If you are in the logistics or the shipping industry, freight damage and loss are an inevitable part of the business. There are high chances that you might face such scenarios throughout your business activity. Hence, you should be aware of the difference between cargo insurance and the carrier's limit of liability. Understanding these terms, their main areas of difference and claim processes can greatly impact your business model.
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To understand this term, let us spilt the word into two. The word carrier means the logistic company is legally entitled to transport the shipment from one place to another. Liability means having a legal responsibility towards something. So, the word carrier limit of liability means the maximum amount a carrier or the company is liable to pay in case of damages, losses, or delay in shipment.Â
The value of this coverage is usually much less than the actual value of the cargo. It may also depend on the content of the shipment and the rate at which the carrier charges for that type of commodity. Liability limits typically cover a percentage of the value lost.
What is Cargo Insurance Policy?
When your consignment is in transit, it is prone to various risks. These risks can damage or cause the loss of your cargo. It is thus always important to consider cargo insurance for your freight. Marine cargo insurance policy, also sometimes known as freight insurance, or goods in transit insurance, is one of the most common insurance types used to protect the value of goods (cargo) from physical damage or theft.Â
The main aim of cargo insurance is to minimize financial loss if the shipment is damaged or lost. A small amount, in terms of premium, is paid to buy this insurance which also gives the shipper peace of mind.
Cargo Insurance VS Carrier's Limit of Liability
Carrier limit of liability and cargo insurance may seem similar, but in reality, there are a few major differences between them. If you are having a business in shipping, transportation or logistics, these differences may help you choose the right plan and improve your bottom line. The table below briefly showcases cargo insurance VS carrier's limit of liability.
Cargo Insurance
Carrier's Limit of Liability
Cargo insurance is a specific type of insurance that is bought by payment of premium
Carrier limits of liability is not considered as insurance but is only a supplementary protection
Shippers are not obligated to have a minimum cargo insurance
Carriers are legally required to carry a minimum amount of insurance
It ensures that the business is protected from unexpected losses or damages
Goods are not fully protected even if the carrier is at fault for damaging the goods
Difference in Claims Process
Let us look at the difference in the claims process in cargo insurance and carrier's limit of liability.
For shipment covered only by carrier’s limit of liability:
The claim must be filed within 9 months of delivery
Notice of damage must be included in the delivery receipt
Proof of value and proof of loss must be provided
Acknowledgement should be done by the carrier within 30 days and responded to within 120 days
Carrier negligence must be proven
For shipment covered by cargo insurance:
Proof of value and proof of loss must be provided
Claims payment is done usually within 30 days
No need to prove carrier negligence
Marine Insurance Premium Calculator
New machinery or equipment for industrial use
Iron & steel rods, metal pipes, tubes
Electronic and white goods
All types of FMCG commodities
All kinds of food like oils essence flavours and other various packed items
Automobiles
New machinery machine tools and spares in closed ISO containers
Solar panel
Machinery machine tools spares duly packed/lashed
Stationery items
Timber and wood products
Edible oil in tanker
Aggregators/Transporters
All types of containers
All types of paints duly packed
Auto spare parts
Ceramic products and tiles
Edible vegetables or fruits and nuts or peel of citrus fruits
Granite and marble
Metal hand tools
Metal scrap in ISO container
Metals of all types excluding precious metals
Non hazardous chemicals in bags
Pharmaceuticals and bulk drugs
Rough marble in blocks
Toys, games and sports equipment
Used CPM machines and equipments
Used machinery machine tools and spares in closed ISO container
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Conclusion
Rough weather, accidents, or circumstances beyond your control can lead to damaged or lost cargo. Purchasing a policy for marine insurance online can help providing adequate coverage, seamless procedures, and hassle-free claim settlements.
Disclaimer: Above mentioned insurers are arranged in alphabetical order. Policybazaar.com does not endorse, rate, or recommend any particular insurer or insurance product offered by an insurer.
Marine insurance is essential for protecting goods during...Read more
23 Oct 2024 by Policybazaar2847 Views
Disclaimers+
*Savings of 42% are based on the comparison between the highest and lowest premiums for a Rs 50 lakh sum insured under Inland Transit Clause B or Institute Cargo Clause B for single transit cover of auto spare parts with shipment type of Inland(Domestic) and road as mode of transport. Premium varies on the basis of Occupancy, Business Activity & Coverage Type By clicking on "View Plans" you agree to our Privacy Policy and Terms Of Use and also provide us a formal mandate to represent you to the insurer and communicate to you the grant of a cover. The details of insurance coverage, inclusions and exclusions are subject to change as per solutions offered by insurance providers. The content has been curated based on the general practices in the industry. Policybazaar is not responsible for the factual correctness of these details.
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