If the merchandise is handled in a rush, the shipment can be damaged. Accidents happen during the loading and unloading process at the ports in China and US unloading ports. To be covered, you need freight insurance that will reimburse you for all damages.
Freight insurance can sometimes be referred to as “cargo insurance” or “transportation insurance”. In essence, it covers business owners for the bulk of the damages caused to their merchandise during the shipping.
In the event, your cargo is damaged partially or the entire shipment is damaged, you can file a claim and get reimbursed for the full value of the merchandise. To do so, you need to choose the right freight insurance and consult with your shipping contractor to get insured before you ship the container.
How Much Does Ocean Freight Insurance Cost? Calculator
Ocean freight insurance costs vary based on the shipping forwarder and insurance coverage. To estimate the total freight insurance cost, you need to consult your forwarder/shipping agency and ask for a quote on insurance.
The fee is estimated based on the total value of the merchandise. In most cases, the insurance cost is 0.5% of the total value of the cargo.
- Cargo Value: $15,000.
- Deduction: 0.5% of $15,000 is $75.
- Total Cost: $75.
Depending on the shipping forwarder, you may pay as little as $75 or as much as $150 for shipping insurance. The rate may vary between 0.5% up to 1% of the total value for risky goods. The price is usually affordable, and well worth it for large shipments with thousands of dollars worth of goods.
How Much Insurance Coverage Do You Need?
CIF freight insurance requires business owners to pay 110% of the insurance coverage necessary for the value of the goods. The forwarder determines the total value of the goods.
If you have merchandise worth $10,000 in your container, you’ll need a plan that can cover $11,000 worth of coverage. The total payment is usually $50-100 in total, depending on the shipping contractor and insurance agency quote.
2 Types Of Shipping: CIF & FOB
If you place an order for a container from China, the shipping contractor will likely offer you a few options in regards to the Incoterms. If you are not familiar with Incoterms please check out our guide.
If you are looking at having insurance with your shipment there are two options: FOB or CIF shipping. What do these two stand for? The difference is in the insurance coverage for the goods, which increases your shipping expenses but covers you in the event of merchandise damage.
Type_01 Shipping // Cost, Insurance & Freight (CIF)
CIF insurance is the most popular form of insurance that is offered by all major shipping contractors. CIF ensures you for the full value of your goods from the port of loading to the port of destination. CIF plans can be added to any container order by consulting your shipping forwarder.
The main advantage of CIF insurance is that you can file a claim in the event of damages. However, you have to pay 0.5% of the total value of the merchandise to get coverage. Read below to find out how to obtain the CIF coverage you need.
Type_02 Shipping) Free On Board (FOB)
If you opt for the FOB model, this means you’re uninsured. Your containers will be uninsured and if the goods are damaged while shipped, you’ll have to bear the responsibility by yourself.
The main advantage to FOB shipping is that you don’t have to pay 0.5% for insurance (saving you on initial costs) but if your goods are damaged you’ll have no backup plan.
How To Get Ocean Freight Insurance For Cargo
Check whether your forwarder includes shipping insurance by default. If you’re not covered under a basic insurance plan, you’ll need to either contact your forwarder to put you on an insurance plan or purchase a CIF shipment directly (which will have insurance). There are two ways to insure an ocean cargo shipment:
Method 1 // Order CIF Shipments
Start the shipping process by researching CIF-backed shipping forwarders. CIF stands for “Cost, Freight and Insurance”, hence all plans will be insured by default. If you purchase shipping based on CIF terms, your merchandise will be fully covered from the minute it’s loaded on the port until it gets unloaded at your port of destination. The merchandise is insured for the entire duration of its trip over the ocean, irrespective of how long it takes to get there.
Research CIF shipping forwarders that can help you secure your cargo and always request a copy of the insurance policy as proof you’re insured. If you have to file a claim, you’re going to need coverage for your merchandise. The insurance policy will be translated in English and the money will be deposited in your bank account 3 weeks after filing a claim.
Method 2 // Add A Policy With Your Forwarder
Many manufacturers work with the same forwarders for years because they’re reliable. If you don’t want to cut ties with your forwarder, ask them to add an insurance policy to your shipping cargo and request a copy of the insurance plan. Forwarders can offer you insurance that extends beyond the ports and covers the inland road transportation between the factory and the loading port.
The CIF agreement mentions insurance by default. If you opt for alternative contracts, you’ll have to reach out to your contractors including suppliers or shipping forwarders in order to add an insurance policy to your merchandise.
How To File A Freight Insurance Claim
Manufacturers who order low shipping amounts are at a very low risk that their goods will be damaged. However, for those who ship regularly from Chinese ports, there’s a risk that at some point they’ll have broken goods that they’ll have to file a claim for.
The filing process is straight-forward and goes through your shipping company which collects the payment in your name. However, you must act fast and file the claim within 48 hours in order to get reimbursed for the value of the loss. Here’s what you need to do to get a payment:
- Contact Your Forwarder // The shipping agency or the forwarder who is in charge of your insurance policy will file the claim for you and collect your payment. You won’t have to deal with the insurance company directly. Once you file the claim, you can expect the insurance companies to react fast and deposit payment within as little as 1 week (or a maximum of 3-4 weeks).
- Gather Documents // You’ll need to provide evidence of the damages including the packaging (photos and videos of the damage). The insurer will request a full list of damaged goods and their value, including proof of value. To provide proof of value, you’ll need to gather receipts from commercial transactions. You will also need a cargo receipt to verify you’ve received the cargo.
- Collect Payment // The insurance company will payout based on the value of the damaged cargo or the full container, depending on the damages. The money will be deposited in your bank account.
Final Thoughts on Ocean Freight Insurance
Ocean shipping is relatively safe, however, there is always a chance something could happen that results in the loss or damage of your ocean shipment. This is why insurance exists so that you can eliminate financial risk. IN order to get the best rate and the right coverage make sure you have a full understanding of Cargo Freight insurance for your ocean shipment.