How Much Does Cargo Insurance Cost and Is It Worth It?

When shipping goods, whether across the country or worldwide, there’s always a risk something could go wrong. The list of potential hazards is long, from natural disasters to accidents or theft. 

That’s where cargo insurance comes in. Cargo insurance protects your investment should the worst happen to your shipment in transit. But how much does it cost, and more importantly, is it worth the investment for logistics managers and business owners? 

What is Cargo Insurance?

A cargo insurance policy protects your goods in transit, either on land, sea, or air. It covers a range of potential risks, including:

• Damage
• Loss
• Theft
• Even delays in some cases

Depending on the policy, cargo insurance can cover the total value of the goods or a portion thereof, ensuring that your business doesn’t take a financial hit if something goes wrong during transport.

How Much Does Cargo Insurance Cost?

The cost of insurance will depend on a variety of factors. The most common influencers of price include the following:

• Value of the Goods: The higher the value of the goods being shipped, the more expensive the insurance will be. This is because the potential payout is higher in the event of a loss.
• Type of Goods: Some items are riskier to transport than others. For example, fragile items, perishable goods, or high-value electronics typically cost more to insure due to the increased risk of damage or theft.
• Destination: The location you’re shipping can also affect the cost. Shipping to areas with higher risks of theft, political instability, or natural disasters will increase the premium.
• Mode of Transport: Whether your goods are shipped by air, sea, or land impacts the cost. Each mode of transport has its own set of risks, which are factored into the insurance premium.
• Coverage Amount: The amount of coverage you choose will directly affect the cost. Full coverage policies are more expensive than those that cover only a portion of the goods’ value.
• Deductibles: Higher deductibles can lower your insurance premium, but they also mean you’ll pay more out-of-pocket in case of a claim.
• Typically, cargo insurance can cost anywhere from 0.1% to 2% of the goods being shipped. For example, if you’re shipping $100,000 worth of goods, your insurance premium could range from $100 to $2,000.

Is Cargo Insurance Worth It?

Several considerations can help you determine whether or not cargo insurance is worth it or not. Below are several key considerations that can help you decide.

• Risk Management: If your business frequently ships high-value or fragile items, cargo insurance is a smart way to manage risk. Even if you only occasionally ship expensive goods, having insurance can provide peace of mind that your business won’t suffer a significant financial loss due to unforeseen circumstances.
• Client Contracts: Some client contracts may require that you have cargo insurance. If this is the case, the insurance cost is a necessary expense to maintain your business relationships.
• Nature of the Business: Even a small loss could be detrimental if your business operates on thin margins. Cargo insurance helps protect against such losses, ensuring your business can continue operating smoothly.
• Geopolitical Considerations: If you’re shipping to or from regions with political instability or higher risks of natural disasters, the likelihood of something going wrong increases, making insurance a necessary precaution.
• Legal Liability: In some cases, carriers might have limited liability for loss or damage. This means that without cargo insurance, you might be unable to recover your goods’ full value.