Cargo insurance in Ukraine has long been not just a “formality for a check mark”, but an important mechanism for managing risks, of which there are now plenty.
And for international transportation, insurance is a mandatory condition for crossing the border, so it is worth familiarizing yourself with the issue of protecting your own supplies in detail.
Cargo insurance: how it works in practice
Cargo insurance is a useful tool for business, allowing it to turn a potential colossal loss into a predictable and small expense for an insurance policy.
For which goods is it especially important to pay attention to insurance:
- electronics;
- cosmetics and pharmaceuticals;
- alcohol and other excisable goods;
- branded items;
- dangerous goods (ADR);
- expensive goods.
Cargo and baggage insurance is issued by both the importer and exporter, as well as the customs broker and logistics company that provide services to the business.
What insurance formats are used in logistics
In general, all types of cargo insurance are divided into two large varieties – insurance of the contents itself and liability insurance. The latter outlines the carrier’s responsibility for the loss of cargo – in this case, it covers the losses.
Main types of international transportation insurance
| Type of cargo insurance | Characteristics |
| Coverage “A” – maximum, “all risks” | the most complete protection against most logistics risks |
| Coverage “B” – partial | covers individual risks |
| Coverage “C” – partial | covers certain force majeure |
There are also more specific types of insurance that depend on the specific case. For example, currency insurance that protects against exchange rate fluctuations, insurance of expensive and dangerous goods.
The policy can also be one-time (for one delivery) and for permanent import. Then it automatically covers all flights, which is often used by large importers, retail businesses and distributors.
What are the logistical risks of a business without insurance
What are the logistical risks of international transportation:
- delays on the way due to traffic;
- breakdowns and accidents;
- damage to goods (due to improper storage);
- delay in customs clearance (due to errors and discrepancies in documents);
- theft and shortages;
- fluctuations in fuel prices, exchange rates, tariffs.
With such risks, insurance of goods makes sense, because it usually costs less than 1% of the cost of the cargo, and covers 100% of potential losses.
Carrier’s liability: where is its limit
Some entrepreneurs mistakenly believe the following: when the carrier has taken the cargo – he is fully responsible for it. This is not true because insurance of the cargo itself is a separate type of procedure. And the carrier’s liability is usually limited to the terms of international conventions and the limits of CMR insurance.
At the same time, a professional logistics company always has insurance for its own transport, which generally provides a basic level of protection and preservation of cargo during transportation. However, this does not replace full insurance of the goods themselves.
Usually, an experienced international carrier has:
- CMR – liability for cargo;
- CASCO – for transport;
- Green Card – mandatory international car insurance.
At the same time, the carrier is not responsible for force majeure circumstances and situations that occurred through the fault of the sender.
Cargo insurance rules that 90% of companies ignore
Cargo insurance rules determine the risks, liability limits and compensation procedure.
Typical mistakes in cargo insurance:
- thinking that CMR is full insurance of goods;
- not familiarizing yourself with the “exceptions” in the policy (usually typical exceptions are natural deterioration of the goods, hidden defects, etc.);
- underestimating the value of the cargo in order to reduce the insurance payment;
- not recording damage upon receipt (accepting the cargo without comments, not taking photo and video recordings, signing papers);
- ignoring international packaging requirements;
- not checking the carrier’s liability limits.
The most important principle of all that is worth remembering is that cargo insurance operates within the terms of the policy, so it does not cover risks that go beyond it.
Cargo insurance in Ukraine and during international transportation
We can conclude that the most reliable insurance option for international trade is Cargo Insurance, ICC A and separately the carrier’s CMR. For domestic transportation in Ukraine, cargo insurance helps to minimize financial risks, and for international transportation, it is a necessary condition for legal export and import.
It is critical for international transportation to pay attention to the Incoterms rules that are spelled out in the contract. They determine who should insure the cargo, who is responsible for the risks and when they pass from the seller to the buyer. For example, under CIF, the seller provides insurance, while for EXW and FOB, it is usually the buyer.
Conclusion
In order not to be mistaken in the types of insurance, policies and Incoterms, it is more profitable and practical to arrange cargo insurance through a logistics company. They often have a cheaper rate and simplified registration due to direct contracts with insurance companies.
Transport and logistics of the company will clearly assess the risks for all types of transportation (road, air, sea, rail and multimodal) and help you choose adequate coverage.
