Purchasing cargo insurance is an essential risk management step in international trade. However, many businesses, despite having insurance, still face claim rejections when incidents occur due to a lack of understanding of implicit terms and conditions.
To ensure this “shield” truly works, here are the key points every cargo owner must keep in mind.
1. Choose the Right Insurance Coverage (A, B, or C) Based on Cargo Nature
A common mistake is choosing the cheapest option (Institute Cargo Clauses C) for sensitive goods, or the most expensive option (Clause A) for bulk commodities, leading to unnecessary costs.
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High-value, fragile goods, machinery: Should opt for Clause A (All Risks) to cover damages such as dents, scratches, or theft.
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Bagged goods, agricultural products: Consider Clause B for additional protection against rainwater or seawater entering cargo holds.
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Bulk cargo (coal, ore, sand): Clause C is sufficient to cover major risks such as sinking or fire.
2. Understand “Exclusions” – Cases Not Covered
Many businesses assume that “All Risks” (Clause A) means full coverage under all circumstances. In reality, insurers will reject claims in the following cases:
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Improper packaging: If damage is due to weak or inadequate packaging, claims will be denied.
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Fault of the cargo owner: Intentional acts or delays caused by the owner.
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Inherent vice / natural loss: Evaporation or natural weight loss (e.g., fuel, grains).
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War and strikes: These risks are excluded by default under Clauses A, B, and C. Additional coverage must be purchased if transporting through unstable regions.
3. Rule for Calculating Insured Value
Do not insure only 100% of the invoice value. The standard formula in logistics is:
Insured Value = 110% of CIF (or CIP) value
The additional 10% is considered “anticipated profit,” helping businesses cover extra costs such as manpower, delays, replacement sourcing, and lost expected profits.
4. Carefully Check Information on the Insurance Policy
Any clerical error can delay or complicate claims. Always verify:
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Vessel name and route: Must match the Bill of Lading exactly.
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Cargo description: Must align with Invoice and Packing List.
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Insurance period: Should cover from seller’s warehouse to buyer’s warehouse (Warehouse-to-Warehouse clause).
5. Act Immediately When Damage is Detected
This is the most critical factor in determining whether you will receive compensation:
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Take photos immediately upon noticing damage (e.g., dented container, broken seal, wet cargo).
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Record remarks on the delivery receipt; do NOT sign “goods received in good condition” if damage is evident.
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Notify the insurance company immediately so a surveyor can be appointed within 24–48 hours.
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Prepare a claim file with all necessary documents: Bill of Lading, Invoice, survey report, photos, etc.
6. Timing of Insurance Purchase
Insurance must be purchased before the transport begins. If purchased afterward, any occurred risks will not be covered.
Conclusion
Cargo insurance is not just a piece of paper—it is protection for your business’s cash flow. Understanding these principles will help you proactively safeguard your rights.
If you are unsure which insurance package best suits your upcoming shipment, contact the experts at Songwin International Logistics Vietnam. We don’t just move cargo—we deliver trust and absolute safety.
Contact us today for detailed consultation on international shipping and cargo insurance!
SONGWIN INTERNATIONAL LOGISTICS VIETNAM CO., LTD
📍 Address: 344 Nguyen Trong Tuyen, Tan Son Hoa Ward, Ho Chi Minh City
📞 Hotline (24/7): 083.681.3969 - 0373.262.105
📧 Email: Sales2@songwinlog.com
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