of marine insurance? ›- Freight Insurance.
- Liability Insurance.
- Hull Insurance.
- Marine Cargo Insurance.
Marine insurance covers the loss or damage of ships, cargo, terminals, and any transport or cargo by which property is transferred, acquired, or held between the points of origin and final destination.
What are the main elements of marine insurance? ›The fundamental principles of Marine Insurance are drawn from the Marine Insurance Act, 1963* As in all contracts of insurance on property, the contract of Marine Insurance is based on the fundamental principles of Indemnity, Insurable Interest, Utmost Good Faith, Proximate Cause, Subrogation and Contribution.
What is general average in cargo insurance? ›General Average is a principle of maritime law that essentially establishes that all sea cargo stakeholders (owner, shipper, etc.) evenly share any damage or losses that may occur as a result of voluntary sacrifice of part of the vessel or cargo to save the whole in an emergency.
What are the types of cargo insurance? ›Types of Cargo Insurance:
Land and marine cargo insurance are the two main types of cargo insurance (which also covers air cargo).
What is Cargo Insurance? Insurance that generally protects shipments from loss, damage, or theft while in transit. This coverage is beyond basic claims insurance that may be provided, and it will reimburse for the designated value of the goods if a covered event occurs while the freight is in transit.
What are the 4 types of coverage available in ocean marine insurance? ›These include: Ocean Cargo insurance, Hull and Machinery insurance, Protection and Indemnity insurance, and Marine Liability insurance, both primary and excess.
How to calculate boat insurance cost? ›The general rule of thumb when it comes to calculating average boat insurance cost is that you'll pay about 1.5% of the value of your boat in annual rates. To insure a boat worth around $20,000, it would cost you only about $300 per year to have it fully insured.
Do you always need marine cargo insurance? ›
Marine insurance is not compulsory by law. However, if you are engaging in international trade, most shippers and carriers will require you to have cargo insurance in place before they will agree to transport your goods.
How to calculate insurance value? ›- IDV = Manufacturer's registered price – depreciation.
- Insured Declared Value = (Company's listed price – Depreciation value) + (Cost of vehicle accessories - Depreciation value of the accessories)
Whether a business goes with a carrier or third-party provider, the cost to add insurance for single shipments is generally between 1.5–4% of the item value.
What are the 7 main types of insurance? ›The types of insurance are Life Insurance, Car Insurance, Health Insurance, Two Wheeler Insurance, Home Insurance, fire insurance, marine insurance, and Travel Insurance, etc.
Why is marine cargo insurance important? ›You can't always protect your freight from loss. In fact, the number of containers lost at sea each year is staggering. The good news is insuring your goods can protect the value of your goods against potential losses that can happen while in transit during air, ocean, and rail shipments.
Who buys marine cargo insurance? ›These can include international buyers and sellers, contractors, e-tailers, import/export merchants to anyone with the requirement to the transportation of goods from one country to another.
What are the 3 parts of insurance? ›The core components that make up most insurance policies are the deductible, policy limit, and premium.
What is the cost of insurance called? ›An insurance premium is the amount of money an individual or business pays for an insurance policy. Insurance premiums are paid for policies that cover healthcare, auto, home, and life insurance.
What is basic general insurance? ›Definition: Insurance contracts that do not come under the ambit of life insurance are called general insurance. The different forms of general insurance are fire, marine, motor, accident and other miscellaneous non-life insurance.
What are the 4 characteristics of insurance? ›- Pooling of losses.
- Payment of fortuitous losses.
- Risk transfer.
- Indemnification.
What is 4 and 8 in insurance? ›
Whereas, the non-guaranteed returns are variable as they are a reflection of the projected investment rate of return based on the assumption of 4 percent per annum and 8 percent per annum on investment."
What are the objectives of marine insurance? ›The principal objective of a marine insurance policy is to protect the finances and assets of an individual while they are commuting or transporting via the sea routes. It is common to find different insurance companies offering multiple types of marine insurance policies.
Who is responsible for cargo insurance? ›Quite simply, it's what the carrier is responsible for when it comes to shipment losses, damages and delays. However, there are exceptions – 17 to be exact, including: any loss or damage resulting from an act of the shipper (that's you);
How is cargo cost calculated? ›Trucking rates are calculated on a per-mile basis. First, take the mileage between the starting and destination points. Then divide the total rate by the number of miles between destinations to get your trucking freight rate.
What is cargo insurance rate? ›Generally, the cost of cargo container insurance is approximately 0.15% of the total value of goods. This is as per the commercial invoice . However, this cost may vary across insurance companies and their offerings.
How are cargo rates calculated? ›The main factors in determining the freight rate are: mode of transportation, weight, size, distance, points of pickup and delivery, and the actual goods being shipped.
How much is 250k cargo insurance? ›...
Cargo Insurance Cost.
Cargo handling costs include the costs arising from both loading and unloading cargo together with any claims that may arise relating to the cargo. Cargo handling costs are excluded from voyage charter costs but have to be met in owner operation.
How is Cost Insurance and Freight calculated? ›In order to find CIF value, the freight and insurance cost are to be added. 20% of FOB value is taken as freight. Means USD 200.00. Insurance is calculated as 1.125% - USD 13.00 (rounded off).
How do you calculate transport cost per item? ›To calculate this cost, you start with production expenses that include all overheads incurred, materials, staff, and incidentals. You then add to this the shipping costs from the warehouse to the client's premises as well as your profit margin to arrive at landed cost per unit.
What is marine cargo insurance policy? ›
Marine cargo insurance is a class of property insurance that insures property while in transit against perils consequent or incidental to the navigation of the sea or air or rail/road/inland waterways.
What is the average cost of freight insurance? ›However, there are some general guidelines that can help you get an idea of what to expect. Generally speaking, freight insurance will cost between 1% and 2% of the value of the goods being shipped. So, if you are shipping goods worth $10,000, you can expect to pay between $100 and $200 for insurance.
How do you calculate transport cost per kg? ›Rate per kg for first 400 k.m. = 400 x17 /100 = 68 Add rate per kg for additional 150 k.m. = 150 x 12/100 = 8 Add handling charges = 5 paisa Total 91 paisa b.
How do you calculate cargo size? ›Find the dimensions of your package in inches (length, width, and height). Compute their product according to the CBM formula: CBM = length × width × height .
How do you calculate transport cost per km? ›How do you calculate transport per km? In other words: Divide the total distance (km) by 100. Now multiply the answer by the average fuel consumption, and then multiply this number by the price of fuel (per liter).
How much is a 100 000 cargo insurance policy? ›...
How much does Cargo Insurance cost for Truckers?
| Policy Limit | Typical Range in Cost (per year) |
|---|---|
| 50k limit | $400 – $700 |
| 100k limit | $800 – $1400 |
| 250k limit | $1,100 – $1,800 |
It is quite expensive to have a $1M cargo coverage limit. Based on our research, the average $1M cargo insurance policy costs $410 per month or $4,920 per year. Most owner-operator truckers pay between $350 and $620 per month for a $1M cargo insurance policy based on the cargo types that they haul.